Disruption has a way of throwing out old rules of convention. What is normal in times of good fortune doesn’t always apply when things are going down the drain. For those of us who have been around the block for more than one (or two) of these downturns, we can think back and remember some crazy ideas that stuck during crazy times like these. Call them “unreasonable requests.”
Here’s a good story of one. Once upon a time, when we were living through 20% price erosion in the video business, the market leader suddenly quit the game. Scotch had about 18% market share in a business where 18% was actually #1. A bloody, awful business to be in and one that made you appreciate anything with more than 6.5% gross profits. So when the biggest guy in the business drops out, there’s momentary chaos in the market and in the channel. Here’s where the “unreasonable request” comes in.
What does the average Joe in the industry say when the #1 guy bails out? “Forget it, kid, it’s Chinatown.” Everyone will pick up a few points and we’ll all get back to normal. You’ll never really notice that they’re gone. And I’m sure that everyone in the market clearly articulated these points over bad coffee in conference rooms across the country. But we didn’t. We sat down as a group and asked ourselves if an “unreasonable request” wasn’t in order. Why can’t we get more than our fair share? As a matter of fact, why don’t we go out and ask for all of it?
Plans like these make no sense. They’re unreasonable. No sane person would expect to take 100% of the available share from a vacating #1 player. This is why the idea was so powerful. It was beyond audacious. It was silly. We had a hard time keeping a straight face when we left the room. But it wasn’t because we were embarrassed to put it together: it was because we loved it. It was energizing, it was possible, and we knew that no one else would have the guts to even try.
Careful analysis of the channel map of our now deceased competitor, specific identification of those key three or four players where they sold the bulk of their products, and a conceptual financial presentation based on rock solid return on inventory investment (ROII) scenarios followed. We planned out our discussions and carefully introduced the idea to the key channel partners, followed up with top to top meetings, and delivered very powerful, persuasive and completely unreasonable requests to some of the biggest players in the US market. The end result was that we were, in fact, the only guys to even ask for the sale, let alone apply the choke-hold we put together for our partners. We cleaned up, nearly doubling our share and emerging as the clear #1, by a factor of two, over the next largest player in the industry.
Sometimes your customers and channel partners appreciate your playing by the rules. But not in times like these. In times like these, it pays to be completely unreasonable.
I love this story. In the process, were you able to increase your GPM?
Cam: we still saw the same price erosion but our costs dropped due to the dramatically increased volume, which gave us a bit of margin breathing room. Still was a miserable business. However, the increased planogram presence translated into a bigger role in category management, new SKU placement in other product groups (like 8mm) and merchandising.
Big, audacious plans work – especially when everyone else is heads down in the bunker.