All of recorded history confirms that the relative strength of a nation’s military power largely determines the degree it can assert and enforce its imperialistic, economic and political aims. The waxing and waning of its relative military power tends to closely correspond with the rise and fall of nations.
Similarly, the relative power of a commercial organization’s marketing, sales and distribution capabilities largely determines the success or failure of a business worldwide.
Perhaps for these reasons, analogies of various military strategies have been used to illustrate marketing and selling mechanisms and means. Certain ideas of military strategy are important for all who are engaged in commercial competitive activities. These are the ideas of maneuver, and especially of flanking movements.
Maneuvering and Flanking a Vulnerability
In marketing terms, a flank is a point of vulnerability or opportunity with a major customer or in a large market, which is sometimes called a niche.
If a competitor successfully takes this opportunity it can become a launching point from which the competitor can further encroach on large markets and specific customers.
Winston Churchill describes this phenomenon in his series entitled “The World Crises.” In that series he states that maneuver is necessary before one group can flank another.
Maneuvering is typical of competition during the early and developing stages of a market. Almost every great company establishes themselves by maneuvering themselves into a position where it is considered the best choice for customers.
This maneuverability must also remain a main focus of organizations once they mature as they keep track of the major established segments in the total market. This obsession with maneuvering can leave new, vulnerable flanks in the market, which smaller organizations can attack with specialty products and offerings.
Examples of flanking movements can be seen in almost any industry as smaller firms recognize and take advantage of weaknesses to surpass well-established competitors.
The Automobile Industry
During the 20th century, Ford and General Motors (GM) became dominant auto providers by offering innovative products like the Mustang and the Corvette. While they are two separate companies, their offerings seem to show very little differentiation today. Their sales and marketing strategy was a head-to-head combat in which they strove to wear the other down by maximizing value, quality and discounts instead of distinguishing the providers.
Such strategies left the innovative field almost completely open to other companies, like Honda, Nissan and Toyota, which were looking to break into the American market.
In the 1960s and 70s, Japanese auto providers saw that the low cost, fuel-efficient auto market was an exposed flank that Ford and GM weren’t paying much attention to. They moved in accordingly and began offering products to fill this gap. This was their initial niche, from which they all subsequently expanded their offerings.
Later, Toyota saw a different but similarly exposed flank in the ultra-prestige markets. They attacked with the Lexus’ quiet, high-performance V8 engine which out-maneuvered the BMW 750 and the much higher-priced Mercedes by offering similar quality and style at a much lower price.
Chrysler, a lesser-American auto maker didn’t have the funds to compete head-to-head with GM and Ford. Instead, they attacked another flank with the minivan in the 1980s and the retro-style PT Cruiser in 2000, effectively creating new markets which they have managed to hold onto.
Complexity of Strategy Demands Orchestration and Communication
Clearly, there are many different types of flanks and the coordination of the processes and roles needed to capitalize on these can become quite complex.
Complex situation demand that “plans can be concerted in common,” and that there be a “common clearing house where the different relative values could be established and exchanged,” according to Churchill. Failure to have the necessary information, insights,determination and energies to put such systems in place often proves extremely damaging and costly.
Within the computer and software industries, there are many examples of major opportunities having been overlooked or neglected due to this failure.
The Computer Industry
The Digital Equipment Corporation offers an example of a failing to seize on adjacent markets in high tech industries.
After growing very rapidly in the 1970s and 80s, Digital decided to abandon its third-party sales and distribution systems which were largely responsible for its growth and success. Instead, they became a direct selling organization.
Without the power of those third-party selling relationships, Digital’s growth slowed dramatically and its share price began to fall from its high of $200 per share all the way down to $25 per share, where the then virtually prostrate Digital was acquired by Compaq.
Subsequently, Compaq also lost its way when the former Digital and Compaq staffs could not diminish the “distinction between politics and strategy” internally. Eventually, Compaq came to believe that its only alternative to viability was to be merged into Hewlett-Packard, which was done in 2002.
Accepted Ideas Can Restrict Innovative Thinking
One of the deficiencies of some business leaders is the tendency to think too narrowly, while ignoring their vulnerable flanks. Another common failing is to remain committed to practices, thinking and political forces that are no longer competitive.
Habituated mentalities too often cause failings that restrict one’s organization so that it becomes imperiled by encroachments from diverse flanking attacks and maneuvers from new innovations and discoveries. A classic example is the American railroad industry.
Always seeing itself as being “in the railroad business,” and not in the shipping or transportation industries, railroads saw themselves lose major shipping volumes to the trucking industry and virtually all of its passenger travel to airlines, buses and automobiles. Today, the once immensely powerful American railroad industry is but a faint shadow of its former force.
The Need for Coordinated and Rapid Action by Diverse Resources
Refusing to recognize the need to diversify in a market is only part of the problem. Once a company or industry innovates, it must mobilize and coordinate adequate and diverse resources quickly in order to capitalize on flanking and maneuvering opportunities. Success, however, demands that this be accomplished with accurate information, sound strategy and good execution.
While this article focuses on the losses some companies face when they are flanked by other innovative firms, there is always a successful party in these situations. Cincom, itself, has seen many successes in this area of initial niche marketing, which enabled subsequent expansions into more opportunities.
Penetration, Radiation and Collaboration
It is necessary for any developing organization to establish initial customers to generate the revenues needed to sustain and support the firm as it seeks to expand. Beyond these initial and vital requirements, the first penetrations into a marketplace provide the basis and the foundation for recognition and further radiation. This radiation can be within an industry, a geographic area, a technology or product offering, or a large customer.
For example, in its early years Cincom began to offer the database management system TOTAL to manufacturing firms. But, as TOTAL was being perfected among manufacturing customers, Cincom realized that organizations in every area of activity had a data relationship and data management need. Based upon the successes of the penetration made within its early manufacturing customers, TOTAL radiated its success into insurance, banking, medical, government and other industries.
Geographically, Cincom’s strategy was also one of radiation from its headquarters in Cincinnati into reasonably adjacent, and similarly sized areas like Pittsburgh, St. Louis, Milwaukee, Cleveland and Indianapolis. However, as it became more successful, Cincom began to subsequently target larger American cities as a part of our flanking maneuvers into all major markets worldwide.
Cincom was also one of the first software firms to radiate internationally as it maneuvered itself to be a global company with operations in Toronto, Montreal, London, Paris, Tokyo, Sydney and other major international marketplaces. Eventually, Cincom had a larger international presence than it had in it’s American markets.
Cincom also realized that both IBM users and non-IBM customers had a need and a desire for a DBMS such as TOTAL. Therefore, it began to promote alliances with various non-IBM computer providers through third-party computer companies such as NCR, Honeywell, CDC and others. No other software company developed such a market flanking strategy into the secondary computer user marketplace.
Marketing studies have shown that 10 to 15 percent of all buying choices are made because of a product’s features, functionality or appeal; 10 to 15 percent are made because of price and acquisition terms; but 70 to 80 percent of all buying decisions are based upon relationships. Therefore, the establishment and the successful development of happy, productive and mutually beneficial relationships are of paramount importance.
When a customer is discerning which product to buy, a potential provider’s efforts are seen as “sales promotion,” which may have a negative connotation in the marketplace. Once the customer chooses a provider, however, their new offerings, and promotions can be more welcomed, if only because the two companies now have a relationship.
Once this relationship is in place, customer contacts are often viewed more as an appreciated service of customer support, and not as sales efforts. In fact, a lack of such post-sales contact by the provider is often considered to be neglect by the customer. In such cases, customers tend to retaliate by not buying additional products from the provider. Therefore, customer care becomes an opportunity for a cultivation of a major relationship between the customer and the provider, while a failure to satisfactorily perform becomes a source of potential estrangement.
Keeping all of this in mind, a company can have a successful relationship with their customers for many years. But, they also must make sure they pay attention to their customers changing wants and needs and to their own weaknesses so they aren’t flanked by the competition.