Strategy

Chapter 1

• While this first chapter is less about strategy and more about developing the characters, there are some lessons for business. For example, business can make for unexpected allies, much as in life. Segmentation, for example, has a famous phrase associated with it: “Segmentation makes for strange bedfellows,” meaning that when you focus on customer needs instead of strict characterization, you often end up with segments with individuals you never thought would have been in the same segment. Conversely, traditional segmentation using demographics, for example, can often lead to not very useful segmentation schemes. An interesting example to make this point is that two individuals share the same characteristics that might lead some to put them both in the same segment: Both are male and born in 1948, both were raised in the UK and married twice, both are wealthy and famous, and both live in a castle. However, the two individuals are King Charles III and Ozzy Osbourne. While this is an extreme example, the point should be well taken.

Chapter 2

Lessons for Defending a Market (and What Not to Do)

• Scale equals bulletproof to disruption is how Victoria viewed Heritage. This was sheer folly. While scale can indeed provide a distinct competitive advantage and even a strategic control point, it is by no means absolute and can be disintermediated. The list of companies that found this out the hard way is long: Kmart, Circuit City, Blockbuster, Kodak, Sears, WeWork, etc. In short, while scale as a strategic control point can be a source of strategic control, it is one that can be disrupted or disintermediated.
• Victoria dismissed Trish and the consultant’s report way too easily. Note that what got you to the dance isn’t going to take you home. This is a very common dilemma that entrepreneurs face as the skill set to build and grow a company is quite often not the same skill set that it takes to run a mature organization.
• Game theory is something we do with clients often: Know your enemy/competitors. Scarlett did this very well—she knew Victoria was allostatic! Study your competition obsessively and live inside their minds. In one of our game theory sessions, a client’s senior executive spent a month prior to the game theory exercise getting “in character.” To him, that meant being able to come to the session envisioning a competitive response by knowing everything there was to know about the competition and what motivated their executives. Anticipate and “game out” potential disruptors well before you spot them in the market.
• To this end, use decision trees and game theory; never ever be caught by surprise. Do your homework, or at least hire someone to do it for you. Chapter 8 in The Carrot and the Stick goes into how to do this in detail, but the essence is to create decision trees that represent every combination of strategic moves that could happen in the market and choose your initial move that gives you the best chance for success in the market. It works—use it.
• Disrupt yourself! What would you rather have, you disrupting yourself and cannibalizing your own sales or someone else doing the same thing.
• Lessons from history matter:
• There is an excellent History Channel miniseries called The Men Who Built America. It was set around the Industrial Revolution in the United States in the early 1900s. It is startling to see the parallels between what companies were doing back then and what companies are trying to do today. In a telling example, Rockefeller was trying to spread the claim that electricity was unsafe, caused fires, and should be abandoned as a technology. The reason why he wanted to do this, of course, was that he owned the company Standard Oil, which provided all of the oil in the lamps that lit buildings throughout the country. Were electricity to be adopted, it would put Standard Oil out of business. Of course, Rockefeller wasn’t going to stop electricity from happening. Yet we see time and time again new technologies with individuals advocating their elimination. These days, it’s AI, social media, TikTok, you name it; the examples are nearly endless.
• Rivals’ reactions are incredibly consistent. We know from the academic literature on game theory that rivals are incredibly consistent in how they react to any move you make in the marketplace. The same thing applied to Scarlett.

Lessons for Disrupting a Market

• For Scarlett at first glance, one could imagine or think that she overreacted to some of what happened. However, it’s kind of like the customer that blows up over one little thing isn’t really blowing up over one little thing. Most often, it’s the cumulative things that have been building up that they are unhappy with that lead them to seemingly overreact to one little thing when, in reality, it’s the cumulation that they are reacting to. Same thing with Scarlett with her childhood, James, Rick and Victoria, and now Victoria again.
• Strategic fit and timing: Scarlett put together a packet of quality and talented individuals at precisely the right time for AI, IoT, and supply chain interconnectivity to be integrated in the way that could materially affect performance. Like Steve Jobs’ creation of the iPhone with Apple, timing is everything. Many claim that the iPhone would not have been successful had it been launched even a couple of years earlier since it needed the cellphone bandwidth to support the things that the iPhone was set up to do. Similarly, Scarlett came into the market at exactly the right time, right when AI had the capabilities to make a difference and at a time when an old-line retailer would be especially vulnerable. While Scarlett’s plan was indeed brilliant, but much like the iPhone, had it been put into place even a couple of years earlier, it may not have succeeded. 
• The strategic brilliance of vengeance:
• Building scale by combining various entities using a third-party, arm’s length supplier through the use of IoT-enabled supply chain, AI, etc., is brilliant. Scarlett recognized that the combined scale of all of the smaller rivals was actually greater than the original Heritage scale, entirely eliminating Heritage’s advantage with one strategic swarth. Further, she took advantage of her own unique skill set in the realm of AI and her inside knowledge of Heritage to implement her plan. Brilliant.
• Data on many as opposed to the data on one, something important today in various aggregation models. It is especially important with respect to AI. Insight gained from data across multiple retailers and multiple regions, with its inherent larger and more diverse set of customers and transactions, is almost always greater than the inside gain from a single, monolithic retailer. In the chapter, the customer insight that Scarlett could gain by combining retailers that were disparate in the regions and customer base would give it a substantial advantage over any single retailer, including Heritage.
• In practice today, aggregating businesses through a firewalled third-party provider is actually viable. Aggregation is often very compelling and a new business model today. Independent, firewalled third-party aggregators are real (Amazon, healthcare with HIIPA anonymity, etc.).
• Scarlett’s whole business model created a flywheel, self-reinforcing business model. Scale, time to cash flow positive, and self-reinforcing growth are all built in from day one. (A good counterexample is MoviePass, which actually lost with scale. See https://wordpress.com/
  post/competesmarternotharder.wordpress.com/136.) In the book chapter, each retailer had an incentive to join Shiftlink Dynamics’ system because it lowered their costs and the probability of inventory stockouts. This increased the revenue to Scarlett’s company and gave them the resources to do an even better job providing insights and lowering costs. This, in turn, gave them increasing leverage over those that were not part of the system since those that were not part of the system were now at an increasing disadvantage relative to both Heritage and their other small arrivers that were now part of the system. The flow of money and incentives created a virtuous cycle, thereby establishing a self-reinforcing business model.
• Shiftlink Dynamics had built a system where being left out was greater than the cost of being included. As the system grew, as noted above, being left out of the system was increasingly expensive, so the fear of missing out (FOMO) grew as Scarlett’s company and adoption of it grew.
• In the chapter, the sum of smaller retailers (through Shiftlink Dynamics) could dominate the larger company (Heritage) without worrying about antitrust considerations since that coordination was provided by an independent, firewalled, third-party provider.
• DATA, DATA, DATA. Today, especially in a world of AI, it is all about the data, and Scarlett was now steadily adding retailers throughout the country, thereby giving her a substantial advantage in the marketplace. Furthermore, we cannot underestimate the importance of IoT, AI, and supply chain. Digital is pivotal today. So is data access.

Chapter 3

Lessons for Defending a Market (and What Not to Do):

• Johnny-Go-Lucky: the importance of positioning and location. Right place, right time. He knew that his success was based on the traditional three main real estate items: location, location, location.
• The basis for the franchise model is solid.
• The organization can grow quickly with others’ capital, namely, those that put in capital at the individual franchise.
• You have ears to the ground—use them! Chick-fil-A is a great example of an organization that uses its franchisees as an integral part of their customer discovery. They know that a franchise knows the customer better than anyone.
• Lindsay was the “canary in the coal mine,” but Victoria didn’t listen. Countless firms have followed in this tradition and continue to. Think of We Work, MoviePass, etc. Do you have a “canary in the coal mine”? Do you listen?
• The worst place to be in business is always in the middle. 

• We know, for example, that both first movers and late entrants have the best chance of success in a new market. Being in the middle (e.g., fast follower) is the worst place to be. Think about it: A first mover has the advantage of brand and learning, while a late entrant has the advantage of scale and of learning from others. Those in the middle have neither.
• In retailing, the likes of JCPenney, Sears, Borders, and others are testimony to being in the middle as a retailer is a recipe for failure. 

Chapter 4

Lessons for Defending a Market (and What Not to Do)

• The signs are the signs:
• There are many examples like this, of course, but one interesting leading indicator of a recession is the “lipstick theory.” Lipstick is discretionary, so one of the first things to get cut from the budget when times are hard is lipstick. Reading these signs, whatever they may be, can be an important leading indicator of times to come.
• One is the use of floor space in a retailer. When you start to see a greater percentage of retail space devoted to non-core items, this is a cause for concern. Rite Aid, for example, had an increasing percentage of sales coming from non-pharmacy-related products a couple of years before its eventual demise. Borders had a majority of sales coming from non-book items a few years before it declared bankruptcy. The same thing is happening today with Barnes & Noble. Some are able to transform the operations and move to a new space, but this is the exception rather than the rule.
• One example of the use of signs in business, albeit an ethically abhorrent one, is what Blockbuster did to build its business many years ago. At lunch with Wayne Huizenga at the height of Blockbuster’s success, he boasted about how they built the business at the expense of the local mom and pop video store. What he described was the process of what he called “stocking deep.” He went on to explain that they intentionally located Blockbuster stores as close to the local mom and pop video rental stores as they could. At the local Blockbuster stores, they strategically “stocked deep” of all the latest titles so that they would never run out. The way they were able to make that work financially was due to the fact that they were expanding rapidly in the number of stores that they were operating. When that formally hot title was no longer as popular, they merely shifted inventory from the old store (where they now had too many of the no longer top videos) to the new stores, thereby stocking the new stores’ inventory at little or no cost. The intent of the strategy was to drive the mom-and-pop retailer out of business. (They couldn’t afford a similar strategy, and hence, they were often out of stock of the most popular titles each week.) In fact, Huizenga boasted that they knew that the mom and pops were going out of business when they posted the two-for-one signs on their windows. It was just a matter of time, he said, before they would go bankrupt. Once the two-for-one signs went up, Blockbuster stopped stocking deep at that local store. While a great business strategy, it’s tough to sleep at night when your business is built on the backs of local small businesses.

• Impact of external business environment: Shrinkage, crime rates, “smash and grab,” etc., have been emboldening retail theft (recent retail numbers on theft support this); you can’t control or usually even influence this. However, there are methods to develop strategies that don’t depend on your forecast of the future being correct. For example, scenario-based planning methods attempt to develop strategies that are “robust to future states of environment.” An example is Boeing’s 787 “Dreamliner” launch. Since the 787 had twenty percent better fuel efficiency than rival planes, it would sell well in a high fuel price environment. Conversely, in low price fuel environments, it would still be successful since it was efficient in point-to-point routes as the economics of the plane often didn’t require it to have to go through a hub. Analogously, Scan Rite had developed a strategy that was robust to future states of the environment since it wasn’t affected by the level of retail theft. There simply were no products on the shelves, so shrinkage or retail theft was nonexistent and the model was robust to future states of the level of retail theft. Is your business similarly protected, 

• One hopes you can see these signs in advance. If the first “sign” you see is the significant loss of share that Lindsay saw in Bladensburg and then Bill saw a bit later on his financial dashboard, it is often already too late. It is imperative to stay ahead of the curve. Always assume you are being disrupted.

Lessons for Disrupting a Market

• “Showcasing” is a real phenomenon. 
• Many believe that the future of retailing lies with retailers that won’t actually carry product but rather will be paid to show and demonstrate manufacturer products. Anything bought on-site would be delivered elsewhere, much like the Scan Rite example in the book. Think to how Tesla has altered the automobile retail landscape: You can go to a Tesla experience center and test drive the car, but you have to order and pay for it fully online. Many believe this is the future of retailing more generally.
• To that end, CNBC’s Jim Cramer says that Best Buy is his favorite store: “This is where I go to check out the products that I buy for cheaper online.” This may represent the future. Note that what economists term “search” goods (products that you can evaluate the quality of at point of sale, like clothing for example) versus “experience” goods (products that require you to bring them home and use them in order to evaluate their quality, like a can of soup or paint) versus credence goods (ones that you can’t evaluate the quality of even after purchase: an auto mechanic for example) are all likely to have different “showcasing” opportunities.
• Companies like Scan Rite that lead in this “showcasing” movement will likely have a HUGE first-mover advantage.
• Scan Rite had many advantages:
• A clean slate was most important. You can do all that they did if you have no legacy systems, people, culture, or business model; it’s easier leapfrogging incumbent competitors with a superior business model.
• That stockouts are free is very important and baked into the design. You have to design for growth from the outset. They were designed for scalability and designed to be a self-reenforcing business. It’s imperative to success today but particularly so for a startup.
• Their stockout plan solved an important customer pain point. No checkout lines? Another customer pain point solved. Add to that no shrinkage, no sales associate, no expensive inventory, and cumulatively, that all makes this a brilliant business model. Much of this could be accomplished, at least in part, due to their being unencumbered by legacy.
• Note the use of AI, NFC, and geo tags here. They are not used as gimmicks; rather, they are being used to make it easier for the customer and to solve very specific customer pain points, some of which customers never knew they had (which reminds us of the old Henry Ford quote: “If I asked my customers what they wanted, they’d say a faster horse). Better yet, it also lowers the cost and improves the efficiency of operations.
• An example is their displays/apps. This made things easier for the consumer, but it also eliminated stock outs and empty (valuable) shelf space (which reduces opportunity cost). The ability to alter dynamically and instantly what is displayed on the shelf due to changing retail demand, inventory, and supply chain dynamics, etc., is better for the customer, their profitability, and the environment.
• Note (as discussed above) the link to sustainability issues; they were also inventing a more sustainable business model. Leveraging all three parts of the triple bottom line of people, planet, profits, these are often win–win–win. Use technology to affect impact, not for technology’s sake.
• They were able to cater to multiple segments by also incorporating the scanner gun and actual checkouts for the “technology challenged” and could give them better service at lower cost. Brilliant.
• Very important: Scarlett’s company could leverage multiple data sources on inventory, supply, and customer behavior and bring them together seamlessly. This made for a huge gain in efficiency and a better customer experience. It was kind of like shopping online with an in-store experience.
• Scarlett, Shiftlink Dynamics, and Scan Rite recognized the “Sam Brannon strategy.” Sam Brannon was one of the few to consistently make money during the Gold Rush in the United States during the 1840s. Instead of panning for gold, which left most people penniless and bankrupt, he sold overpriced pickaxes to those that would eventually go bankrupt. Often the opportunities are behind the technology, not in the technology. Scarlett recognized that the opportunities were in the use of AI, not in AI itself.

Chapter 5

Lessons for Defending a Market (and What Not to Do):

• The importance of attention to detail and specifics: predetermined metrics to guide the business, key performance indicators (KPIs), finance metrics in general, the use of hurdle rates, a generalized living and breathing adherence to the need for ROIC (return on invested capital) to be > WACC (weighted average cost of capital); in short, your risk-adjusted return on invested capital has to be greater than the cost of obtaining it. Finance matters. Every executive has a material and fiduciary responsibility to shareholder/owner interest
• The importance of the use of a financial dashboard, metrics, and monitoring: This enables you to spot changes as a leading indicator (as opposed to when it’s too late). The Bladensburg store was indeed the canary in the coal mine, but no one was listening to the noise it was making. George, as chief commercial officer, should’ve been one of the first to spot this.
• The advantage of data outside of the one data point (here, Lindsay’s Bladensburg store) is that you can discern a one-off versus a more general trend (here, vis-à-vis Bill’s dashboard). Get and use as much data as you can.

Chapter 7

Lessons for Defending a Market (and What Not to Do)

• Note Lindsay’s “go-to” Cabernet versus Victoria’s. The corporate “ivory tower” can isolate and insulate you from the best source of information and leading indicators. (Always find a way to “zoom in, zoom out.”)
• If it doesn’t pass the strategic due diligence test, it never gets to the financial due diligence test; ultimately, it must pass both. Don’t forget this: It should never get to finance if there isn’t a strategic fit, but it has to pass the financial rigor regardless. Focusing on strategy first is important.
• The power of data and specifics is very compelling here. Trish and Lindsay put together a very compelling case.
• Trish noticed the business strategy from the press release, so much so that “Bill’s hair on the back of his neck stood up,” yet it took seemingly forever for them to move on this. Turning an ocean liner can be difficult and time-consuming, as they say.
• Learn from what Bill did well. 

• He formed a hypothesis to be disproven.
• He then asked an unbiased third party (Trish) to investigate.
• Then, armed with evidence, he acted. 
• What Trish did well: She didn’t stop at the face value of the first set of results; she dug deeper.

Lessons for Disrupting a Market

• Scarlett and Shiftlink Dynamics used a judo strategy and “stealth mode” for as long as they could. Like Walt Disney buying Florida real estate under various different company names when he built Disney World, “designed for the smaller player” kept them off the radar for longer. It takes a while to realize that many, many smaller players aggregate into one giant behemoth. That was an advantage to be kept under wraps as long as possible, and it worked!

Finally, what Scarlett did well trumped everything else. The original strategic control point for Heritage was thought to be scale, and it was. However, Scarlett found something to disintermediate that strategic control point, and it was brilliant. Victoria never saw it coming, and there’s a lesson in that: Owning a strategic control point can make you blind to disintermediation (see Blockbuster versus Netflix, medallion owners versus Uber, name brand hotels versus Airbnb, Gillette versus Harry’s and Dollar Shave Club, Luxottica versus Warby Parker, etc.).

Chapter 11

Lessons for Disrupting a Market

• Shiftlink Dynamics’ success was the combination of the following:
  • A brilliant strategy
  • Staying in stealth mode as long as possible (This was aided by a Roy Disney approach to gathering up and aggregating smaller players.
  • Victoria being allostatic
  • Timing: AI, IoT, and aggregation models all aligning (Think of Steve Jobs and the original iPhone, which owes its success in part to its timing.)
  • The reinforcing nature of the business model:

• • • The more retailers that join, the more savings and more insight.
    • Data across multiple retailers provide more insight than data from just one.
    • The more savings and insight, the more incentive for other retailers to join.
    • The more retailers that join, the greater the pressure for yet more retailers to join.
    • The more retailers that join, the more the insight and cost savings.
    • And on and on—just like Amazon’s flywheel of growth
    • Scale not only decreases costs but also reinforces the business and business model.

Finally, once they hit critical mass, not being in the retailer aggregation can be a death sentence for a smaller retailer. (They can’t compete with Heritage on scale/cost and can’t compete with other retailers in the system for the same reason, so they almost have to join!)

Chapter 12

Lessons for Defending a Market (and What Not to Do)

• This section had a candid and accurate assessment of Heritage’s strengths and weaknesses, something that had been lacking to that point:

• • Customer – The customers were loyal, but satisfaction scores were declining rapidly.
  • Product – Assortment was best in retail; stockouts were the worst in retail.
  • Distribution – Weakest area: carried too much of the wrong inventory; technology was old and dated.
  • Brand – Once was the strongest in retail, but recent surveys showed significant weaknesses in many brand metrics and KPIs.
  • Service/operations – Strong but lagging any Shiftlink Dynamics customer
  • Experience – Below average and falling
  • Employees – They were having serious morale issues within many areas in the business.

• More generally, a closer examination of Heritage’s business model suggests:

• • Products today are easily imitated (systems like this or not) and often require heavy and time-intensive expenditure.
  • Experience matters. While brand may indeed be an asset, customers will walk away if you can’t deliver.
  • What are the customer pain points in your industry? Know them inside and out. Always start here.
  • Customer discovery journey (recall the Andrew Berlin story above): Map out the customer journey and learn from it. Don’t do this yourself; you know the business too well. Hire someone, an intern even, that has never walked the shoes of the customer before and learn from what they see. Use empathy from the eyes of your customer. There are so many biases we each bring to the table that we should never do this ourselves.
  • Fallacy of the VOC (voice of the customer surveys): A number of years ago, British Airways did an exit survey from London’s Heathrow Airport, asking people what their top three reasons were for choosing one airline versus another when they were traveling from London to New York. The top three responses were: 1) safety, 2) route, and 3) schedule. This is very typical of voice of the customer surveys. While I can certainly lose the business by being less safe, not flying direct, or having an inconvenient schedule, I can’t win the business there; all airlines are equally safe, all fly non-stop direct, and all leave about the same time. These are must-haves. I can lose the business there, but I can’t win it; no one can claim to be a safer airline than their competitors. You win or lose the business not on the top three VOC stated reasons; you win or lose the business on what we call “salient differentiators,” things like frequent flyer programs, service, seat comfort, and on-time performance. If you concentrated only—or even primarily—on the top three VOC-stated reasons, you’d likely lose to the competition on the salient differentiators that are the basis for winning or losing in the market. Be wary of VOC surveys.

Lessons for Disrupting a Market:

• AI and IoT-connected supply chain implies lower costs and addresses a variety of customer pain points, creates a strategic control point, and is sustainable and efficient. It is the future of multiple industries, not just retail.

• Who wouldn’t want to invest in the right-hand side below? A candid, honest, and plain assessment of your business model as compared to that of the “traditional” incumbent in an industry can often reveal a great deal. Here, it looked like this:

  • Heritage                                                    Shiftlink and Customers

     

    Old line                                                      Unencumbered by legacy

    Scale (they thought)                                Even greater combined scale

    Systems (legacy) in place                        Design systems from scratch w/ AI, data, etc.

    Frequent stockouts                                  AI and POS-integrated supply chain, IoT, etc.

    Lost customer focus                                 A flexible, lean new design that will evolve         

    Old-line distribution
    contracts, etc.                                            Customer focus imbedded in the design                                        

  • so there really is no good way to lose it.

Chapter 13

Lessons for Defending a Market (and What Not to Do):

• Bill started where every firm should: with the customer. Nike famously had one chair empty in every meeting: the chair to represent the voice of the customer. This has to be part of every good culture. Is it part of yours?

• Aspiration: What do you want to be known for, what customer archetypes are you serving, who are you competing for, and what do you want to be known for? Based on the destination you are choosing, what is your opportunity to win? You need to put a stake in the ground and deliver to the main archetypes you are serving. The executive team was finally addressing these questions, but it was too late. Are you asking the same questions?

Chapter 14

Lessons for Defending a Market (and What Not to Do)

• For Victoria and Heritage, scale was both a strategic control point and something that aligned incentives in the channel; both were originally, but now both were gone due to Scarlett’s brilliant strategy. Strategic control isn’t an ending point; rather, it’s the beginning. Use the margins that you get from strategic control to leverage that into new market opportunities. The revenue you get from strategic control should be used to explore and find the next strategic control point. “You don’t know what you got till it’s gone.” By analogy, Victoria’s stores are going to be “paved over to put up a parking lot,” as the Joni Mitchell song says.

• It was so ironic that Victoria fully understood the point of a strategic control point but took it for granted. A strategic control point needs to be nurtured, protected, and built into the next one, presumably in an adjacent market.

• Sanjay’s idea was indeed a great response to Shiftlink (even if late). Service through AI is the right move. But with Shiftlink having access to many(!) retailers, it’s not clear that they couldn’t do an even better job at this; data insights from many and diverse retailers are likely to be better than for just one monolithic retailer.

Lessons for Disrupting a Market

• Building a strategic control point and how to disintermediate in today’s environment: This was a textbook example of how to do this. Heritage was a textbook example on how to use scale to build it initially (the “strategic control point that Moose built”) and Shiftlink Dynamics on how to disintermediate.

• Shiftlink Dynamics: Their strategic control point was now the network. Brilliant. How could they build on this into adjacent markets? What skill sets did they possess that could be leveraged into other adjacent market opportunities?

• Not every customer wants cappuccinos and flowers. The ability to segment, prioritize, and give associates discretion is paramount here. You can use AI to do this for you. In many ways, it can become the modern segmentation tool, “segmenting” down to the individual.

• Today, we can customize with AI so that every customer feels as though the offering is customized for them, even if it isn’t.

• The old Burger King slogan was “Have it your way!” This can be constructed across the board. This is what we should strive for today and lessen the importance of segmentation today with AI providing that with little or no cost or customization required.

• Note the reference to Blue Bottle Coffee. Nestle owns it, yet all local customers feel it’s their brand. Is there a lesson for your brand?

Chapter 15

Lessons for Defending a Market (and What Not to Do)

• Note that keeping the brand front and center is what they It doesn’t solve any customer pain point or customer problem. This is inside-out thinking; we need outside-in thinking.

• They needed a timeline and risk mitigation strategy for the launch as well as a competitive and capabilities map, yet none of that was even on their radar. This was a classic strategic miss.

• Further, they were already significantly behind the ball on this. They should’ve been in process a long time ago, and they should’ve been doing this all along. If you’ve spotted something at this point, it’s almost always too late.

• It was not at all clear that their SaaS model would have been better than Shiftlink’s (for the aforementioned reasons). Indeed, we have many reasons to believe it would have been inferior.

• The one area where they might have a strategic advantage was if they could get traction in the larger market. Then, they might be able to leverage multiple retailer insights in ways they could not before. This had legs. Further, it did attack a legitimate weakness in Shiftlink’s approach.

• Recognizing the need for addressing strategic control and the competitive and capabilities map was spot on—but should have been done twenty years earlier! This needs to be done proactively, not reactively!

• The initial AI approach proposed was admittedly poor. This is almost always a bad strategy:

• In other words, do you want to become known as a brand in this area by introducing a really poor product that customers will know you for first? And you think that’s going to help with AI into what comes later (i.e., with the better product)?

• What Victoria did right with her questions was to prioritize; what she didn’t do right was to approach this a) realistically, b) from the customer’s lens, and c) “R t -L.”

• Formulating the “big bets” but deciding to compromise to the “bad bet” in favor of putting the stake in the ground on the big bet is a mistake in almost every case in business.

Chapter 16

Lessons for Defending a Market (and What Not to Do)

• The death–cost spiral‎ in cutting the staff by twenty percent is pretty obvious. You cut costs, and as a result, your customers notice degraded customer service and attention to detail. So, customers start staying away from your store, and your revenue falls. As a result, you cut costs more, and as a consequence, customers observe even further degraded service. So, you cut costs further. The cycle goes on and leads to the death of the company. This is exactly what they started by cutting staff by twenty percent. Saying it’s not a death–cost spiral isn’t going to change it from being one.

• That said, what Victoria did right was retrench to and protect the core. If the core isn’t right, not much else will matter. When times are hard, a good strategist often thinks about how they can protect their core first and foremost. The classic example is when Steve Jobs went back to Apple and famously used what is referred to as the “2×2 example.” He took the four quadrants that represented the core products and shed every other product category that wasn’t in those four quadrants. This has often been credited with saving the company.

Note that Victoria had the right intention now (she put her stake in the ground) and had the right “big bet” in mind. It was unfortunate that she had this right but compromised with the poorer, watered-down, intermediate AI solution.

Chapter 17

Lessons for Defending a Market (and What Not to Do)

• It is not at all surprising that this had little success. As noted above, it is almost never a good strategy to initially come in with a knowingly inferior product for any reason. The customer gets to know you and associates you and your brand with poor performance. One could’ve easily predicted that this inferior first version (a kind of “AI light” system) was doomed to fail.

• Had they done the AI/SSaS to begin with, scale plus this would have been an impenetrable strategic control point. Yet another example of acting too late. Had they been developing this all along, they would’ve been ready with the launch and may actually have survived.

Chapter 18

• Scarlett and Victoria were now reversed: Scarlett’s gloating gave Victoria the key to disrupting her! The tables were turned. Victoria was no longer allostatic; Victoria had changed. Scarlett didn’t know this. Scarlett had become arrogant, while Victoria was now humble. Strategically, you always have to be aware of and ready for this.

As discussed above, there are many lessons to be learned from the book, lessons on various components of both strategy and tactics on many dimensions. What you have read above is our take on this, but we assure that there are many more that you may have thought of as you read through the book and our comments above. Take these in and learn from them, for it is in these learnings that the foundation of our motivation for writing this book in the first place can be found.