Taste It First

Volume 3 Letter 7

Strategy is about creating value – value for Shareholders, for Customers, for Employees and yes for Society. A good strategy executed well is relentless – it accomplishes a central set of objectives through a continuously changing set of circumstances.

Schlitz beer used to rule over the USA beer market with the same dominance that Budweiser and Heineken do in their respective markets today. The famous advertising lines for the beer were “Schlitz, the Beer that Made Milwaukee Famous” and “When You’re Out of Schlitz – You’re Out of Beer”

It seems that dominating the USA beer market wasn’t producing enough money for the Milwaukee based brewery so they devised a strategy to really make money. In 1967 a chemist came up with a great idea for brewing beer faster – in fact, twice as fast shaving 10 days off the brewing cycle. Without adding one more point to their market share Schlitz could double their profits!

The new brewing process would allow Schlitz to shrink their inventories. Since less beer needed to be brewed, brewing facilities could be sold off or used for other purposes and tremendous amounts of cash flow could be freed up. The strategy was brilliant!

For the first six months Schlitz couldn’t believe how much money they were making – profits sky- rocketed. However, in all their excitement to introduce the new (financially) improved beer, nobody stopped to ask the customer if it tasted any good – it didn’t.

Unfortunately, Schlitz beer taste got associated with another word that rhymes with Schlitz. As the market share plummeted and cash flow dried up the famous Milwaukee brewing company was eventually sold. The Schlitz brewery passed through several hands including Stroh and Pabst before it finally closed its doors in the early 90s.

Business strategies that are designed to benefit only one stakeholder at the cost of others are ill conceived. In every business there are at least three stakeholders – the customers who support the business, the stock holders who fund the business and the employees who either are the business (if it’s a service business) or who build the products.[1] A good strategy speaks to the needs of each of these stakeholder groups. If increasing the value to one group means reducing the value to another there is often trouble ahead.

One must applaud Schlitz’s effort to reduce costs and boost profits but one can only question their disregard for their customers’ concerns. They paid a heavy price for their market miscue.

When developing your business and brand strategies:

· Build your strategy around a clear value proposition for the customer.

· Never diminish the value of your brand to gain internal efficiencies.

· Test market your approach if time allows.

· Develop you strategy from the outside in based on what customers and other stakeholders have to say – not gut fee and instinct.

· Look for opportunities to further build the brand in the eyes of your target customers.

· Clearly communicate your brand strategy within your organization.

Taste it first! Your strategy must speak to all the stakeholders otherwise it’s the Schlitz.

[1] Other stakeholder groups can include regulatory agencies, special interest groups etc.

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