• Ken Leung

One size does not fit all

If you’ve ever received a free T-shirt at an event that you’ve participated in, more often than not, they tend to be ‘one size’. Usually its large and will fit some people, but not all. For those of us with a smaller or larger constitution, it can look a bit ridiculous. The reason for doing this usually boils down to cost and simplicity.

Sometimes we see the same approach being applied in business. The classic being the first Ford Model T, which came off the production line in September 1908. Henry Ford believed that a standard offering was good enough for market entry and coined the classic line “any colour so long as it is black”. However, even Henry Ford realised that a ‘one-size-fits all’ does not always work. In the 18 months following the introduction of the first Model T, Ford extended the offering with numerous body styles that included 2-door and 4-door touring, roadsters, pickups and saloons.

This is the essence of customer segmentation, which recognises that not all customers want the same things, or behave in the same way. By recognising this, companies can develop differentiated propositions to target each customer segment. Failing to recognise this, by taking a one-size-fits-all approach to customers can have disastrous consequences. Take, for example, the takeover of Safeway by Morrisons in 2003. Morrisons assumed that what had worked for its stores in the past would work for Safeway. However, their customers bases were different. Whereas Morrisons is a no-frills operator, Safeway offered an aspirational shopping experience.The result was four successive profit warnings (1).

We also see the application of the ‘one-size-fits-all’ approach in a variety of other areas within organisations. For example, in managing and predicting customer demand, organisations tend to use forecasting as a tool. There’s nothing wrong with this, unless it is the only tool. It’s not always effective to forecast demand. Take, for example, Nike's deployment of a supply chain planning software. Christopher Koch, writing in CIO Magazine at the time, said “If there was a strategic failure in Nike’s supply chain project, it was that Nike had bought in software designed to crystal ball demand. Throwing a bunch of historical sales numbers into a program and waiting for a magic number to emerge from the algorithm — the basic concept behind demand-planning software — doesn’t work well anywhere, and in this case didn’t even support Nike’s business model. Nike depends upon tightly controlling the athletic footwear supply chain and getting retailers to commit to orders far in advance. There’s not much room for a crystal ball in that scenario.” The result was $100 million in lost sales (2). Recognising this, some companies have adopted demand segmentation, where the demand management approach matches the demand characteristics of the goods.

The one-size-fits-all approach can also be seen in the adoption of new ideas and practices. Take for example, agile development. What started out as a rapid software development approach has now become a ubiquitous adjective for almost anything. Whereas using an agile and iterative approach to develop digital customer applications can be very effective, the same approach does not bode well when implementing a large complex ERP platform. The bimodal or ‘2-speed’ IT model recognises that there isn’t a single mode of operation within IT, and quite rightly so.

As a final example, of the ‘one-size-fits-all’ approach I’d like to turn to the area of post-acquisitions and merger activity. Here, the acquiring company often replaces the processes, systems and ways of working of the acquired company with their own. This is usually done in the pursuit of simplicity, rationalisation and the unlocking of the financial benefit of integration expected and required to recoup the sizeable premium paid for acquisition in the first place. However, the replacement of processes and systems can result in the loss, or degradation, of differentiating functionality or services that the acquired company might have had, creating a customer experience that is no longer familiar or even alien to their customers. Replacing the ways of working can also be very unsettling for the staff of the acquired company which can disrupt performance and result in the loss of talent, to the competition. Take, for example, the acquisition of Homebase by Wesfarmers in 2016, who essentially went about replacing the acquired Homebase stores with the Bunnings format. According to a report by the BBC, "The Australian firm thought they could show the Brits how to do DIY. So confident, they immediately sacked Homebase's senior management team. That was a huge mistake.They then began to strip out the soft furnishings that were popular at Homebase. Instead, Bunnings opted for no frills DIY sheds." The result was huge losses and costs that brought its total acquisition bill (including the purchase price of £340 million) to about £1 billion, and its sale to restructuring specialist Hilco for £1 (3).

Perhaps there is a better way, where the strengths and weaknesses of the two companies are identified to create a combined organisation where the whole is more than the sum of the parts. The ‘best of both’ worlds could be brought together to counter the weaknesses of the individual organisations.

In summary

Whereas unnecessary variation can result in cost and complexity, adopting a default ‘one-size-fits-all’ approach can create more problems that it might solve. Sometimes, it can lead to disastrous consequences, as the cited examples have highlighted. When considering the use of a common approach, it is vital to consider whether doing so will destroy valuable differentiation, limit market penetration or simply drive the wrong outcome.

Ken Leung is a Co-founder of Outvie Consulting and an expert in business design and transformation.

1. A big supermarket merger has gone badly wrong, The Economist, June 2005. https://www.economist.com/node/4079539

2. Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain Disaster, Christopher Kock, Cio.com June 2004. https://www.cio.com/article/2439601/supply-chain-management/nike-rebounds--how--and-why--nike-recovered-from-its-supply-chain-disaster.html

3. Homebase sold for £1 as DIY disaster ends for Wesfarmers, BBC.co.uk, May 2018. http://www.bbc.co.uk/news/business-44248409?intlink_from_url=http://www.bbc.co.uk/news/topics/cr589m0wxd0t/homebase&link_location=live-reporting-story

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