Profit vs Market Share

And the debate continues...

I have friends who work across various industries-FMCG, including Retail, Telecom, Technology, Financial Services, etc. We meet up regularly, and I often ask them a naive' question: So, how is the company doing?

And invariably, their answer is: "Great! We have the largest market share in this product category";" My territory market share has gone up by x% "; " Oh! We are feeling some pressure; our market share is falling".

Does this sound familiar? , almost everyone seems to be talking about 'Market-Share,' but very few talk about 'profitability.' So let me share my perspective on the same…

Delivering Happiness -Zappos.com

Here is an excellent presentation by Tony Hsieh -CEO Zappos.com

Please note the vision statement:

"One day, 30% of all retail transactions in the US will be online. People will buy from the company with the best service and the best selection. Zappos will be that company" Important point to note..'they call themselves 'service company' not 'shoe or clothing company'.

Most important - their product is 'happiness'

Zappos - SXSW - 3-14-09

View more presentations from zappos

Vision shared-vs- Shared vision

"The empires of the future are empires of the mind." — Winston Churchill

I promise to keep this post really short.

First a small exercise, if you are a senior manager in your company, go out and meet few frontline employees, and ask them this simple question: What is our company’s Vision?

Are you surprised with what they have to say? I bet you are…

So, is it important to have a vision for the organization? More importantly having a ‘shared vision’ rather than 'sharing a vision'.

We generally find so-called elaborate ‘vision statements’ adorning the wall in corporate headquarters or maybe briefly mentioned in ‘annual shareholders’ report.

But, is that enough?

A vision is like ‘soul’ of the company; its aspirations, and like north-star, guides it into the future. A vision can only be effective if it is espoused by each and every member of the organization.

'Lose the Battle to Win the War'

A wonderful story - in Corporate Dossier, Economic Times, 22 August 2008 . 

A learned sage was in the middle of a very narrow bridge when he saw a powerful king approaching from the other side.

“Please turn around,” said Shakti-muni, “So that I may pass.”

“No, you turn around,” thundered the king, “So that I may pass.”

“But I stepped on the bridge first.”

“Yes, but I can push you back.”

“That’s not fair. Know that I am a teacher, a priest and the most respected philosopher in the land. Hence, I must be given the first right of passage.” Argued the sage

The king sneered, “I built the school you teach. I pay for the rituals you perform. Without me as patron, you would not be able to indulge in philosophy. So you must give me the first right of passage.”

The Paradox of Adjacency

An interesting article appeared this morning in The Economic Times : The Paradox of Adjacency by Ashish Singh and Chris Zook of Bain and Company. I have written to Ashish with my views.

Yes Nokia-India is a successful example of ‘adjacency strategy’. While product proposition for entire consumer spectrum (BOP included) and Product Innovation did contribute to its success, there were other factors which contributed in equal measure, such as: Quick to identify the Opportunity (1995)-ahead of Change curve, Localizing the business strategy, Focus on core business ( Nokia only had mobile phones , while other players had consumer electronics and home appliances) etc.

Google is another great company at identifying ‘adjacent opportunities’. From Google search to Google Video to Google Books to Google News to You tube ....

Cognitive Inertia

How did Kodak respond to the threat of 'digital Camera' in 1980's ?What factors distinguish successful firms from unsuccessful firms?

It’s a common observation that many firms, especially large firms, are limited in their tendency to exploit the abundance of lucrative opportunities that surface from within the firm. As a result of the incumbent firm’s failure to support exploitation of these opportunities, some intra-preneurs are encouraged to become entrepreneurs by founding a start-up organization. In many a cases, founders of these new firms would have preferred to exploit their entrepreneurial discovery within their previous firm, given sufficient management support and resources.

So what went wrong? Research suggests that cognitive inertia is one powerful explanation as to why established firms are not as innovative as young, less established firms. Gladwell throws in a very interesting perspective to this.

Diruptive thinking

Recently attended a video conference by Prof Richard D'avani (Tuck School of Business-Dartmouth,VA) on 'Hyper competition' . What should companies do in an competitive environment to succeed? and what should be the right strategy...?

One insight gained is..' self-cannibalization'..i.e...rather that wait for the competition to assail and rip apart the competitive advantage, firms should constantly engage themselves in continuous innovation. Being first is not always the same as being the best. Entry barriers are trampled down or circumvented.Goliaths are brought down by clever Davids with slingshots. We've seen and heard the stories in corporate world - Ford vs Toyota , Merill Lynch vs Schwab , Yahoo vs Google, Microsoft vs Sun Micro system etc etc.

As competition enters, the industry always shifts from Monopoly( only one player, excessive profits) to Oligopoly ( few more players , sustainable profits) to Perfect Competition( many players , no Abnormal profits). Hence to stay and continue enjoying that phase of (sustainable or excessive profits) , the companies should disrupt the market place on a regular basis( i.e constantly innovate and redefine the rules of the game) ...such that competition will always have the 'catching up' to do.

Take for example what happened to Ford in US ( huge distribution, service and dealer network panning American continent);in came Toyota with "TQM" and cars that didn't need repair and wait time for delivery. Ford was always engaged in 'catching up' by asking " what is Toyota doing next?" , while Toyota was busy self-cannibalizing its competitive advantage and moving ahead by asking " what next?" Or for that matter..what happened to the music industry in last one decade is for everyone to see. The digital revolution has crossed all barriers and changed the music industry today. Maybe the advent of "I" ( Apple's I-Phone and I-Pod) is a just the beginning ( more on this later...)