Are you employing tactics or strategy in your franchise?
After nearly 40 years in business and over 50 years sailing – I finally now get the difference between strategy and tactics thanks to a recent lecture at the Sorrento Sailing Couta Boat Club.
This is the big plan: how we should get around the course in the least amount of time with no other competitors to worry about. This entails considering how many people are on the boat, the weather, the start line bias, which sails to use, and all those elements that help us navigate the course as quickly as possible.
This is what happens on the course – and how I deal with the situations (avoiding a collision and a dunking).
The interesting point is that in a handicap race, beating another boat by the slimmest of margins,10 seconds say, is pointless if the competitor has to give you two minutes handicap. The sailors you are directly racing are in most cases some distance from you. But you can lose heaps of time by engaging a boat you already have beaten on handicap – just to soothe your ego.
In this type of handicap racing it is probably 70 per cent strategy and 30 per cent tactics.
On the other hand if we are racing in the Olympics, all in the same one design boats, it is probably 30 per cent strategy and 70 per cent tactics – as first over the line is the undisputed winner. This can even be down to two boats in a match race, like the 2013 Americas Cup, and the upcoming 2017 Americas Cup in Bermuda.
What this means for franchisors
If your business is unique, and you are building on the differences between you and the rest, then you are more like the couta boats, or more focused on strategy.
I recently was working with Salts of the Earth, and asked about their competition. The answer given was that they do not have any, so their business is all about long term strategy.
Many other businesses have a unique product or set of skills and their long term growth is focused on strategic long term plans. In franchising we see many of these like National Drones, ICMI Speakers & Entertainers and Base Zero.
The decision-making they undertake is where to open new locations, whether the population is sufficient to support the business without cannibalising existing trade. Issues like discounts, short term specials and other pricing issues are much more in their strategy, than any need to change tactics.
Probably their biggest fear should be a price war break out between over-zealous franchisees.
We work with many other businesses for which the opposite must be said. If for example your business is a coffee shop or a pizza business, then it’s all about tactics.
Just look at the pizza wars between Dominos, Pizza Hut and Eagle Boys (and others) over the last few years. This is really tactics (normally called discounting) – or the race to the bottom.
As we all know Pizza Hut Australia has just been sold off by Yum! Restaurants, Eagle Boys went into receivership and has now been purchased by the new look Pizza Hut, and Dominos has continued to grow.
The collateral damage for the tactical approach applied has been unhappy franchisees – think of the legal case of franchisees against the Pizza Hut franchisor for its rock bottom prices. Others have left the business or cannot and are not meeting their own expectations.
Compare these actions to another sector driven by discounting and tactics, the oil industry. When the oil businesses stopped training sales reps to cut costs, the long term effect was a generation of untrained people who were making major and costly decisions.
The oil industry has turned this around, and become very profitable – partly due to consolidation of brands. The pizza business right now seems to be less about strategy and more about tactics but, as with the oil industry, when profitability returns, companies can again take on a longer term strategic view.
Lessons to be learnt for franchisees
If franchisees understand the difference between strategy – a longer tem set of aims, and tactics – the short term, day to day events, they will probably save themselves a lot of money.
Skirmishes driven by ego are unnecessary. I hear on a regular basis that 'if some similar business opens somewhere near me, it will kill my business!'. This may occur, but in many cases competing brands can actually work as a positive, bringing more people into the area to become their customers.
Why do home maker centres exist with four bed retailers, four electronics retailers? It isn’t just because they like each other. No, the answer is that from a strategic view they actually benefit each other. The tactical position is what happens day to day with local area marketing, specials and pricing.
Don’t fight with shadows, and pick the battles you need to be in. Franchisees and franchisors need to think about long term strategy, and then support that with shorter term tactics to tune the business to win the race.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.