JP Hanson wrote an article for MarketingWeek titled Big brands must not play the startup game.

« If you work in strategy, regardless of what kind, it is imperative to understand and account for the key contextual factors that dictate the best course of action. Small brands do direct-to-consumer (DTC) sales and ecommerce not because they necessarily want to – though they may – but because they practically have to.

Few, if any, startups will be able to obtain distribution in traditional channels, and even if they did, they would not have the scale necessary to provide adequate supply. Nor can they afford TV advertising, so their media investments inevitably have to go elsewhere.

As the companies grow and mature, the key contextual factors change. In order to maintain reach – be it through product, distribution, media or otherwise – the approaches do too. Nielsen data, tracking 120 DTC companies, showed that the group’s TV ad spend increased to more than $2bn in 2018, up from $1.1bn in 2016.  »

« In a three-battlefield game, a player with 25% more resources has a 60% expected win ratio and a player with twice the resources has a 78% expected win ratio. In other words, there is still randomness, but decisively less of it. The bigger the brand, the more likely it is to win. »

« To improve the odds, the weaker player has to add dimensions to the game. The more dimensions a game has, the less certain the outcome, as the weaker player will force the stronger player into allocating resources more thinly, weakening its relative advantage. »

« Importantly, however, the decision to refuse to engage where the strong player has a power advantage is a strategic one. It thus inherently requires a strategic process and must factor in complexity, randomness and other similar market traits. Consequently, agile is not an excuse not to do strategy. In fact, agile requires one. »

« Large companies can deploy defensive-cover strategies to deal with the added dimensions, but that is not the same thing as taking a ‘hedonic’ route and covering everything. Resources, even for category leaders, are not endless.

Nor is ‘pivoting to agile’, as is currently oft-argued for, a very clever solution… The effort required to continuously change course is much larger for an aircraft carrier than a dinghy.

Instead, large companies should aim to be as anti-fragile as possible, acknowledge their weaknesses and play to their strengths to the extent possible. All of which should be considered in the strategic process.  »

 

 

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