Choose or Lose

More than 13,500 grocery stores have closed since 1988. One of the primary reasons for these failures is that when a Wal-Mart Supercenter came to town, grocers froze like deer in the headlights, allowing the industry giant to bear down on them with thundering velocity.

Many of the retailers who fail in the wake of Wal-Mart do so because they don't make critical choices to alter their approach. In a study of 62 small retailers in southwestern Virginia, for example, researchers found that 52 percent of storekeepers didn't adjust their product lineup, 42 percent didn't adjust pricing, and 21 percent didn't adjust service levels. The researchers noted that storeowners didn't seem to make a conscious effort to vary their product assortment from Wal-Mart's.

To avoid becoming retail road kill, follow this simple philosophy: Choose or lose. Make explicit choices—and then execute them with intentionality—to significantly increase the chance of success in an economy dominated by industry giants.

The alternative—not making a choice—invites outsiders and outside circumstances to shape your future.

The first step in choosing is deciding what not to do. The second step is making explicit, well-reasoned decisions about what to do. The last step is to choose with intentionality.

Step one is based on the simple premise that strategy is the elimination of options. Most organizations have many more opportunities than they have resources. Unless you explicitly choose what not to do, the company loses resources, because the excessive choices dilute the pool of people and money needed to attack the highest-value strategies.

Choosing what to do involves making it clear to employees, vendors, and customers what you stand for, and especially how this is noticeably different from what the competition offers. Without clearly defined priority initiatives, managers will devote time and effort to pet projects, and employees will refer to the constantly shifting priorities as the "flavor of the month."

Choosing with intentionality means choosing in a way that makes those choices happen. Intentionality is the gut-level willpower to overcome the inevitable roadblocks. Without intentionality, entrenched employees will wait out frequent but ineffectual strategy changes by adopting a "this, too, shall pass" mentality.

You absolutely have to make three critical "choose or lose" decisions to thrive as competitors: how to differentiate, what to emulate, and where to dominate.

First, you can't take on the bear in your markets by playing its game, in its habitat, with its rules. To succeed, you have to explicitly differentiate yourselves in one or more areas, in the eyes of your vendors, your employees—and especially your customers.

Kmart was a great example of the folly of a frontal assault. As an e.v.p. at Fleming with operational responsibility for our $3 billion supply alliance with Kmart, I watched the retailer's disastrous attempt to match Wal-Mart pricing in 2001—a debacle I later dubbed "Kmart-geddon."

Second, when it comes to emulating dominant market competitors, you must select those attributes that are consistent with your own differentiated position. Meijer, for example, chose to emulate Wal-Mart's low-cost structure by removing over $400 million of annual operating costs, but it chose to differentiate with a combination of permanent price reductions and hi-lo pricing.

Limited-assortment retailer Aldi emulates many retailers' private label standards, but doesn't emulate those same retailers' shelf-condition standards, because those standards don't fit its differentiated value proposition.

Third, winning competitors in this climate find the pockets of abundance in their markets. There's plenty of opportunity for a strong No. 2, if that retailer chooses to dominate the remaining portion of the market the giant doesn't or can't occupy. Hence, there are numerous markets with strong No. 2 players such as Pepsi in relation to Coke, Burger King in relation to McDonald's, and Dell in relation to Apple.

Winning competitors in this economy are the ones that consciously make—and, if necessary, remake—this triad of strategic choices. They keep a sharp lookout for competitive threats and act early to mitigate them.

William H. Marquard further develops strategic competitive choices in his just-released business strategy book, Wal-Smart: What it Really Takes to Profit in a Wal-Mart World. The book is based on his experience running Wal-Mart's strategic planning process, serving as an e.v.p. at Fleming, and advising over 100 companies in over 25 industries as a consulting executive. Write to bill@wal-smart.com or visit the Wal-Smart User Forum at www.wal-smart.com.