Monday, November 23, 2009

Strategic Planning Analogy #293: Circus Crisis

Years ago, I was watching a documentary on the history of the circus. According to the documentary, the circus industry reached its peak of popularity in the 19th century. The secret to their success at that time was their image. Circuses in the 19th century had the reputation for being on the leading edge of whatever was new. Whenever the next big thing in entertainment came about, the place where you saw it first was at the circus.

Circuses were noted as places of innovation and creativity. There was always something new to see at the circus. It was forward-thinking.

But then something happened. Circuses got in a rut, doing the same thing year after year. At the same time, innovative leading edge entertainment shifted to the movies, radio, and television.

At the end of the documentary, it said that circuses were trying to survive in the late 20th century by emphasizing the “nostalgic” aspect of the entertainment. The idea was that going to the circus was a way to re-live the past and remember a piece of your long-ago childhood. It was a way to re-capture that innocence of years gone by.

In other words, the industry that became popular for being associated with everything new was now trying to survive by attempting to be associated with everything old. How’s that for a change in strategy?

You’d think that to change your image as radically as the circus, you’d have to radically change your actions. The irony is that the image changed precisely because the actions did not change. Circus acts of the late 20th century were not that different from circus acts of the late 19th century. You still had the same animals doing the same types of tricks. You had the acrobats doing the same types of stunts. The clowns did pretty much the same antics.

The difference was that in the late 19th century, this was relatively innovative stuff. A hundred years later, it was old and out-of-date. Why watch an elephant try to stand on its hind legs when you can rent a movie with state-of-the-art special effects that place you in an exciting visit to an alien world?

This same problem can happen to your business. You may have found a path to great success. Relying on the concept that “If it’s not broken, don’t fix it,” you leave the successful formula in place. However, the world around you changes. The changing environment changes the viability of that old formula. “New and Exciting” quickly morphs into “Old and Boring.” And success quickly turns into failure.
Your success changes (for the worse) precisely because you did not change.

To save the circus industry, Cirque du Soleil needed to reinvent the circus into something modern and cool. It took a massive departure from tradition to do this. Perhaps you need to do the same.

The principle here is that you do not control all of the factors which impact your image/strategy. External factors are constantly changing/evolving. As a result, your company/brand’s relevancy to that environment is constantly changing/evolving. Consequently, you have to make one of two choices:

1) Continually Update your Actions to Maintain the Same Level of Relevancy; or
2) Maintain Somewhat Similar Actions and Find New/Different Ways to Make them Relevant.

These options are discussed below.

Successful companies tend to own a desirable space in the marketplace. For example, Wal-Mart owns “low price” in the retail marketplace. As the marketplace evolves, your ability to continue to own that space can change. You may need to change in order to maintain ownership of that space.

Take Apple, for example. Apple was known as the “cool” computing company. Unfortunately, the novelty of computers was fading and just having a computer was no longer enough to be cool. Computers were progressing towards becoming a boring, commitized tool, something like a hammer.

So to maintain and grow that image of “coolness” in computing, Apple needed to change its actions. It needed to take its computing expertise to the newer, cooler places of iPods and iPhones. Owning these is really cool, and Apple was a leader in this evolving change in what constitutes a cool device.

Compare this to Dell, who is trying to look cool predominantly through just computers. It is struggling. Had Apple stayed only in computers, I suspect they would be seriously struggling, as coolness moved to Blackberries or whatever. Apple could have become like those outdated circuses had it not moved with the marketplace to maintain its cool factor.

Similarly, Wal-Mart saw that there were changes in the marketplace that could threaten their ability to own the low price space. In the 1980s, Warehouse clubs were starting to show the ability to underprice Wal-Mart discount stores, so Wal-Mart created Sam’s Club. Later, in the 1990s, supercenters were showing the potential to underprice discount stores, so Wal-Mart converted its discount stores into supercenters.

The strategy at Wal-Mart is to chase whatever shows potential for unseating Wal-Mart’s ownership of the low price space. Today, the new threat is the internet, so Wal-Mart has recently decided to get more aggressive in that space. Wal-Mart is ever-changing in order to keep is reputation for owning low price unchanging.

Sometimes, it can be difficult to do the types of changes Apple and Wal-Mart did to maintain their relevancy. Therefore, instead of changing the actions, you may need to change the way you make yourself relevant.

Years ago, I was talking to some executives at General Mills. They were telling me about the evolving relevancy of Hamburger Helper. When Hamburger Helper was first introduced, it owned the space for dinner-time convenience. At that time, the average time to prepare a dinner was about 45 to 90 minutes. Hamburger Helper took only about 20 minutes. Hence, Hamburger Helper was a huge time-saver and the more convenient way to prepare a meal.

Then the marketplace changed. Microwave cooking came about, redefining what was considered a normal amount cooking time. In addition, there was an explosion in the number of people serving meals obtained from a fast food drive-up window. Suddenly, for a large sector of society, dinner preparation was down to around 10 minutes or so. In a world accustomed to 10 minute preparation time, the 15-20 minutes it took to make Hamburger Helper no longer appeared convenient.

General Mills tried to speed things up with faster-cooking noodles and microwave versions, but for years none of the experiments met the quality levels demanded by General Mills. Therefore, General Mills had to change the relevancy of Hamburger Helper. A revised advertising campaign for General Mills stressed how the quality and taste of Hamburger was worth the extra effort. With the latest economic recession—yet another shift in the environment—Hamburger Helper is now repositioned as being the low price alternative.

Toy companies like Hasbro are finding that the older “uncool” toys in their portfolio can be made relevant again by repositioning them as movie merchandise. GI Joe and Transformers are some of the latest examples. Based on their success, all sorts of old toy brands are being licensed to movie studios, including the old board games Monopoly and Risk. If movies are where the cool entertainment factor is, then associate the toys with that movie experience.

The changing environment can change the relevancy of your strategy. You can respond in one of two ways. Either change what you do in order to regain that same relevancy or find a new relevancy for what you are doing. Doing neither will eventually make your brand/company irrelevant.

When my children were little, I took them to the circus. The most exciting part of the evening was when one of the elephants decided to have a major bladder emptying right there on stage. The circus stage crew had to truck in a huge pile of sawdust in order to soak up all of the elephant urine (during the middle of the show). My son thought that was pretty cool. The rest of the circus, though, he was not impressed with. Let’s hope you don’t have to resort to what the elephant did in order to be relevant to your audience.

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