Market research is the field to better understand your current and possible new customers’ needs and wants for your current products, services and their levels of satisfaction with your current offerings. Understanding customers for innovative and radically new products and services comes from the new field of innovation, and market research does not have a good track record here. There are two major kinds of market research – primary and secondary. This article will discuss primary only.
Last month we discussed the fall of one of the most respected brands in the style/fashion industry – Gucci – in the mid-1970s. Our aim in these classic strategy stories is to bring to life the other articles in this series over the last fifteen months. We chronicled Gucci family struggles and intrigue as the founder’s sons tried several strategies to turn the company around after some disastrous strategic moves.
This article and some others for the rest of the year will provide some quintessential company examples of putting the elements into practice. There is no better place to start than with the Fall and Rise of Gucci. Gucci is the firm that embodied high fashion and inspired design of leather goods and accessories and almost went bankrupt not heeding some of the key principles highlighted in this article series.
In 1986 Masco Corporation was considering a $1.5 billion move into the furniture manufacturing industry in the United States. Prior to this, the company had re-invented the faucet industry. Its portfolio included kitchen and bathroom cabinets, locks and building hardware and many other household products. These were “sleepy” industries before Masco entered, and Masco shook them up by “professionalizing” them and it extracted nice growth and profits.
Recall from Part 1 last month there are eight skills that are required for Dynamic Capabilities. Keen Footwear embodies all of them and in May 2003 started perfecting them like almost no other firm had done before. It is a fascinating story of how inexpensive shoe design tools and part time designers, offshore factories, and free buzz marketing helped Keen go from idea to a $30 million hit virtually overnight. I will paraphrase from an article in Business 2.0 Magazine by Michael Copeland and present my own research into Keen.
Up to now, the strategy field has provided many valuable tools, frameworks, and knowledge. The emphasis for the current tools and frameworks is around “positioning”. I have discussed many aspects of positioning over the last twenty-two months. Positioning seeks to have a firm develop a great strategy and business model and then “defend” that position. Defending comes from marketing your current offerings and brand frequently to keep you visible to current customers.
Does your sales force (I am not picking on them) almost always say “If we just offered this version of our product, or if we added more “bells and whistles”, more customers would buy it? Operations and production folks usually hate to hear this because they know it almost always increases the firm’s costs. If you add up the number of these kinds of “bolt ons” over say ten years, you could end up with a serious complexity problem. What is the problem? Figure 1 shows complexity affects both costs and revenues negatively.
It would be nice to know if we have laws of business strategy that should be followed at all times. Think about this – if there are no laws of business strategy then every decision we make is really following rules of thumb that have been passed down from generations or practicing common sense at the time of the decision. Not bad if these have worked in the past. But were you perhaps just lucky? What if there are laws of business strategy that could help you outperform your industry averages by a wide margin?
If you are like me and are not an information technology (IT) expert or aficionado, then you probably scrape by understanding the ins and outs of the waves of new IT the best you can. You call on your IT experts to train you on what you need to know from a technical standpoint, and make do until the next IT wave emerges. However, IT and the waves of new IT that we can count on to happen every year, if not every six months, have huge potential for helping to grow the value of your firm, which is the topic of this series of articles started last year for the Forum. As such, IT can be very strategic, as well as allowing us to perform daily tasks at ever increasing productivity and efficiency.