The need for strategic change is quickening

Most of the companies fail in two years. We take this general rule of thumb for granted with start-ups. But there are other deadly thresholds, too. Did you know that the expected lifespan of a Fortune 500 company is 40 years?

Photo by jscreationz
Photo by jscreationzs

Why is that?

Because the world changes around them. The corporation needs to change or perish. Just take a look around you. I bet you can’t find any F500 size companies founded before 1975 and still operating the same.

Either a bigger company bought them or they made radical changes in these three areas:

  • strategy
  • product portfolio
  • pricing

Both product and pricing are strategic changes, but I still wanted to list them as separate items.

Let’s have an example.

Nintendo changed gaming cards into experience consoles

Nintendo started in 1889 as a gaming cards company. In 1940’s (way past 40 years lifespan) it came up with plastic cards. They tried several diversifications and the company came to the brink of extinction. Then an assembly line engineer brought a personal project to work and rest, as they say, is history.

donkey-kong-screenshot

Nintendo released the game Donkey Kong in 1981. We haven’t seen the gorilla that much anymore, but everybody knows the antagonist of the game. Mario started his career jumping over the barrels rolling down the hill.

Nintendo has made changes after that, too. In most cases,  they were technological in nature. First it took out Atari and then governed the industry side by side with Sony Playstation. After both Playstation and XBox passed it, Nintendo came up with a different strategy. It replaced technological aptitude with more customer experience coming up with Wii.

Since then, both competitors have implemented moving sensors in their consoles. Nintendo continues on its way, actually not considering PS or XBox as competitors. They don’t want to fight over existing gamers, but to bring more people into games. Or how do you view the sports resort and the yoga applications?

And that’s what I call a strategy change.

What else can we learn about Nintendo strategy changes?

For starters, there is a clear quickening in the timeframe.

It first took 50 years for the company to come up with a new idea of a product (plastic cards). They kept playing around for 30-40 years until the crown jewels (videogames). It took only 25 years before Wii and even less to change the actual strategy towards bluer oceans.

I don’t believe the expected lifespan of a Fortune 500 sized company is 40 years anymore.

I have always believed in differentiation and considered abundant benchmarking harmful. If you keep measuring your company against the actions of its competitors, you loose. You can’t pass a competitor by watching their back or coming behind them. The best way to win a game, is to make the rules.

Which is also called cheating. But hey, who’s counting?

How do you see and communicate your product or service?

When I’m talking with my customers, its clear they’re on the lookout for a change. In most cases they see their services different than I do as a potential customer. Despite the company thinks it’s selling holes in the wall, all I’m seeing is drills.

The key challenge here is to find both the view and the way to communicate it. The company needs to communicate it to me as a potential customer, but also to the workers. If the workers see drills, they talk drills. No amount of corporative bullshit bingo keywords on an annual report can fix it.

There are many tools out there to help defining the view. But you can’t go too wrong, if you do everything opposite from the old millenium.

The old way: calculate manufacturing costs and add a profit margin to determine price. The current way: define a target cost and adjust your product or manufacturing to meet that.

The old way: add hundreds of features the customer is never going to use to add value. The current way: add one feature enabling a solution to a real problem. But be careful of creating a make-believe problem around your features.

Note that I didn’t say ”the new way” or ”the proper way”. It’s just the current way, as the world is bound to change under this, too.

But wait! Some old rules still apply:

Follow the money

If you make it too difficult for your customers to give you money, they will give it to someone else. Evaluate your monetizing scheme in theory and the payment gateways in practice including taxation.

Secure the logistics chain

If you force your customers to jump hoops to get to your product, they don’t. Unless the product is that good. Be honest and ask yourself, if it is.

Check if your customer segment actually is eligible, or is there some prerequisites needed.

The butler did it

There are many misconceptions that are not facts. When you hear someone say something cannot be done, start planning how to do just that. As why, why, why, why and once more why.

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