The operative word is “winning,” for the simple reason that if you’re not winning, you live in fear of the competitor in your space that is. If they’re winning and you’re just participating, they can use the greater resources that derive from winning to beat you up. The only place in competitive endeavors with any degree of safety is that of the winner. If you’re not winning or attempting to unseat the winner, you’re simply playing a game that will leave you bruised and battered with only marginal gain to show for it.
Take the story of the 2008 Chevy Malibu. (Former GM CEO Rick Waggoner hired Roger Martin on January 1, 2006, to help the then-senior management team–Bob Lutz, Fritz Henderson, Larry Burns, Troy Clark–with a turnaround strategy.)
The 2007 launch of the 2008 Chevy Malibu was to be a key strategic move for GM. Chevy is GM’s biggest brand, and the Malibu plays in the biggest dollar volume product segment in the US car market. The previous version, the 2007 Malibu, was by no means a winner, selling just 60,000 units at retail that year.
Roger asked the team in the Fall of 2006 a key question: “What is our aspiration for this launch? What do we really want the 2008 Malibu to do for GM?”
Answer: “120,000 units.”
Seems like a winning aspiration, right? It’s a big aspiration to double your retail volume in one year. In no way insignificant.
But this is where the art of strategy really plays out.
“The Malibu competes against the Toyota Camry and Honda Accord, right?” asked Roger. “How many Camries and Accords were sold at retail this year?”
Answer: “560,000 Camries. 440,000 Accords.”
“So let me get this straight,” Roger began. “Our aspiration is to go from selling 1/10 as many as the category winner to selling 1/5 as many? Do I have that right?”
Silence. Then, grumbles…“not how we think about it” responses from the management team.
“Well, that’s how I think about it,” replied Roger. “The Camry is bang-on direct competitor and your highest aspiration is get to a fifth of their volume with as big or bigger dealer network.”
That is not winning. That is lowering the bar to declare victory.
“But, ok,” Roger continued. “You’re going to have to get 60,000 new customers. How does the planned Malibu stack up against the Camry?” (Camry had just launched its upgrade, so the specs were available.)
Answer: “We actually don’t really know.”
Now, to have a sense of strategy, you cannot craft a winning one in the context of just yourself. “This vehicle is going to be much better than the previous vehicle” rather than “better than the competitor’s” is all well and good, but strategically tricky, unless of course you’re the current winner. Which the Malibu wasn’t. (In other words, a “do better” strategy would work for Camry, but no one else.)
“I don’t think you can count on an incremental 60,000 units without some valid third parties saying nice things about the Malibu,” Roger explained. “You won’t even meet your current aspiration if bad reviews come in.”
Roger convinced the team to hire an independent third party to evaluate the Malibu prototype against the Camry, using all the objective measures typically reviewed by the Edmunds, Car & Driver, and Consumer Reports of the world.
The test report came back with an answer to Roger’s “how we stack up?” question: a few criteria were on par with the Camry, but on nine key criteria, it was a loser against the Camry.
Roger made the point that selling 120,000 units against the headwinds of mediocre reviews essentially saying “not bad, but no Camry” was a losing strategy.
The team agreed. In response, they spent $300 million to retool the Malibu so that it beat Camry against those criteria. GM ran three consecutive engineering shifts a day (24/7 engineering!) for the seven months they had remaining before production had to start.
They sacked the engine program. They put thicker glass in. They tuned the new engine to be as fuel efficient as the Camry (vs the one mile per gallon less that they had planned to go to market with!).
Media response: surprise and delight.
Retail response: Malibu sold at a 250,000 a year pace…until the market crash in the summer of 2009. And even after the crash and comeback, the Malibu matched the Camry on monthly sales. The payback on the $300 million investment was, in Roger’s words, “ridiculously high.”
Lesson: if you don’t have winning aspiration, you won’t do the things you need to do in order to win.
Sounds simple, but if a ginormous company run by very smart people can spend a gazillion dollars going to market with what sounds good but is in reality a losing strategy, anyone can.
The sine qua non of strategy is to have a winning aspiration.
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Matthew E. May is founder of EDIT Innovation and author most recently of The Laws of Subtraction: 6 Simple Rules for Winning in the Age of Excess Everything.