Two vastly different news stories, one about Alzheimer’s and the other about dollar stores, together convey an important strategic leadership lesson about the importance of alignment with partners in achieving an organization’s goals.
Dollar stores (Dollar General, Family Dollar Stores and Dollar Trees) are growing rapidly at the expense of Walmart. Recently, the dollar stores have added a lot more branded products e.g., Kraft, Heinz and others. Better packaged food selections, plus dollar stores’ closer (than Walmart) proximity to low-income neighborhoods has attracted new customers and larger shopping trips as rising gas prices increase the cost of driving to Walmart.
Lipton Cold Brew Iced Tea and Jello No-Bake Cheesecake in a dollar store? I suspect that after decades of Walmart’s ruthless purchasing practices, consumer goods companies seek any opportunity to diversify their channels to gain supplier power to fight Walmart’s Herculean purchasing power.
Two recent examples demonstrate Walmart’s incessant drive to secure lower prices:
Walmart recently told suppliers that Walmart’s fleet would soon pick up its purchases. That’s great for Walmart, lowering its shipping rates, but it will raise shipping rates to Walmart’s competitors. Volume drives shipping costs after all.
This past week, I learned that a leading branded product – an esteemed brand whose name is the name of the category – sells every Walmart unit at a loss. Why? Walmart’s “Take this price or we’ll carry a different brand” purchasing philosophy is to blame. Because losing the Walmart volume would price the company out of other channels, this company takes Walmart’s win-lose deal. (Confidentiality precludes my sharing the name of the brand.)
Switching gears, scientists in academia, the U.S. government, drug and medical imaging companies are sharing data as part of an unprecedented “collaborative effort to find the biological markers that show the progression of Alzheimer’s disease in the human brain.” The 10-year old project now serves as a model for efforts to cure other diseases, like Parkinson’s.
According to one participant in the Alzheimer’s work, “…we all realized that we would never get biomarkers unless all of us parked our egos and intellectual-property noses outside the door and agreed that all the data would become public immediately.” Terrific findings are being generated, with the prospects for better (patent-protected) drugs and diagnostic tools around the corner.
I love this example of collaboration because our culture increasingly contains an “eat what you kill” norm, in which everyone seems to be out only for himself and those he loves. One measure is that social outcomes unacceptable in decades past – unemployment rates of 50 percent and more for black youth and many middle-class families using food pantries – are now taken as unsolvable problems.
The scientists, on the other hand, recognize that in most cases we are stronger together than we are apart. Collaboration with partners to achieve a common goal enhances shared success, which then circles back to make us stronger. Medical companies in the Alzheimer’s project will likely find leading positions in billion-dollar markets.
Walmart, on the other hand, dictates terms and cares not about the carnage. That approach worked when they were the lowest-price game in town. It spells trouble now that dollar stores, Tesco, Aldi and Amazon are building business models that challenge Walmart’s lowest-cost position.
Our nation faces thorny problems whose solutions will create new markets but likely require many organizations’ expertise. Walmart’s approach, I suspect, will leave it isolated and less competitive in an economy requiring collaborative efforts. Winning companies in the new economy are not just aligned internally around their value promise. They are aligned with all their outside partners to build a stronger overall value-chain.
Strong business models are anchored in hard-to-copy advantages. Collaboration with outside partners, as well as internal alignment gained through a collaborative culture, builds stronger advantages. What are you waiting for?
The rock bank legend Three Dog Night’s observation – “One is the loneliest number that you’ll ever do” – applies to business, not just love.
Kay Plantes is a Madison-based consultant and author of “Beyond Price: Differentiate Your Company In Ways That Really Matter.” She is an expert in business model innovation and was the keynote speaker at the BizTimes CEO Strategies Breakfast in April.
