If You're in a Dogfight Become a Cat
By Leonard Sherman
Columbia Business School, 348 pages, $29.95
In a business dogfight, rival firms scratch and claw for the territorial dominance known as market share. They often use similar tactics and, while one dog may gain temporary dominance, the ongoing fight usually takes its toll on the combatants. Renewed battles are an ever-present threat.
So if you're in a dogfight, as so many companies are, Columbia Business School executive-in-residence Leonard Sherman suggests becoming a cat.
"Cats are a different breed of animal – clever, solitary hunters who are more inclined to explore new territory and to redefine the game on their own terms than to engage with the pack in a no-win dogfight. Cats are agile and innovative, and seek their prey (customers) with tactics that dogs cannot easily replicate," he writes in If You're in a Dogfight Become a Cat.
Yellow Tail is a cat, breaking dramatically with the normal way of selling wine and the normal audience. LittleMissMatched is a cat, selling colourfully, non-matching socks for girls, in threes rather than the usual pair. Hotel chain citizenM (the m is for mobile) is a cat, with more affordable luxury rates, keeping many key features of traditional high-end offerings such as downtown locations and fancy showers but stripping out amenities business people don't need that add to the costs, such as a restaurant with a full menu, and keeping the rooms very small for guests who only use them to sleep.
If the metaphor and those examples leave you still fuzzy on his strategic approach, here are three more conventional steps, tightly interconnected, at the heart of his approach:
- Continuous innovation – not for its own sake but to deliver …
- Meaningful product differentiation – recognized and valued by customers, enabled by…
- Business alignment – where all corporate capabilities, resources, incentives, and business culture are aligned to support your company’s strategic intent.
"While this prescription may seem to draw heavily on a heavy dose of common sense, it turns out to be difficult and rare for companies to actually incorporate these imperatives as the foundation of their business strategy," Mr. Sherman notes.
Often companies opt for a dogfight because they figure there is no alternative. They are in a bad industry, one without a future, they assume. But he argues strenuously that no industry precludes breakthrough companies. A Booz & Co. study of total shareholder returns for 6,138 companies within 65 industries found that there are exceptionally high-performing companies in every industry, despite the structural challenges they might face.
The U.S. wine market was slow growing, extremely competitive, fragmented, heavily regulated and subject to global oversupply when Australia's Casella Family Brands launched Yellow Tail for Americans and soared to success. Southwest Airlines seems to have missed the fact it's in a terrible, profit-elusive industry. Both companies are cats, of course.
As companies age, growth often stalls. It is assumed that inevitably will happen because of the law of large numbers (the amount of incremental revenue required to maintain above-market growth becomes larger); the law of competition (since its success will draw competitors eager to chip away at the market leader); and the law of competitive advantage (the basis by which it was differentiated from competitors will erode over time). But he argues that's not necessarily true, and draws from the academic strategy reservoir to highlight three streams:
- Breakout positioning: Reconceptualize the design of new products and services in your industry. That can involve reverse positioning, which means to stop augmenting the features of products or services and find a better way to serve customers who currently aren’t well-served, as citizenM hotels did. Or borrow from another category – breakout positioning – and come out with something never seen before, like Swatch taking ideas from fashion to the world of watches.
- Blue oceans: INSEAD professors W. Chan Kim and Renée Mauborgne in a 2005 book urged companies to swim in uncharted waters, blue oceans, rather than red oceans coloured by the blood of too many fierce competitors. You need to look at what elements of current products can be eliminated, which can be reduced, which need to be increased, and what new elements need to be created so that you have a well-differentiated offering. Cirque du Soleil is a prime example, changing much of what traditional circuses do.
- Disruptive technology: You can try going for the low end of the market, when current products are far more sophisticated and expensive than many consumers need (as with Netbooks undercutting computers); remove a constraint that previously prevented consumers from participating in a market (as with walk-in medical clinics in American retail stores); provide a new product at a premium price (as with FedEx’s original one-day delivery); or dramatically improve product performance at lower prices (as with Uber).
Those approaches have echoes of each other, of course, and all tie back to his original three interconnected points and his dogfight-cat metaphor. The book is similarly well-sewn together, with ample strategic and marketing insights backed by pungent examples that might help turn you into a cool cat.