Lessons From Amazon vs. Hachette: Focusing On What Counts

 

Editor’s Note: Market Research is a business, and one facing many changes from multiple angles in the marketplace. It’s important to be reminded that the keys to success in business are fairly universal, and in today’s post master strategist Larry Gorkin reminds us of a few of those core principles, using the recent standoff between Amazon and Hachette publishing as an example. It’s good stuff.

 

By Larry Gorkin

Leaders that want to win long term need to clearly define their business’ key success factors, and consistently deliver them with excellence. Failure to do so can undermine the business’ core strategic intent, weaken its competitive position, and erode results. That’s the lesson from the current stand-off between Amazon and book publisher Hachette.

For those unfamiliar, Hachette is a leading global book publisher, representing popular authors like Malcolm Gladwell, James Patterson, and Stephen Colbert. Its dispute with Amazon centers on pricing and other terms the online retailer wants to sell and promote its books. Amazon wants more favorable terms versus history to reflect its dominant size, and the changed economics of e-books.

With the two sides unable to reach agreement, Amazon has delayed shipping Hachette books, refused to take pre-orders on upcoming releases, and reduced marketing promotions. While Hachette’s business has suffered, the dispute has been a public relations black eye for Amazon. Critics have accused it of abusing its market power, and hurting both customers and authors.

Amazon has responded with a hard line, positioning the negotiation as part of its on-going effort to give consumers the best possible prices and service. The company has apologized for the inconvenience, even suggesting that customers buy impacted books elsewhere until the dispute is over.

What’s important here is the clarity with which Amazon has identified and executed on its key success factors. Amazon needs the best possible terms from every vendor to maintain its own competitive price position. As part of this, they see continued opportunity to disrupt the book market, particularly with the growth of e-books. They are willing to take a short term hit to win this battle long-term.

Hachette has similarly crystallized what counts, albeit from a clearly defensive perspective. The company sees Amazon as a fundamental business threat, and has defined preservation of its traditional business model as essential. From this view, Hachette may be focused on a critical issue, but its goal of preserving the status quo may not be realistic or achievable.

Of course, the idea that companies should define and execute against the key requirements of their strategy is not a new one. Wal-Mart established supply chain leadership as a foundation of its strategy and continuously invested to maintain advantage there. Steve Jobs made ease of use and elegant design the basis upon which Apple would compete; the company still benefits from that.

Yet, many companies fail to crystallize their key requirements for success. Others know what counts, but lack the organization discipline to deliver them with excellence.

Using today’s book market example, Hachette sees its future success dependent on preserving its historic business model with Amazon and other retailers. But, I’d argue that’s mistaken. Instead what is essential for Hachette is to create a new business model that reflects the reality of today’s changed and evolving book market. Even if Hachette strikes an acceptable deal with Amazon, their long term outlook won’t change; they may survive, but won’t thrive.

Importantly, a company will have multiple success drivers, all of which should flow from its current strategy and market reality. Both the strategy and success imperatives should change over time. And once defined, leaders must ensure the resources are in place to deliver them successfully.

Given this important issue, here are five ways to identify and focus on what counts for your business.

1. Identify Dependencies— What does your strategy depend on? What must happen for the strategy to succeed? What elements are in place versus missing?

2. Define Drivers— What’s driving growth in your market and business? What capabilities and assets are needed to support that growth? Where are your strengths and gaps?

3. Examine Changes— What is changing in your market? What are the implications for your business? What are the opportunities to target and threats to defend?

4. Evaluate Progress— Where do you stand on previously identified imperatives? What gaps remain? How should priorities change?

5. Align Resources— What resources are needed to deliver the key requirements? What gaps are there? How can they be filled?

To win any game, you have to know what counts. Then, you have to execute better than everyone.

Questions: Do you have a clear definition of what counts for your business? How well do you deliver against those factors? How could you do better?