Choosing Your Strategic Role

The tale of David and Goliath

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The secret to David’s success was that he understood the strategic role he was playing

Your strategic role becomes a guiding star that tells you…

• When to fight

• How to fight

• When to run away

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The Four Strategic Roles

1. Defender

2. Attacker

3. Flanker

4. Niche Player

1. Defender

2. Attacker

3. Flanker

4. Niche Player

Defense is superior to other strategic roles

• Defenders already occupy a leading position in their respective markets

• Customers irrationally value the benefits of incumbent brands 2-4x more than the benefits of alternatives

• Customers also incur transaction costs, learning costs and obsolescence costs which further discourage the switch to alternatives

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* Source: Advertising Age Survey of 25 leading brands from 1923, 1983, p. 32

This explains why it’s so difficult to topple Defenders

Principles of the Defensive role

1. Only the market leader should play defense*

2. Leaders make their own products obsolete

3. Strong competitive moves must be blocked

* Avoid narrow definitions of leadership. Only the customer can define the leader

Leaders emerge, build a strong base and begin to expand into adjacent segments

Gillette is a quintessential Defender

• It makes its own products obsolete before competitors do

• If you liked the Sensor with two blades, you’ll like the Sensor 3 even better

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Defenders also block strong competitive moves

• Bic’s disposable razor threatened Gillette’s core razor business

• Gillette launched a preemptive strike with its Good News brand and leveraged its distribution power to emerge as the leader in this new category

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The Four Strategic Roles

1. Defender

2. Attacker

3. Flanker

4. Niche Player

Distinguishing features

• Aspire to become market leaders

• Normally only one or two players capable of playing this role in every market

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Principles of the Attacking role

1. Develop a deep understanding of the strength of the leader’s position

2. Find a weakness in the leader’s strength and attack at that point

3. Launch the attack on as narrow a front as possible

Attacker’s emerge to challenge leaders in specific segments

Burger King Attacks on Customization

• McDonald’s strength lay in it’s assembly line efficiency

• McDonalds customers sacrifice quality for speed and consistency

• Burger King encourages customers to customize their burgers

• Burger King grills it’s burgers which is generally preferred to frying

• Burger King service was a little slower but the resulting quality gains made the company a formidable challenger

The Four Strategic Roles

1. Defender

2. Attacker

3. Flanker

4. Niche Player

Distinguishing features

• Flankers are bold risk takers. Flanking is a gamble with the possibility of a big payoff or a big loss

• It requires the ability to envision products and services that customers have yet to articulate the need for

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Principles of the Flanking role

1. A good flanking move must be made into an uncontested area

2. Tactical surprise is a critical element of the plan

3. The pursuit is just as critical as the attack itself

Flankers enter spaces that are adjacent to market leaders

They then grow these new segments by bleeding share from market leaders

Amazon is a quintessential Flanker

• Launches world’s 1st online bookstore that customers love

• Uses high stock price to raise massive funds needed to reinforce it’s competitive position

• Builds out infrastructure to enhance speed and efficiency of operations

• Survives storm of criticism from analysts who want to see profits

• Amazon reports first profit 8 years later but emerges as world’s #1 online retailer

While successful Flankers are rare, survivors often go on to become market leaders

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71%

29%

PioneersLate Entrants

* PIMS database, Harvard University, 1973

Origin of market leaders

Some famous Flankers that became market leaders

Mobile Music Light Beer Overnight Mail Hip (Bratz) Dolls for Girls

Mobile Email Super Premium Ice Cream

DVD Movie Rental by Mail

Low Calorie Meals

The Four Strategic Roles

1. Defender

2. Attacker

3. Flanker

4. Niche Player

Principles of the Niche role

1. Find a segment small enough to become the leader

2. No matter how successful niche players become, they never act like defenders

3. Be prepared to exit if a defender enters your segment

Niche players operate on the periphery and steer clear of major battles with Defenders

• Quickbooks became leading accounting software by focusing on ease of use

• Buys TurboTax to become leader in adjacent tax preparation segment

• Purchases providers of online banking services, payroll services and credit card processing services

• Launches cheaper online versions to block competitors

• Sales exceeded $4 billion in 2013

Intuit is a quintessential Niche player

Critical difference between niche players and flankers

• Flanking attacks are deliberately launched close to a leaders position with the intention of bleeding share from the leader

– Amazon targeted Barnes & Noble first and then went after Wal-Mart

• Successful Niche players avoid segments that place them in direct competition with Defenders

– Intuit resisted the temptation to compete with Microsoft and built an extremely successful niche business

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The Niche role is by far the most common strategic role to play

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17DefenderAttackersFlankersNiche Players

Summary

• Strategic roles are guiding stars that tell you when to fight, how to fight and when to run away

• All four roles rely on concentrating resources at the right point of attack

• The defensive role is by far the strongest due to people’s innate resistance to change

• The Niche role is the one that most of us should be playing

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