More Emergent Strategies: Groupon, Greendot

I’ve always loved emergent strategies for many reasons:

  • They’re practical.  You invest in what works as opposed to what leadership wants to work.
  • I’ve seen too many strategy offsite white-board, created-in-a-vacuum strategies fail.
  • The premise that genius is not in crafting a particular strategy, but instead noticing what’s actually working and investing in that.
  • They often involve marketing, essence, and the truth:  positioning around what you really do as opposed to what you want to do.
  • They are so common.  There are countless stories of companies and products where success was predicated on observing this intention/reality gap and then positioning on reality as opposed to intention.

Some of my favorite examples include:

  • NyQuil.  In testing, they realized this regular cold medicine kept putting people to sleep.  The solution?  Reposition the product as a nighttime cold remedy, which it’s been for over 25 years.
  • Viagra.  Originally intended as high-blood pressure medication, patients in the clinical trials consistently reported an interesting side effect, so they repositioned the drug around the side effect and created a multi-billion dollar category in the process.
  • FriendFinder.  When users kept posting explicit profile pictures on FriendFinder, a B-tier social network, they needed to make a policy decision:  block the behavior or not.  They decided to run with the idea, spun up derivative site AdultFriendFinder, became the dominant social network for swingers, and later sold the site for $600M.
  • Sybase.  Originally conceived as a fast relational database, Sybase realized that financial institutions were particularly attracted to that value proposition, repeatedly doubled down on the finance vertical, and became a powerhouse in providing databases to financial services.

While I’d say that MarkLogic’s focus on media was similarly emergent, my personal favorite emergent strategy was actually at BusinessObjects.  When analytic applications were the rage, we created a unit to build a high-end CRM analytic application called Ithena.  The trouble was we staffed the unit with platform people, not applications people.  Since they had basically no idea how to build a CRM app, they kept building enablers, effectively building another layer of platform on top of BusinessObjects.  (I kept saying “there’s no app in your app” but nobody wanted to hear it.)  When positioned as a CRM analytic application, Ithena was a non-starter.  When we repositioned it as BusinessObjects Application Foundation, a platform for building analytic apps, sales took off.  By simply calling something what it was — instead of what we wanted it to be –we enabled a new, and quite successful product line.

To pick some more recent examples, I read an article about Groupon in Forbes a few weeks back.   Groupon is conjunction of group and coupon and they provide daily deals in a large number of cities where you can, for example, get a massage worth $80 for $35 provided enough other people also take the deal.  Groupon gets a cut of the total revenue (often 50%) and the merchant offering the deal gets either a bunch of new customers or the chance to unload some inventory.  The company is on track to break $500M in revenue this year and raised its last round at a $1.35B valuation.  While I confess I’d not heard of Groupon before the Forbes article, I now get the daily deal email and think it’s a great concept.

And Groupon is also an example of an emergent strategy that morphed several times along the way:

The [first] idea soon morphed into ThePoint.com, an online platform for petitioners to muster support for all sorts of causes. ThePoint launched in November 2007 and drew national press attention for its users’ zany campaigns. One amassed 1,000 people committed to donating millions of dollars toward solving Africa’s aids epidemic–on the condition that u2 front man Bono would retire from public life. Another corralled several thousand supporters of building a dome over Chicago to keep the city warm all year. The publicity helped lure $4.8 million in venture capital from the likes of Sand Hill Road’s NEA. “I figured it was just a matter of time before I had my $400 million company and got my big payout,” quips Mason.

But ThePoint didn’t attract enough eyeballs to live on advertising revenue. One of Mason’s lieutenants, Aaron With, proposed paying for popular Google search terms related to societal issues–such as “make weed legal.” Mason got traffic, just the wrong kind. Obnoxious fans of the band Insane Clown Posse, known as Juggalos, made ThePoint their online playground. As losses mounted in 2008, Mason trudged to With’s house to lay off his friend. “If I was a rational person, I probably would have quit right there,” says Mason.

One promising trend: Some of ThePoint’s most effective campaigns banded consumers together to gain buying power. Mason began featuring a blog that offered readers a different deal from various vendors every day. Having little to lose, his investors encouraged him to pursue the strategy. Groupon–then called Getyourgroupon.com–was born.

I went to a function last night where I heard the hilarious founder of Greendot, Steve Streit, talk about his company’s beginnings.  The original idea was a e-commerce site where kids could buy junk online (e.g., http://www.isellcrap.com).  This, in turn, begged the question how kids would pay for stuff online, which lead them to the idea of a payments service for kids, which in turn lead to Greendot which, as it turns out, is not focused on kids at all:  it serves the 50M Americans who either don’t want or can’t get credit cards with prepaid reloadable Mastercard and Visa cards.  His company went public earlier his year and is now worth $2B.

4 responses to “More Emergent Strategies: Groupon, Greendot

  1. This was brilliant and aided by Strategy revision – thank you!

  2. this really helped me with my uni assignments thanks x

  3. Pingback: Week 4: Kotter’s Model of Change – Is planned change outdated? | businessawarenessblog

  4. Pingback: Week 4: Kotter’s Model for Change – | businessawarenessfinal

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