Back in the 1880s, selling ice was a thriving economic activity in the north-eastern United States. The business was quite lucrative and deceptively simple: work hard to cut chunks of ice out a frozen lake, wrap the harvest and ship it as quickly as possible to the warmer southern states where it could be used to cool drinks and preserve food. Ice transformed society in a profound way. It changed the way people shopped, stored food, entertained, and established an ongoing relationship with the “iceman.” Ice harvesting soon gave way to the ice factory. And in 1920, ice ranked ninth in investment among American enterprises. Developments in ice cutting, snow ploughs, insulation techniques, and logistics underpinned industry ’s growth because these innovations enabled, for example, an expansion to far-flung locations like Hong-Kong, Bombay and Rio de Janeiro.
But while it was a thriving business, ice harvesting had limitations, like weather, location, and seasonality. This luxury quickly became a year round necessity, and eventually fueled the technological invention of refrigeration. The new technology took over as the old harvesting model reached the limits of what it could be achieve in terms of technological efficiencies. Significantly most of the established ice harvesters were too locked in to the old model to make the transition and so went under to be replaced by the new refrigeration business dominated by new entrant firms.
What happens when companies wrongly define the purpose of their existence and the game they play? Natural ice gave way to ice factories that were ultimately replaced by refrigerators. And the leader in each period never made the transition to the next stage. They simply melted and disappeared like a snowman. Ice harvesting did not disappear because the problem of cooling food and drinks reduced. In fact, cooling demand grew. Ice harvesters got in trouble because they assumed themselves to be in the ice harvesting game rather than in the game of resolving cooling problems. The reason they defined their business incorrectly was that they were product oriented instead of people oriented.
Similar stories happened between mobile phones and Apple’s iPhone, telecommunications operators and WhatsApp, movie rentals and Netflix, Yellow Pages and Google, taxis and Uber, hotels and Airbnb. It’s very dangerous to focus the company’s purpose on selling products and services, rather than on solving people’s problems and meeting their needs. Theodore Levitt defined, in 1960, this situation as ‘Marketing Myopia’ in a famous article published in the Harvard Business Review. Your product is not your business. As Levitt used to tell his students: “People don’t want to buy a quarter-inch drill. They want to buy a quarter-inch hole.” Firms that fail to understand this risk becoming obsolete and getting pushed out of the game.
Value Hackers find the necessary stability in their strategic purpose focused on hugely improving the lives of millions of people and shaping new markets and value games around that objective, ruling out traditional competition in existing industries. It is what I like to call ‘strategic ID’ because it defines what is core, distinctive and enduring about the firm.
Amazon’s strategic ID is about being the earth’s most customer-centric company and building a place where people can come to find and discover anything they might want to buy online. Google’s strategic ID is about organizing the world’s information and making it universally accessible and useful. LinkedIn’s strategic ID is about connecting the world’s professionals to make them more productive and successful. Nike’s strategic ID is about bringing inspiration and innovation to every athlete in the world. Tesla’s strategic ID is about accelerating the world’s transition to sustainable transport. Uber’s strategic ID is about bringing transportation, for everyone, everywhere.
Business organizations need a relevant, enduring and evocative understanding of why they exist. In other words, a firm needs to stand for something it believes in, going beyond profit and impacting individual people’s lives and society as a whole. The companies that succeed are the ones that people really do care about and that have a future vision for the world.
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