Strategy in Three Minutes. Episode 25

1. Strategy and Value Exchange: Ridiculous Terms Lead To Bad Strategic Decisions

Measuring the “market” by units sold is absurd—but not as absurd as measuring an organization’s success solely by profit.

If you measure your market by units sold, it leads you astray.

Take the electric drill market as an example.

If the sales of drills shrank, an ordinary marketer would say: “The market has plunged, so we should cut the sales forecast.”

A savvy marketer would say: “This data is not enough to make decisions. The volume of need, most likely, remains the same, but customers have switched to alternative solutions –they rent drills or hire freelancers. We need to adjust our strategy.”

Economists coined the term ‘market’ for their own purposes, but you shouldn’t misuse it.

You should measure a market by the total volume of need.

Need consists of:

[1] Need satisfied in the usual way (“sold drills”)

[2] Need satisfied through alternative solutions (rental, etc.)

[3] Unmet need (for any reason)

[4] Unrecognized need

How do you measure the size of your market? How do you ensure that your strategy is based on an accurate market assessment?

2. Strategy-related terms: Five reasons NOT to create new markets

[1] You’re absolutely sure that AI and other innovations are nothing more than scary tales.

[2] If your clients have been loyal to you for 10 years, what on earth could possibly make them disloyal in the next 10 years?

[3] You’ve studied your competitors very well over the years of competition. You don’t expect any surprises from them.

[4] Business success is measured by profits. But making a profit in a new market isn’t guaranteed.

[5] You believe that tech innovation alone is enough for success.

What reasons not to create new markets do you know? 🤣

In the photo: me at the entrance of a hotel in Bergen, Norway.

3. Reflection of the week: The pitfall of a data-driven approach

Once, I sat at an executive meeting.

The CMO showed a slide with a colorful chart.

“The number of customer complaints has decreased by 5% compared to the previous quarter,” she said with pride.

The CEO and other executives looked content.

I asked for the numbers and was shocked. Thousands of customers had complained about the company’s products.

Yes, 5% fewer than the previous quarter, but still thousands.

When a company is small, its leaders get a lot of information from people – their colleagues, team members, and customers.

As the business grows, they get more information from numbers than people.

They hide behind spreadsheets and dashboards.

Numbers don’t lie, but they fail to convey emotions.

One time, my team recorded a few interviews with disappointed customers of our client. We used this video for our strategic executive retreat.

They were just a handful of customers among thousands, but their emotions spoke louder than dozens of stat graphs.

How do you get information that you need for your strategy but can’t get from reports? Share your experience in the comments.

Support this newsletter by sharing this articles with your friends and on social media.

Svyatoslav Biryulin

––

Want to brainstorm new strategic or product ideas but need the right facilitator to lead the session? DM me.

Read also: Winning customers isn’t enough: win the market instead

Visit my website.

Join my free newsletter to read more groundbreaking articles on strategic thinking.

Check out my book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism