Try This Strategic Thinking Hack
It has been said that the true competitor of a Harley Davidson is not a Yamaha, or a Honda, but in fact a conservatory. Within this quip lies the most fundamental of strategic truths; one which vanishingly few businesses acknowledge or understand:
Your true category is probably not defined by products similar to yours.
Naturally, we could say that Harley Davidson exists in the “motorbike category”, and with a one-dimensional reading of the situation, they certainly do. But that fact does not give us an accurate picture of market dynamics or buyer thought process. The majority of Harley’s sales do not come via the punter performing a textbook competitive analysis, for instance:
- Deciding they want a motorbike
- Looking at the different models, weighing up the pros and cons of each
- Making a purchase decision based on which matches their needs best
No, more likely (in their particular case) is that someone simply wants a Harley, but has to decide whether it’s a realistic / responsible decision in their current life circumstances. In other words, whether those savings are going on a Harley or a conservatory.
This understanding naturally has a profound impact on the strategic thinking that Harley uses to run their business. If they saw themselves as simply being part of the “motorbike category”, they would naturally give a lot more attention to matching or topping the offerings of competitor marques – thus gradually becoming more and more like them. But as they don’t see themselves like that, they are free to go in a more distinctive direction – one which makes them, for many, an automatic choice.
Such sophisticated “true category” understanding and strategic thinking would be transformative to the majority of brands, but very few ever look beyond the set of businesses superficially similar to their own.
Nowhere is this one-dimensional thinking more rampant than in the FMCG/CPG categories. Such brands face a structural disadvantage on this front, as their sales figures are provided by grocery chains within their “listed categories”: for instance “juice” or “biscuits” or “soap”. This naturally brackets their thinking, and thus encourages a competitive dogfight for hallowed “market share” within that niche.
Rarely do they realise that true strategic advantage can be gained by bracketing themselves with products from outside of their category – products with which they are genuinely competitive in the real world.
Take for instance bananas. Bananas, superficially, belong in the category of “fruit” along with say apples, oranges, and mangoes. If bananas were a brand, that’s who they’d be measured against, and from whom they’d be expected to “steal” market share. But how often do people weigh up the purchase of a banana versus a mango? One is an ideal on-the-go product, whilst the other is palpably not. It’s quite hard to see them as interchangeable, even if they are both fruits. And then what about other non-fruit products which many people substitute with bananas? For some, bananas – with their handy “packaging” and “indulgent” taste – are essentially a confectionary substitute. For others, with their energy-giving properties, they are a breakfast or pre/post-workout food. Thus bananas actually exist in a variety of categories simultaneously and have as their “competitors” not only mangoes, but also Mars bars, Lucozade, Nutri-Grain, bowls of porridge, and bags of nuts.
“Brand banana” would do well to acknowledge this, and not let themselves be seduced by what happens to be going on in the “fruit” category at any given moment.
For myself, I can readily recall two CPG clients whose strategy was explicitly built on re-interpreting their category. In each case, the brands had a superficial “primary category” (i.e. the collection of products that look like them), and a true “secondary category” (i.e. the products that do a similar job to them, but which are superficially different). By shifting attention to the secondary category, they were able to command an immediate competitive advantage due to their profound differences in that alien space (i.e. consider how a banana is bigger, cheaper, and more natural than, say, a Nutri-Grain bar; this is a more effective competitor than whoever Nutri-Grain’s supposed competitor is).
It’s a staggeringly simple device, but one that will remain invisible to most businesses due to the way financial figures are reported. I think it’s a little coincidence that these two clients I have in mind were the two fastest-growing CPG brands in the UK in 2018.
So, the takeaway is simple – can you identify a “secondary category” of your own? Not all businesses will have one (toilet paper is, let’s face it, probably toilet paper), but the majority will. If identified correctly, you will probably find yourself in a territory where your strategic thinking now has a far clearer path to growth than in your primary category – and immediate ideas on how to make that happen.