A key factor in crafting a new strategic direction is to ensure that the vision and objectives of the strategy are communicated throughout the company. Failure to do so almost always results in mass confusion. A case in point is the Asian division of the makers of the famous wrinkle reducer Botox.
Cosmetic medicine is big business as more people attempt to defy time by reducing a few wrinkles. One of the iconic drugs of this industry is a product called Botox. Botox is derived from botulism, a deadly paralyzing poison found in rotting food. (I’ll stop there). In very tiny dosages Botox paralyses the small muscles under the skin that are responsible for smiles and frowns, magically making wrinkles disappear.
Originally developed in the 1990’s as a treatment for “lazy eye” ophthalmologists soon discovered that patients being treated for lazy eye were also looking younger with reduced wrinkles around their eyes. This interesting side effect caught the attention of dermatologists and soon Botox caught fire as the “off label” drug of choice for the age defying set. It would take until 2002 before the FDA finally approved Botox for cosmetic procedures and by 2017 Botox was a 2.2 billion dollar juggernaut of the vanity industry.
However, storm clouds were on the horizon in 2017 as the patent for the drug was expiring. Generic versions of Botox were expected on the market in Asia in 2019 at a much lower prices than the branded Botox. Whether in response to this impending challenge or other outside influences, the Asian CEO suddenly increased the price of Botox in 2017 by a jaw dropping 20% in an effort to boost profits.
One would hope that a price increase of that magnitude was the result of a well-designed strategy but by all appearances it had the hallmarks of a strategic “Hail Mary”. The 20% price hike was thrust upon unsuspecting customers who only became aware of the increase when the invoice arrived. But wait — it gets even better… What’s even more dumbfounding is that the CEO failed to inform any of her management team of the price increase! Gobsmacked customers who called in to complain found that the Botox management hadn’t been informed of the price increase either. Confusion and frustration became the corporate norm and in a matter of months resignations from the embarrassed management started pouring in as disillusioned staff headed for the exits. The bleeding only stopped when the CEO herself resigned.
What can we learn from Botox in Asia?
- Communicate your strategy: A key component of any strategy is to ensure the whole team understands it and is onboard.
- Reactionary strategies are rarely good strategies: There is nothing to indicate this strategy was well thought out. It has all the hallmarks of a business “Hail Mary”.
- Always keep your customers informed: Surprising customers with bad news is never a good idea!
Raising the price wasn’t necessarily a bad idea, just before you do it make sure it’s supported by a strategy that’s well developed and well communicated. The number one job of all leaders is to remove any confusion about what the business is trying to accomplish!
Have you taken the time to communicate your strategy? Remove the wrinkles; take away the confusion; communicate your strategy.