Strategy As an Egoistic Concept
Do you care for your customers?
Do you like self-checkouts in supermarkets? I don’t. Using them feels like doing somebody else’s job without getting any additional benefits.
Do people like IKEA? They apparently do. Since the company opened the store in Ljubljana, where I live, a few years ago, customers have purchased thousands of pieces of furniture there.
But why do people love buying heavy brown boxes with pieces of chipboard and spending hours assembling them and don’t like self-service checkouts?
Because IKEA makes it clear that it cares about them, but grocery store chains don’t.
The winner takes it all
Roger Martin is deservedly famous for being one of the most prominent strategic thinkers on the planet. He is renowned for his Where To Play / How To Win strategic framework.
I will not delve into the details of the concept, but the title speaks for itself. It is a tool that aims to help a company ‘win’ in the market race.
That’s how Roger Martin and many other old-school strategists see the primary purpose of any business. It has to win, crush the rivals, earn a profit, and become a market leader. You will likely find the same idea if you read other business strategy books.
Business exists, operates, and develops to make its shareholders happier – period.
Read any business magazine. By what indicators do business journalists call a company ‘successful’?
But when you call something a goal, purpose, or objective, you turn everything else into instruments for achieving it.
Your customers, employees, and business partners become the assets, the resources you use to reach your egoistic goal – to become successful.
But this contradicts the notion that happy customers are the only source of a company’s prosperity.
Assets shouldn’t be happy or satisfied. Assets should work and provide a high ROA.
That’s why we witness such scandals as ‘Dieselgate.’ And even Tesla, the icon for many entrepreneurs and analysts, was caught red-handed. The company inflated driving range data and downplayed the number of complaints about the discrepancy between the claimed characteristics of its vehicles and reality.
Economic theory
The economic theory teaches us that businesses fight with competitors for the customers, and this makes them improve the quality of their products and reduce prices.
In theory, it looks like a win-win situation. Companies look for ways to increase earnings and polish their products and services, and customers are kings.
But it doesn’t work like this.
Some sources claim that when DuPont first introduced nylon stockings back in 1939, they were very durable. But then the company realized that the business loses profits if a woman buys a pair of stockings and ware them for months.
So, according to these sources, the company made nylon stocking perishable.
In 1925, the Phoebus cartel of the world’s major light bulb manufacturers was believed to have imposed a lifetime cycle on light bulbs to not exceed 1,000 hours.
Economists call it ‘planned obsolescence.’ And this is only one example of how businesses care about shareholders more than customers.
If the economic theory were true, we would be living in a much better world. Washing machines would work for decades, flights would depart and arrive precisely on schedules, and we would never have to wait in lines for hours.
Customers first
Any business is an ecosystem in which founders, shareholders, employees, and investors are in intricate relationships. And not all of them are interested in making customers happy.
A founder can have a brilliant idea for a product that customers will love, and she even can infect some of her team members with her enthusiasm.
But are investors, bankers, and other shareholders as excited about the solution as she is?
Is she capable of maintaining the same level of customer centricity in her company as it grows?
Will she be able to focus on customers if the shareholders and bankers demand growth, expansion, and profits every day?
She will be unlikely to do it, even if it pays off. Barns & Nobel’s revival is an excellent example of this.
People love IKEA because it offers them low prices, a pleasant shopping experience, and the opportunity to feel capable of doing something with their own hands by assembling the furniture.
People don’t like self-checkouts because they make us do extra work without offering something meaningful in exchange.
Strategic thinking is not about the ability to predict the future or think big.
It is about staying focused on customer needs.
This is an excerpt from my new book on strategic thinking. I'll be launching the book this fall, and subscribers to my newsletter will receive the ebook for free. Stay tuned!