Change While You Are Ahead

“Stability is risky,” Columbia Business School’s Rita McGrath told us. “By the time you need change management it’s almost too late.  You want to be in continual motion.  There are some things you want to keep stable as an organization.  You want stability in values, you want stability in leadership, you want stability in your core reason for being.  And I actually found firms that were capable of super success in this very dynamic environment combined stability with motion. So they had a lot of stability in things like values and talent and networks and developing people, and incredible dynamism in investments and locations, how they move people around.  And so it’s this combination of stability with dynamism that seems to be the trick.”

Dynamic stability is an elusive state. When do you perform a strategic volte face and head in a new direction?  The reality is that most organizations don’t act until it is too late.  The time to question your strategy and change things is usually now.

After all, the only surefire rule is that competitive advantages change.  Yesterday’s competitive advantage is history.  Intel’s Andy Grove wrote a great book entitled Only the Paranoid Survive and former H-P chief Lew Platt suggested that H-P should stand for “healthy paranoia” and explained why:  “General Motors, Sears, International Business Machines, were the greatest companies in their industries, the best of the best in the world.  These companies did not make gigantic mistakes.  They were not led by stupid, inept people.  The only real mistake they made was to keep doing what it was that had made them successful for a little too long.”

It doesn’t have to be that way.  Consider the clothing retailer Benetton. In 1992 it had a turnover in excess of £1 billion and appeared to have the world at its feet.  Luciano Benetton disagreed and decided that the company needed to embrace the future before it was too late.  He decided to invest £80 million in an advanced clothing factory.  The company changed the way it did business.

At the time, Benetton was (according to the company at least) the third best known brand in the world.  But Luciano Benetton wanted to move the company forward.  At the company’s headquarter in Ponzano Veneto, a seventeenth century villa just outside Castrette di Villorba, north of Venice, Benetton came up with a  highly ambitious plan.  In response to high labor costs, Benetton invested a massive £80 million in an advanced clothing factory.  It installed state of the art systems – software teold the machines what to make in response to information coming directly from the company’s stores worldwide.

Its investment in technology made Benetton’s Castrette industrial complex among the world’s most advanced.  The factory was soon producing almost 100 million garments every year and included an automatic distribution system handling over 30,000 packages every day.  This process was managed by a mere 19 people – a traditional system required at least 400.

Benetton‘s support systems and studious awareness of how it was pushing and pulling its brand mean that, in Benetton’s case, bigger did actually become better.

And the strategic lessons?

One, keep it simple.  Benetton’s trademark products – colorful clothing – are strikingly simple but instantly recognizable as the company’s.  It  has extended its interests with caution.  Its other brands now include Zerotondo, Sisley and 012.  It moved into sportswear and sporting equipment through such brands as Prince, Nordica and Rollerblade.

Two, attract attention.  The “United Colors of Benetton” brand provides a large variety of easy options for advertising images.  Eschewing them, Benetton has cornered the market in surprising, or offensive, advertising.  One featured Luciano Benetton naked except for the line “I want my clothes back”.  Then there are the shocking images of people dying.  Gratuitous?  Perhaps, but it has largely succeeded in cementing Benetton’s niche as a colorful outsider.

Photographer Oliviero Toscani has been responsible for some of the most striking images used by Benetton.  “Everything we do is about impulse, about guts,” says Toscani.  “That’s what built Benetton; Luciano didn’t test the market for a taste in colored sweaters.”  The ads are an expression of the brand, of the company and of Luciano Benetton.

This is how the company explains the images it uses to sell more sweaters: “Benetton’s communication strategy was born of the company’s wish to produce images of global concern for its global customers…. Benetton believes that it is important for companies to take a stance in the real world instead of using their advertising budget to perpetuate the myth that they can make consumers happy through the mere purchase of their product.”  True enough, but Benetton’s “stance” is often difficult to determine.

Change while you are ahead.  Often stated; rarely achieved.

This was originally published in What we mean when we talk about strategy by Stuart Crainer and Des Dearlove (Infinite Ideas, 2016).