The Number That Changed a Distribution Strategy

My client was literally bouncing in his chair. I was presenting the preliminary findings of some work I'd done for him to one of his colleagues. 

"When will you get to the number?" he said. 

"I'm almost there. I just need to finish setting the context," I replied. 

The brief had been simple. The organisation had a legacy product that was losing sales volumes. It had plans for a new product already in motion, but couldn't be sure whether these would deliver, and they certainly weren't going to deliver quickly. He'd asked me to have an independent look at the product to see if I could squeeze any last life out of it to buy them more time.

What the evidence revealed

During the course of my work, I had scrutinised the regulatory returns for that product category. These revealed that, industry-wide, customers buying through Channel A were 4.5 times more likely to purchase this product than customers coming through Channel B. Furthermore, while sales through Channel B were indeed declining across the industry, sales through Channel A were holding firm. A few questions confirmed what I already knew: all of the organisation's sales came through Channel B, and all of its sales and marketing spend was focused on Channel B. In summary, the market was moving, but the organisation had not moved with it.

Although there were still fewer customers coming through Channel A than through Channel B in aggregate, with a 4.5-times higher propensity to buy, if the organisation could achieve the same market share in Channel A as it did through Channel B, it would nearly double its sales of the product. That was more than enough to buy the time needed to bring its replacement product online. 

Of course, being able to achieve the same market share in Channel A as it did through Channel B was still only an assumption. And further work was required to estimate the costs of doing so. Insights, even insights as clear as this one, don't exist in isolation and must be considered within the context of a broader strategic choice. 

Why one number changed the strategy

There were two things I've always particularly enjoyed about this piece of work. 

1. Once I'd uncovered it, it was relatively easy to point at the regulatory returns, explain the maths, and have anyone confirm that what I'd discovered was true. The answer was there for anyone to find if they just looked hard enough and in the right way. This is the value of evidence-based strategy: not collecting data for its own sake, but understanding what the evidence should change in your choices. 
2. Once the executives had seen it, they could never look at the market in the same way again. In fact, although I'd only been asked to look at a single product, this new strategic insight caused the organisation to rethink its approach to distribution entirely. Beyond just fixing the problem I'd been asked to look at, it led to a multi-year change of direction and operating model for the whole organisation. 

This is how strategy helps organisations. It asks not how we can try harder to do what we're already doing better, but whether we can find a new way of looking at the organisation and the market in which it operates that helps us to do something different. In this case, that meant reconsidering where to play and how to win: which channels to use, which customers to reach, and where sales and marketing effort could create the greatest value.

Some lessons learned

During the course of this assignment, I'd asked a wide range of questions and analysed large volumes of data. All of the questions had been valid. All of the data had been accurate. But most of it had proved strategically irrelevant. It was the one insight which depended on a relatively small subset of the data on which the whole strategy hinged. 

That doesn't mean that all of that work was wasted. As they say, sometimes you've got to kiss a lot of frogs. And unfortunately, I think a lot of organisations give up before they've looked wide and hard enough to find the insights they really need.

So how do you know where to look? 

1. Anecdotal evidence is a weak form of evidence. But anecdotal outliers do provide clues as to where to look for stronger evidence. 
2. Where everyone already agrees, you're less likely to find something interesting. Look for the dissenting voices and try to find what they're seeing that no one else is. 
3. Look everywhere. There's often nowhere near as much evidence as you would like, particularly where it supports the most interesting question. So look at it all. It's better to look at it and not find anything than not look at it and miss something critical. 
4. Be curious. Take the time to explore anything that looks interesting from at least a few different angles.
5. Install and document. Good summaries build levels of abstraction, which make it easier to find connections between things that might previously have been overlooked. 

If your organisation is making decisions on the basis of familiar assumptions rather than evidence, book a call to discuss how an evidence-based strategy review could help.

Note: This case has been deliberately anonymised to protect confidentiality.