Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Thursday, March 10, 2005

A whole new ballgame in grocery shopping

This is brilliant. Strategic innovations are not a monopoly of the tech industry alone. In fact, many of the best strategy ideas we see theses days are in old and boring industries such as steel or retail. Evey now and then, an innovation like this comes along and turns conventional wisdom upside down. Such innovation can then turn into a solid source of competitve advantage.

The huge lesson for me personally is that sometimes the best strategy is contrarian in nature that goes fundamentally against the prevailing industrial structure. Think about this : here's retail, as old and boring as it gets. Accepted wisdom is that the industry is characterized by relentless competition and price pressure. The only players who can win are those pursuing a low-cost strategy through economies of scale and scope, and squeezing profits off their suppliers and labour. However, someone like Whole Foods carnves out a niche by focusing on a completely different set of value drivers : replace the "shopping for cheap grocery" with "be entertained by indulgent consumption of food". Brilliant! There is no way that the Wal-Mart's and CostCo's of the world can compete against such a player who is going after focused differentiation rather than low-cost.

Historically, the cool counterpart to this is SouthWest. Airline industry was all about comfort and full-service where each airline tried to out-do all others on selling a differentiated flying experience. Remember that this was back in the days when air-travel was seen as a luxury service. However, SouthWest came in, turned the conventional wisdom upside down and utterly focused its energies on providing a low-cost flying service focused on saving money and time. No airline in the US has been able to compete against that. In fact, SouthWest has become the model for no-frills, low-cost airlines around the world such as WestJet in here in Canada and Ryan Air in Europe. Goes to show that strategic innovation can take you a long way, especially if it's based on a contrarian vision of an industry structure.

-- Mahashunyam // 5:58 AM // 0 comments


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