Fabian Strategy

Borodino

The Battle of Borodino was fought on Sept 7th, 1812.  It was the deadliest day of the Napoleonic Wars with casualties around 70,000.

Fought on the approach to Moscow it was the final attempt by the Russians to prevent Napoleons “Grande Armée” from reaching the capital.  In one sense the battle was a failure for the Russians, who were yet again defeated by Napoleon.

On the other hand, as at Eylau in 1807, the Russians were beaten but not defeated.  They retired from the field intact.  They did not surrender.  The Czar did not bend the knee and agree surrender terms.  The Russians had enough of being beaten by the French.

Thereafter they pursued the Fabian strategy.  They kept their army intact but at a safe distance from Napoleon.  They shadowed his moves but refused to engage.  Napoleon arrived in Moscow to find a city deserted and emptied of supplies.  As winter approached he realised that he was unable to sustain his army due to the length of the supply lines.

The Grand Armée then began the long and ignominious retreat.  All the way they were shadowed by the Russian Army, meaning they could not disperse the troops to live off the land.  Foraging parties soon learned how well suited the lightly mounted Cossaks were to skirmishing duties.  The French were forced to keep in column and march west.  Then the weather turned, the snow fell and the Grand Armée was no more.

The Death of a Soldier; by Wallace Stevens

Life contracts and death is expected,
As in a season of autumn.
The soldier falls.

He does not become a three-days personage,
Imposing his separation,
Calling for pomp.

Death is absolute and without memorial,
As in a season of autumn,
When the wind stops,

When the wind stops and, over the heavens,
The clouds go, nevertheless,
In their direction.

When Markets go Dark

Darkside

Traditional marketing theory holds that there are three broad strategies for positioning a product.  You can be the best, you can be the cheapest, or you can serve a specific niche.

It is most simple to communicate that you are the best or the cheapest.  It is more difficult to communicate niche benefits.  One great boon of the arrival of the internet was to support niche communications.  Using the internet you can target communications at tiny market segments and still succeed.  As a result we get the “long tailed comet” and the weakening of mass market simplification.  We don’t all have to settle for a white sliced loaf simply because it serves the broadest audience.  You can get your loaf of yeast free pumpkin seed bread made with stone ground flour from a mill operated by orphan refugees.

What is interesting about Dark Markets is that this niche power is removed.  Tobacco is the most dark market we have.  Some nations are very dark, Australia, Canada, Ireland and England seem to be in a competition to win the race to be the darkest tobacco market.  In Ireland the product is no longer visible in-store.  The packs are hidden behind closed doors, and no advertising, promotion or communication of any sort is permitted to the end consumer – other than the price list.

Absent any communication it is impossible to convey the benefits of niche products.  As a result people select using simplified heuristics.  They can see the price.  So it is either high price or low price.  Highest price must be the most premium product and lowest price is assumed to be best value.  Consumers assume that lower price products will be of inferior quality, and in the case of tobacco they will be less “healthy” than the premium price products.  It is interesting that the biggest markets for low price brands, and for counterfeit brands, are in the “full strength” tobacco products.

Profit margins on low price products are derisory.  It is in the interest of the manufacturers to keep as much of the business as possible up at the premium end.

So what?

Other markets are going dark.  Pharmaceuticals are partially there, Alcohol is being targeted, Baby Milk Formula, Childrens Cereals.  Many products run the risk of following tobacco down the path to the dark side.  What lessons can you learn from Tobacco?

1.  Stop fighting for share.

If you treat a dark market the way you treat an overt market, and fight for market share, you will lead a race to the bottom on price, and drive value out of the market.  The major players in the market have to move away from using share points to reward sales teams.  Focus on profitability measures.

2.  Build premium positions.

Forget the middle market.  Devote your resources now to building strong premium positions that are simple, clear and relevant in the minds of your consumers.  Don’t waste money building brand positions for marginally profitable lines.  Be patient!  Take your time to build your premium position.  You will come under relentless pressure from sales to use sales promotions and discounts to push share.  You have to fight that.  A premium brand should never be on sale.

3.  Cheap must have a compromise.

If one player is building a fighter/Tiger brand, you need to communicate to your consumers why Premium is different to Value.  Why is cheap also nasty?  You must convey this effectively before the market goes dark, or the consumer will simply buy on price.  But you also need to be careful not to damage the category.  If cheap vodka is bad for your health, it must also be clear that premium vodka is at least health neutral (ceteris paribus)

4.  Motivate stakeholders early.

Get the retailers to buy in on premium.  Make sure they understand that it is about CASH margin, not percentage margin.  So what if you get 15% on a $10 bottle of Vladiawfull vodka.  It is far better to get a tight margin on a €60 bottle of Grey Goose.  Also, get them to fight for light.  Make it clear to them what the negative impact of a dark market means to their business.  Organise them into lobby groups.  Help them to advocate their positions with  grass roots political representatives.

5.  Build a network of ambassadors.

Find the people who like your product now and recruit them for the long haul.  Not barmen or shop staff.  They have to have longevity, so they need to be business owners.  Get long term buy in for your brands now, and it will pay back handsomely when the market goes dark.  Bring these people together, make a community where they can help each other and help your brands.  The market may be dark, but you can have online buzz as members plan their next outing of the eg John Player Amateur Golf Classic.

A Vision of Success

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The game of chess is a very useful metaphor for strategic planning.  When you begin to learn chess you start by learning the way each piece can move.  Beginners think that the game of chess is about controlling the movement of pieces.

As an intermediate player you learn some of the strategic openings that are used to develop the game quickly and get as many pieces as possible into offensive positions.  A well-developed opening is often enough to defeat the beginner.  It is at this stage that you begin to realise that chess is not about controlling the movement of pieces.  Chess is about controlling the spaces on the board.

By controlling the space on the board, we reduce the potential for our opponent to catch us off guard.  This principle is common to all strategic planning, be it in a business or a military context.  We use formal planning frames or checklists to ensure that we have examined all potential threats and influences.  We can then eliminate them from our planning, or build the plan around them.

The difference between an expert player and an intermediate player is down to game strategy.  The intermediate player develops his opening well and after the first ten moves is probably on a par with the expert.  But at this stage the intermediate player often finds that they lose control of the play.  They are reacting to strategic moves by the expert and end up playing defensively.

The expert player begins the game of chess with a vision of success.  They can see the game through to the end, before it even begins.  Their opponent may play very well and frustrate the shape of the win, but the expert will revise as the game goes on, and will generally win as a result.

In business planning the same dynamic is true.  Some businesses follow the formal planning frames and develop a workable business plan, but not a winning business plan.  Excellent businesses start out with a vision of success and focus their planning efforts on achieving that vision.

An example of this can be drawn from the differences in approach followed by the Nationalists and the Republicans during the Spanish Civil War.  These lessons were internalised by the Germans and used to polish their Blitzkrieg tactics.  The Russian tanks supplied to the Republican side were superior to the German and Italian tanks, but they were squandered due to lack of vision in battle planning.

Motorised armored columns can strike any defensive line and break through, if they do so in concentration.  The column then drives hard into enemy territory, cutting communications and causing confusion.  The attacking side know where they are going and what they are doing, because they are the ones making the decisions.  Once the motorised column has sown disruption in the lines the main infantry force can advance.  Defenders find themselves isolated as reinforcements are unable to move up due to the communications problems.  At the defending HQ the officers are assailed by a barrage of conflicting reports and struggle to piece together a picture of the battle.  Pockets of resistance hold out as defenders hold onto strategic towns or hills.  The advance moves past them, and a holding force besieges them to limit offensive sorties in the rear, and they are neutralised.  Everything happens fast.  Ultimately the only sane response for the defenders is to retreat to a defined holding point and regroup, losing ground and the troops in surrounded pockets.  This is classic Blitzkrieg.

The Russian generals in civil war Spain did not follow this pattern.  They mounted broad-front assaults.  Instead of concentrating their armor, they spread it along the line.  Whenever they broke through lines they insisted on reducing resistance in every strong point they encountered.  This gave the Nationalists ample time to mount a counter attack.  As a result they failed miserably in their attacks.

What is even more telling is that they failed to learn and adapt their strategy.  The Communist Commissars were more motivated to spread positive propaganda than to learn from mistakes.  As a result they painted defeats as victories.  When defeats could not be presented as victories they assigned blame to anyone but the Russians.  The outcome of this delusional approach was that the Russians continued with these tactics through the Second World War.  Millions of Russian soldiers died because Generals would not admit their strategies were at fault.

In a business context, if you are not the dominant player, there is a danger that you are reacting to the moves of the Gorilla in the market.  If you are dancing to a tune played by the big player you will never overtake them.  You must own your own strategies.  If you are the dominant player you must not fall into the trap of becoming entrenched and defensive in nature.  This will allow smaller players to nibble away at your share.

Before Action ; by William Noel Hodgson

… I, that on my familiar hill
saw with uncomprehending eyes
a hundred of Thy sunsets spill
their fresh and sanguine sacrifice,
ere the sun swings his noonday sword
must say good-bye to all of this;
by all delights that I shall miss,
help me to die, O Lord.

Hodgson’s last poem, written on the eve of the Battle of the Somme in which he died.