Fit or Sexy - Survival Strategies from
Business History

by Byron Kalies

Legend has it that there was a high profile meeting at Parker Pens Corporation in the mid 1980s. Parker Pens had been successful for a long time. They had continued to be successful in the face of a number of challenges - cheap imports, ballpoint pens, roller ball pens, etc somehow by the early part of the decade they had lost their way. The approach that had evolved was one of competing in foreign markets and neglecting their traditional markets. So, a strategic meeting was arranged and there was one item on the agenda: "What market are we in?" Answering this question transformed their business.

Someone asked the question; "When did you last receive a Parker pen?" Ask yourself that question. I guess, like most of us you'll have a similar response to the people at the meeting - birthday present, Christmas present, presentation - a reward of some sort. Parker Pens concluded that they were in the gift business. They were not in the market of competing with cheap pens, etc. This insight transformed their business. Instead of continually cutting cost and quality they spent more. They redesigned and repackaged their products. They increased their advertising budget by 60%. They raised their prices and began to target the "style-conscious and affluent sector." Despite a world recession Parker pens increased its turnover by almost 50% in the last half of the decade.

So, what market are you in? Do you know for certain what your USP (unique selling point - to use marketing jargon) is? Macdonalds thinks they're in the real estate business. When I first read this I couldn't believe it. Then I thought about it and it made sense. If the fast food industry collapsed tomorrow Macdonald's could survive. Think of the positioning of all their sites?

According to some, you are either in the 'fit' market or the 'sexy' market. If you're in the fit market you're continually adapting, continually changing, looking for new opportunities. This would be an Organisation like 3M. This $20 billion company has proved incredibly adaptable over the years. They started in 1902 as the Minnesota Mining and Manufacturing company mining for material for sandpaper. For the next 100 years they changed and developed - from sandpaper to Scotch tape, magnetic tape, microfilm, overhead projectors, postit notes, respirators, pharmaceuticals, high tech products. One of their secrets has been the ability to change and adapt. This hasn't been an accident. There are research laboratories in 31 countries outside the U.S. and over 2,600 employees in these areas.

Or, is it sexy like Ferrari or BMW - market leaders in a particular niche with a loyal following. These Organisations work hard at staying sexy and making it look effortless - BMW employs more than 100 staff in their acoustics and vibration technology departments. They ensure that everything from the sound of the windscreen wipers to the sound of the doors closing is acoustically perfect. Computer simulator designer Christian Muhldorfer explained after one project when describing the sound of a new development model - "The door now has a full, reassuring feel".

If you're in the 'fit' camp you need to be spending as much time looking at the competition as you do at yourself. You may be the leader in a certain area but you know how quickly everyone catches up. Gary Dicamillo, CEO of Polaroid said in an interview in 1998 "Some people think photography is going to go away as everything in our industry becomes digitised. But I disagree. I think analogue photography will endure." Three years later they filed for bankruptcy with nearly $1 billion in debts.

Even in the 'sexy' camp you need to avoid complacency. Take the example of Coca-Cola and New Coke in 1985. Having survived as the number one soft drink since 1886 Pepsi dared to challenge it. The success of the "Pepsi Challenge" brought Pepsi to within 5% of Coca-Cola's overall share of the market, and even overtook them in supermarket sales. So what did Coca-Cola do? They panicked. They dropped the product that had kept them in business for almost a century and launched New Coke in a wave of publicity. People responded; "Tastes like sewer water", "Two- day-old-Pepsi", "Dear Sir, Changing Coke is like God making the grass purple...." and "You have taken away my childhood". It took over 400,000 calls and letters to Coca-Cola Headquarters to get CEO Roberto Goizueto to make a complete U-turn just 78 days after the launch.

What are the lessons here for businesses? I guess the key one is to ask yourself exactly what business you're in. Are you in the gift business, the 'unique craft business', the 'inexpensive, mass production business'? Get as many people involved in discussing this. Ideally as many of your staff as possible and stand around a flipchart and discuss it. Who are your customers? What do they want? Who aren't your customers? What's important to you as a business? What business are you in.

For the 'sexy elements' of your business you need to protect them. These are the areas that you can't compromise on. These are the aspects of your business people buy. People stay at the Ritz-Carlton because they know they will be looked after. It may be expensive, but they know they will be looked after. If Ritz-Carlton suddenly started dropping their prices ....

For the 'fit elements' it's a matter of looking outward as well as looking inward. What is there out 'there' that could impact on your business? Where's the next threat coming from. Identify this threat before it ruins you as Encyclopaedia Britannica found out when they ignored the threat of the Internet.

I guess few businesses are totally 'sexy' or totally 'fit' in this sense. There will be elements of each and as such you'll need to pay attention to each. Learn from the companies that thought they were 'fit or sexy' but ultimately weren't - Bethlehem Steel, Polaroid, Trans World Airlines, Delta Airlines, Encyclopedia Britannica, Baring's Bank, Arthur Anderson, WorldCom, Lucent ... etc.etc.

Byron Kalies is a Liverpool-based writer with 12 years' international experience as a management consultant. Recent publications include Across The Board (U.S.A.), Career Times (Hong Kong), CEO Refresher (Canada) of course, Guardian (U.K.), Sydney Morning Herald (Australia), MIS (U.K.), Management First (U.K.), Lifelong Learning (U.S.A.), Business Day (South Africa), Business Plus (Ireland). Book "25 Management Techniques in 90 Minutes" (Management Books 2000) published April 2005. He can be contacted through his web site at or emailed at .

Many more articles in Competitive Strategy in The CEO Refresher Archives


Copyright 2006 by Byron Kalies. All rights reserved.

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