To illustrate a point in my post on digital twin business models as a strong platform for strategy implementation … that strategy is not only about the long-term, but can concern short-term, fast-moving episodes too. And digital twin business models are a huge help in such cases.
I first saw just how short-term and fast-moving it can be many years ago, when a guy on my executive course at London Business School came in one day with an urgent challenge.
John was general manager of a sizeable business unit at Glaxo Smith-Kline [GSK]. His business had been in ferocious competition for decades with one particular rival, Pasteur Mérieux [PM]. Both companies had a wide range of products in the travel-vaccines category, but John’s business had the only licensed product for one particular disease, and it was big! – it generated a large fraction of his division’s cash flow.
The travel vaccines market is seasonal, and this was about March time. The urgent issue was that PM had just got approval for a near identical drug, and was working up a major marketing and sales attack. PM had enough sales people to get around all of John’s customers in about 10 weeks – just as that season’s sales surge would be building.
To be clear – there is no up-side in this issue. The only way things can go is for John to lose customers, sales and revenue. The challenge, of course, was how to limit those losses to very small numbers. (This is another feature of ‘strategy’ often over-looked – we should recognise heroic leaders who are able to minimise problems, not only capture opportunities.)
John fully expected PM to go in to those customers hard with strong promotional messaging, deep discounts, and other incentives and tactics. (Unusually, this was a paid-for product, not on free prescription). So he had just days to put together “a strategy” – a detailed, timed action plan on what exactly he was going to do on those exact same issues.
We spent an afternoon sketching out the system-structure of the case – the relationships between price, promotional-spend, sales calls, incentives, the tendency of customers to stick with John’s product or switch to PM. (Back in those days, we did it on a white-board, though now I’d do it directly on the Silico online app.) That white-board diagram included time-charts on key items, like prices, customers lost and sales, capturing how John thought PM’s tactics might evolve and how he could respond.
Crucially , the model included two powerful intangible factors [1] the reputation of the rival’s product among the customers and [2] the motivation of the two sales teams to devote effort to their respective products. Both sales teams had other products to sell, and if things went badly, they might choose to focus on other products, whatever the orders of management! But PM’s team were fired up to focus on stealing John’s customers for this product.
As soon as John got back to base, he set up a war-room of key staff who got feedback from the sales force and other sources on what exactly the competitor was up to. Those activities, of course, changed constantly – every day, news came in of some trick the other side were playing or some new discount or promotional offer. (This industry is incredibly tough, with tactics that would make you cringe!)
And every day, John and his marketing VP and head of sales figured out pre-emptive tactics they could employ. Key to this was getting those tactics out to the sales team to keep them motivated to fight off the attack. This was helped by some errors the competitor made, that questioned the new product’s suitability.
And every day, the team updated the working model, and sketched up on the board how the battle was going – how many customers were still buying the GSK product, how many switching and why.
By the end of the season, John could breath a little easier. Yes, his business had lost customers and sales, and in spite of every effort to sustain its prices had inevitably lost some revenue through limited discounting. But by far the majority of the customers had been retained, and the loss of sales and revenue was as limited as he (and crucially, his bosses!) might have feared.
So, this is surely not what we usually think of as “strategy” – 3-5 year high level objectives, maybe with some key plans for the first few quarters. The episode was not even known about when John wrote his business plan the previous Autumn, and the whole thing had played out by the time the next planning cycle started.
But how could an episode threatening a major product and a large fraction of John’s revenue not be a strategic issue, and the evolving action plan be seen as anything other than “a strategy”?!
Yet standard strategy methods, as taught on MBA programs and executive courses, have little to offer executives facing such challenges. Fortunately, strategy dynamics does have something to offer.
This case, and the digital twin dynamic model that supported it, feature in the business modelling Core Course. It is also developed further in the Extension class-7 on modelling competition.