My good friend Sabrina Herrera wrote to me recently to say that the company she cofounded 15 years ago has gone public. Genomma Lab was able to become the only over-the-counter drug company traded on the Mexican stock exchange. Click on the link for a brief story of Genomma Lab.
To appreciate how this energetic company got its start (and how you might apply the same strategy to grow your business), we must first identify the competitive dynamic strategy that underlines Genomma Lab’s success. By applying the ancient Chinese stratagem, “Openly Repair the Walkway, Secretly March the Chen Cang,” Genomma Lab was able to outthink its competition.
Genomma Lab specialized in herbal and cosmetic treatments marketed to upper-middle-class consumers. Big pharmaceutical companies never considered Genomma Lab a threat because they themselves dominated traditional distribution channels – pharmacies. Genomma Lab planned to distribute directly to consumers’ homes, so its competitors thought it posed no threat to what large pharmaceuticals cared about: shelf space. The company also planned to use infomercials, an untested departure from industry practice that traditional competitors would resist copying.
Shielded from preemptive competitive action, Genomma Lab’s youthful managers developed two critical capabilities: (1) by studying human eye movements they learned how to compress an infomercial into one-sixth its original length without diminishing effectiveness; and (2) they learned how to commercialize a product in a fraction of the time their larger competitors required.
With these two capabilities in place, Genomma Lab could efficiently sell pharmaceutical products directly to Mexican television viewers. The results were impressive and provide excellent evidence for this stratagem’s power. The company nearly doubled its revenues in 2003, from $30 million to $70 million. Today Genomma Lab produces about $180 million per year.
Genomma Lab let its adversaries focus on the obvious, orthodox path, and then capitalized on their fortuity by taking an untraveled path. This caught its opponents by surprise.
Genghis Khan used this maneuver to surprise his enemies. Breakthrough companies use it to deflect competition. Dell went direct when the market was fixated on retail; NetFlix bypassed video rental stores and avoided downloads; Avon innovated selling through independent representatives. Each took advantage of the fact that the competition had settled on one path to the consumer and had stopped questioning their choices.
This stratagem plays on that your market – your competitors, suppliers, customers, distributors – tend to fixate on one path to the consumer. In mature industries, this fixation is particularly strong and creates an opportunity for the acute strategist. When you know what your competitors expect, surprise them by giving them what they do not.
What would happen if you used the same stratagem today? Could you become the next Dell, Avon, or Genomma Lab?
To apply this stratagem, ask three questions:
1. What does my market (my customers, competitors, distributors, etc.) assume is the right path?
2. Given this, what unorthodox path would they not copy quickly?
3. What would happen if I took the unorthodox path?