Knowing Who You Are, and Who You Are Not

Some companies try to be all things to all people, and they often achieve mediocre performance (or much worse).  Others have a clearly defined target market and make sound decisions about how they will stand our from the competition.  They make tradeoffs - determining precisely what they will not do (that others in the market typically do).  A few companies go so far as to clearly articulate the tradeoffs they are making, even in their marketing materials.  Recently, we received a brochure in the mail from Viking.  The pamphlet described their various cruise offerings.  My wife and I have never been on a cruise, and we didn't have any prior knowledge about Viking.  I was struck by one page in particular in the brochure though.  It proclaimed, "What Viking Is Not: We do not try to be all things to all people. Instead, we focus on delivering meaningful experiences to you."  As you can see below, the company then explained specifically what it did not provide or offer (making for a stark contrast with many other cruise companies). 

Gene Sloan, who has written about cruising for more than 25 years, recently published a lengthy article about Viking.   Sloan wrote (underlining is mine for emphasis),

There are some cruise lines that try to be all things to all people. Viking isn’t one of them. The upscale cruise brand has carved out a niche since its founding in 1997, catering specifically to a certain type of thoughtful, inquisitive, generally older traveler who is looking to explore the world and learn a thing or two along the way.

Most Viking customers are approaching their retirement years — or are already there — and they’re eager to finally see all the places they didn’t have time to visit when they were raising kids and establishing careers in their younger years. For this subset of travelers, Viking offers a wide range of both ocean and river cruise itineraries that have a heavy focus on the destinations visited. These aren’t cruises where it’s all about the ship.

Viking voyages bring a lot of extended stays in ports where passengers get more time to explore historical sites and experience the local culture than is typical on cruises. The line offers included-in-the-fare tours in every port, allowing every passenger on board to get a guided experience during stops without having to pay extra. (In general, Viking voyages are highly inclusive, in keeping with its “no nickel-and-diming” philosophy.) On board, Viking’s programming revolves heavily around what the line calls “cultural enrichment” — lectures by experts on topics related to the places its ships visit as well as cultural and culinary offerings that often have a local tie-in.

What Viking ships don’t offer is a lot of onboard amusements aimed at families and younger travelers. In fact, the line doesn’t even allow children under the age of 18 on its ships. It’s one of the only major cruise brands in the world with such a rule. Viking ships also don’t cater to the party crowd. If it’s a floating celebration that you’re looking for in a vacation, this isn’t the line for you. As Viking founder Torstein Hagen likes to say, a Viking cruise is the “thinking person’s cruise,” not the “drinking person’s cruise.”

Michael Porter wrote about the importance of making strategic tradeoffs many years ago.  Many companies falter on this issue though.  They want to have it all, and they are obsessed with top line growth.  Moreover, they are afraid to so loudly and clearly proclaim to potential customers who they are AND who they are not.  However, the lesson here is critically important.  Exclaiming clearly who you are not will make you all the more attractive to the target market on which you have set your sights.  

Subtracting Features to Enhance Products: We're Biased Against Doing That

Source: Wikimedia

Diana Kwon recently wrote a Scientific American article titled, "Our Brain Typically Overlooks This Brilliant Problem-Solving Strategy."  She opens with an anecdote about how kids learn to ride a bicycle today versus in the past.  When I was a kid, my father installed training wheels on my bike, as many other parents did.  Today, more and more parents are opting to purchase balance bikes for their children.  These two-wheel bicycles have no pedals.  Kids learn balance and coordination on these bikes. Many say that these bikes are much more effective than training wheels.  Kwon asks the question, "Given the benefits of balance bikes, why did it take so long for them to replace training wheels?" 

To answer that question, Kwon describes a fascinating new research study published in Nature by Gabrielle Adams, Benjamin Converse, Andrew Hales and Leidy Klotz.  The article is titled, "People systematically overlook subtractive changes."  The authors found that people tend to focus on adding components and features when trying to improve a product or service, rather than considering how they migth subtract features and attributes.  This bias toward addition appeared quite strong in their research.  

For me, this interesting research has implications beyond product design.  It explains a great deal about the strategic mistakes that firms often make.   In strategy, we often talk about the power of choosing what not to do.  Great firms make tradeoffs, rather than trying to be all things to all people.    Choosing what not to do means subtracting features.  Southwest took away assigned seats and first class cabins.  Ikea took away furniture assembly and delivery.   Trader Joe's took away branded products, extensive product selection, self-checkout, and loyalty cards.  Edward Jones took away investment opportunities in penny stocks, options, and commodities.   Stihl took away distribution through big box retailers.   Why do firms struggle to make tradeoffs.  We have often said it's because managers become enamored with growing the top line, and they want every customer they can get... rather than thinking carefully about how to create a distinctive, difficult-to-imitate position in the market, tailored to a particular customer segment.  Now this research explains that there may be a persistent bias against subtraction inherent in the way that we think about improving existing products and services. That may be getting in the way of making good strategic tradeoffs. 

Planet Fitness: Making Money in a Tough Industry

I ran across this excellent article by Judith Ohikuare in Inc. magazine.  The article is titled, "The Secret to Planet Fitness's Success."  Here's a quote from the company's CEO in the article:

It's very, very difficult to make money in the fitness industry. In order to thrive, you really have to have a niche and sell it. You've either got to be at the high end or at the low end; otherwise, you're not in at all. We're at the very low end: Members have access to a great club for 10 bucks a month, and I don't see that changing. We keep it as simple as possible, so that there are as few areas to disappoint as possible. When we started out, we included perks that everyone else had, such as day care and yoga classes, but none of that made sense for us.

Having read that quote, now check out the commercial below, a creative follow-up to the famous "I lift things up and put them down" ad which I featured on the blog awhile back. (Thank you to student Meredith Soper for pointing me to this commercial).   What you see is a company that is clearly trying to identify its niche... and clearly specifying what it is not (and who it does not seek to target).  In a very tough industry, leaders must pay particular attention to the clarity of their target market and the boundaries of their strategy.  Making clear choices becomes all the more important when you have fewer potential profits because of an unattractive industry structure (such as in the fitness center industry).  

Can Companies Learn from Apple?

Adam Lashinsky's article has published an article on Fortune.com titled, "3 things any company can learn from Apple." (drawn from his book to the left)  I especially love the first point.  My students know that I preach this point about "saying no" all the time! Here's the excerpt:

Say no more often. Steve Jobs was fond of saying that saying no was harder -- and more important -- than saying yes. Apple said no to making personal digital assistants, in the 90s that is. It said no for years to making a telephone-- until it said yes. Apple refused to focus on selling to businesses. It wouldn't put a USB port on the first iPad. And so on. While not every company can achieve Apple's level of Zen by rejecting seemingly good business opportunities, there isn't a company out there that wouldn't benefit by more rigorously asking itself: "Have we absolutely satisfied ourselves that we have said yes for the right reasons?" How many companies pursue revenue opportunities that any new recruit knows the company is doing to make money rather than delight customers. (An example: Jobs ridiculed the PC industry for years for the margin-boosting "crapware" that comes loaded on a PC. The crap remains.) It takes real courage to say no. But it's not like top executives aren't being compensated for brave action.

I would like to make a larger point though.  I think leaders need to be very careful about trying to draw lessons from Apple and apply them to their businesses.  First of all, Apple is a very unique animal, unlike most other firms in terms of its fundamental DNA.   Secondly, we must remember that competitive advantage derives from fit among strategy, structure, systems, culture, and people.   It doesn't come from a silver bullet - a single core competence, one particular strategic choice, a specific business principle or value.  Emulating Apple in one or two dimensions may not bring much advantage to a firm, if that choice doesn't align well with everything else a company does.  Changing a company for the better requires systemic change, not just a tweak here or there that results from a benchmarking exercise of a stellar firm.