Strategy in an Age of Existential Freedom

This article (free reg. required) from Strategy+Business is one of the most bizarre pieces of business literature I have ever read. After digesting it awhile, I think I like it. Author James Ogilvy begins by discussing his work at SRI.

I remember the day I realized the world was getting weird — so strange and unpredictable that conventional approaches to market forecasting would not work. It was an otherwise ordinary day in May 1985. I was part of a team at SRI International (formerly Stanford Research Institute) that was analyzing the results of a national survey of American customer attitudes. Our program was called Values and Lifestyles (VALS), and it was a well-regarded, innovative breakdown of the purchasing public into nine different lifestyles roughly based on Abraham Maslow's hierarchy of needs: people whose lives revolved around survival, belonging, achieving, the search for peak experience, and so on.

After a while, he realized that the VALS system was losing its predictive power as people stopped behaving true to their type. Here is what he concluded from that experience.

Because I had been trained as a philosopher, I immediately knew what was happening. American customers, without direct influence from the likes of Jean-Paul Sartre or Martin Heidegger, had nonetheless discovered existential freedom. They would no longer be predictable. And indeed, customers around the world have been unpredictable ever since. No general system of market segmentation or analysis has managed to capture their patterns of behavior in any reliable way.

This realization has implications that far transcend marketing, which, typically, commences once a company has identified a strategy and developed products or services for a defined customer base. For corporations, keeping up with customers who are less predictable than consumers of old requires a capacity for innovation. Where the old economy relied on mass production to meet universal needs, the new economy demands customized innovation to satisfy an endless range of wants and whims.

The old production economy was predictable because it operated in the realm of necessity; it produced goods and services people needed, and those were relatively stable. The new economy plays in the realm of freedom; it produces goods and services for a customer who is not bound by needs. The old economy called for strategies built by engineers who could calculate according to necessary laws. The new economy calls for strategies created by existentialists who understand freedom. Most important of all, the old economy operated at a regular pace, in the clockwork time of industrial production. The new economy lurches forward and backward, in some new kind of time that was anticipated, once again, by the existential philosophers.

The article is somewhat heavy on philosophy, but not so dry and boring that it can't be followed. After explaining existentialism and how it is manifested in consumers today, Ogilvy gives us his "Five Principles of Existentialist Strategy."

Five Principles of Existential Strategy
1. Finitude. You can't be all things to all people. If you're not saying "no" to some possibilities, then you're not acting strategically.

2. Being-Toward-Death. No one is too big to fail, to die, to go bankrupt. Gliding on momentum can lead to
a crash.

3. Care. Define your interests more precisely than ROI or return to shareholders. If you don't know where you stand, you'll fall for anything.

4.Thrownness. You have a past; you have experiences and core competencies. Know them, use them, and don't forget them.

5. Authenticity. Don't be bound by your past. Feel free to reinvent yourself and your company for an uncertain future.

I would have added to the list something about customer experience. In a world of existentialist freedom where consumers have so many choices, it becomes more difficult to compete on price, features, benefits, and all the traditional value drivers. Aesthetics, experience, service and emotion are a necessary part of new offerings in most markets. These are the things that will drive consumer choice and thus I think this type of thinking should be integrated into any corporate strategy.

The money quote from the article – "competitive advantage is insecure." I'd like to think the days of sustainable competitive advantage aren't over, but I think Mr. Ogilvy is right. It isn't as easy as it used to be.