Are you fighting the right battles?
Why are we here?
Don’t worry we’re not about to go into a deep discussion about the meaning of life. We mean, more practically, why we are all here? Well, without boring you with all of Darwin’s theory, we are here because humans have been particularly good at the game of life.
The key to our success, and the success of all the other species that have made it this far, has been our ability to adapt. As Darwin said ‘it is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change’.
The basic principle behind Darwin’s theory applies in most walks of life. To be successful you need to do things earlier, quicker and more effectively than your competitors. This is one of the things that differentiates the great chess player from a good one. They think a few moves further ahead. They’ve won the game a while before their opponent realises that they are about to lose. Wayne Gretzky, the legendary ice hockey player said ‘I skate to where the puck is going to be, not where it has been’.
So, why is this important in our industry? Well, we are in a period of great change. Who would have thought Aldi and Lidl would be at 10% market share? That the top 4 retailers would be pretty happy with small declines in LFL sales? That some big out of town stores would be built and never opened?
Over the last couple of weeks we’ve been talking about thinking differently. How it can unlock new ideas that can lead to competitive advantage. One of the keys to this is identifying the right battles to fight. The new battles not the old battles.
The business world is littered with companies who fought the old battles – Kodak, Nokia. The interesting thing is that sometimes you don’t even realise you are fighting the old battles. Market share is up by 5% – everything is rosy. However, that 5% increase is in a segment that is declining rapidly. And where the battle is now being fought, your position is weak. You are winning the wrong battle and losing the right one.
So, how can you adapt and make sure you are fighting the right battles?
Adapt WHERE you sell. What are the trends in the market? Where are shoppers going? Do these behaviours advantage or disadvantage your brands? For instance, if sales are migrating online, is that a good thing or a bad thing? Some categories (e.g. nappies) should be advantaged. Some categories (e.g. chocolate) could be disadvantaged.
Big brand leaders that have had some inherent advantages in store – distribution, share of space, visibility – don’t have the same advantages in the online world. Or the Discounter world. So, how do you adapt what you do in this new world? Where do you need to be selling and what are the new rules for winning in those environments?
Adapt WHAT you sell. This can often be a big challenge for established manufacturers and brands. You have a leading position in key market segments. Your factory lines are set up to efficiently produce certain products in certain ways. Your supply chain and sales force is set up to efficiently get them into store and on shelf in a certain way. Then small upstarts come in, selling different products, getting some of your locations and space in store. The product mix in store changes.
This is happening all the time. Tea used to be all about black tea. Crisps used to be about thin slices of potato. For some companies, the response requires changing their product mix, to play in the new segments. For others, the products exist within their portfolio, they just need to be deployed in the right places. As we mentioned last week, how you think about what you sell has a big impact on your ability to adapt. Do we sell rice or meal solutions? Potato crisps or snacks?
Adapt HOW you sell. FMCG products are typically sold in a traditional way. Put a product on a real (or online) shelf. Put them on deal when you want a sales boost or to steal some share. Uniform pack sizes and case configurations. However, if you look at certain retailers – Amazon is the classic example – innovation is less about what you sell and more about how you sell. Adapting the way that you sell to meet changing shopping habits. Want even more convenience? We’ll give you 1 click ordering.
How should your category, or different parts of your category, be sold? Is the future for some 1 click re-ordering, subscribe and save? For others, really immersive, engaging buying experiences? Could the future even be about the shopper choosing what quantity they want in a pack? It is not just sweets that could do pick n mix.
Socrates said ‘the secret of change is to focus all your energy, not on fighting the old, but on building the new’.
Do you know where the new battles are? And are you set up to win them?
On a separate note, our monthly article in The Grocer goes out in tomorrow’s edition . There is a link to it on our website…. http://www.insight-traction.com/the-ranging-sweet-spot/
Have a great weekend and speak to you next week.