It has become an axiom that “strategy is about making hard choices,” as we have been advised for over 20 years by leading thinkers including Michael Porter and Roger Martin. But our work with a community of senior executives in the Bay Area suggests that today’s market leaders are following the advice of Yogi Berra: “When you come to a fork in the road, take it.” Faced with hard choices, innovators find ways to transcend the tradeoffs. While their competitors make the hard choice between one or the other path, these businesses reap the benefit of both.
Transactions and relationships. When it comes to digital engagement, many companies feel they have to choose either transactions or relationships. Social media evangelists tell CEOs they need to stop focusing so much on driving sales and “connect instead of promote.” A focus on the transaction, they say, jeopardizes the relationship. Meanwhile, sales strategists suggest that social media is often more “hype” than “reality.” Focus on the relationship and forget the transaction, and you waste the company’s resources. The hard choice, it would seem, is between transactions or relationships.
Sephora has become a leader in the cosmetics market by transcending this tradeoff, finding ways to achieve transactions and relationships. It has a vibrant e-commerce business and a highly engaged customer community. What is particularly impressive is how Sephora is bringing transactions and relationships together in the same experience. On the Sephora Beauty Board, community members can upload photos of their favorite “looks” with the makeup products that made it possible. Click on a photo and you can see someone’s profile or posts. Click on a product and you can make a purchase.
High-tech and high-touch. There is concern these days about how technology is replacing our jobs and estranging our connections. As our communications become more digital, our customer relationships become less personal. The only hope seems to be make our technology appear more human.
In the apparel industry, companies choose one path or the other between high-tech and high touch. Shopping services like StyleSeek take the road marked “algorithm,” while Nordstrom’s Trunk Club takes the road marked “personal service.” Approaching the same fork in the road, Stitch Fix chose to go in both directions. New customers fill out a survey about their style and lifestyle. Ever-evolving algorithms then generate recommendations for Stitch Fix stylists, who select the final assortment for their customers based on personal knowledge and relationships. It’s no coincidence that the Chief Algorithms Officer at Stitch Fix was formerly head of data science for Netflix, and its Chief Operating Officer, Julie Bornstein, was formerly CMO at Sephora. Together, they are transcending the tradeoff between high-tech and high-touch.
Size and speed. There is an African proverb, “If you want to go fast, go alone. If you want to go far, go together.” Most large companies excel at going far and going together. But these days every company has to go fast. Is it possible to be both bigger and faster? The recent experience of Visa provides some lessons in how to transcend the tradeoff between size and speed.
The market for cardless payments is growing rapidly, posing a threat to Visa’s core business. Four years ago, Visa launched V.me, but failed to gain ground against its nimble new entrants. For the recent launch of Visa Checkout, Visa took a different approach. One option was to focus purely on speed, and either acquire a smaller company or create a separate skunkworks. But this would have lost the advantage of size.
The solution was to go for size and speed. Lara Balazs, SVP of North America Marketing, leveraged Visa’s brand and market position to recruit a team of top talent, forge strategic alliances with market leaders, and create widespread awareness in the market. Although size was an advantage externally, it was a disadvantage internally. To leapfrog the competition, she had to move fast, but she also needed the involvement of twelve different departments. She had to go fast and go together. Her solution was to rip up the org chart, creating a “team of teams” with a new kind of culture for Visa that emphasized agility and experimentation over consistency and compliance.
Profit and purpose. Purpose has become popular for many reasons. It helps to re-energize leaders, engage millennials, invigorate brands, and demonstrate corporate social responsibility. But purpose still seems like a “nice to have” or something done on the side. Corporate boards still focus on quarterly earnings.
Faced with the choice between profit and purpose, some executives are making the move to social enterprises where profit and purpose are more intertwined. However, the evidence indicates that for-profit companies with a strong sense of purpose have better financial performance. So how can companies in traditional industries achieve both?
For most financial institutions, profit is the purpose. But Wells Fargo has a purpose behind profits. According to CMO Jamie Moldafsky, “every employee at Wells Fargo is focused on helping our customers succeed financially.” This approach is reflected in initiatives such as “Untold Stories” which fulfill this purpose in local communities. Echoing their logo, Wells Fargo promises to “never put the stagecoach ahead of the horses.” Proving that they have successfully transcended the tradeoff, Wells Fargo consistently outperforms it’s less purposeful peers.
Toymaker Goldieblox shows that purpose can fuel market disruption. Their mission to increase the number of women engineers led to an entirely new kind of product that combines storytelling and building. According to Lindsey Shepard, VP of Sales and Marketing, GoldieBlox is about encouraging girls to “think about themselves as innovators that can build their own future.” The result is a disruption in the proverbial “pink aisle.”
Airbnb is also fusing profit and purpose, disrupting (at least initially) the hospitality industry. Just a couple of years ago, people considered it strange to stay in a stranger’s home instead of a hotel. But according to their Chief Marketing Officer, Jonathan Mildenhall, Airbnb is on a mission to change both “behavior and perception” so that people can “belong anywhere.”
For each of these companies, purpose isn’t something on which they spend their profits, or a strategy they devise to make more money. Instead, profit and purpose are intertwined proving that money and meaning can indeed work together.
There is no doubt that these companies have all made hard choices in executing their strategies. But the nature of “the hard choice of strategy” has changed in today’s marketplace. It’s no longer about giving up something that is important to you or your customer. In many cases, it’s about finding a way to take both paths at once. For that is truly the road less traveled.
Originally published on HBR by Mark Bonchek and Cara France