Most successful business plans entail launching a new product, service, or distribution outlet that attacks existing market competitors on what military planners would term an exposed flank. In battle, an effective flanking attack hits the opponent (or competition) where they are less able or unable to respond. A smart commander will mass forces against this flank, just as an astute business leader will pour resources into their flanking effort.
For example, Wendy’s did not start out attacking the fast food burger market by trying to out do McDonald’s with inexpensive, quick to deliver burgers. That would have been a frontal assault. Instead, they hit McDonald’s on an exposed flank with their “Hot and Juicy” campaign, centered around delivering larger, fresh (not frozen) beef patties.
McDonald’s had built an infrastructure to deliver inexpensive (frozen) burgers quickly. The complexity of their existing infrastructure made it difficult for them to respond. Meanwhile, Wendy’s poured marketing and operational resources to deliver on their “Hot and Juicy” promise and carved out a niche for customers who wanted fresh, larger burgers with customized condiments.
Leading edge, not bleeding edge
Often, executing a flank attack involves developing new technology. Whether you’re considering launching a new business or looking to develop a new product in an established company, you may have a vision of a new technology will that expose a vulnerable flank in an entire industry or against key competitors.
However, you must assess the feasibility of actually delivering your visionary, flank-exposing innovation. Ensure you have a crystal clear understanding of the technical risks and an honest assessment of the capabilities of your team.
Ask if the needed technology is at the the leading edge, which is realizable, or at the bleeding edge, which is beyond your capabilities.
Wendy’s attack on McDonalds on a national scale was leading edge at that time. It allowed them to exploit an exposed flank in McDonald’s otherwise formidable market position.
Contrast this with Samsung’s effort to attack their competitor’s exposed flanks with a quick charging feature. The ill-fated Galaxy Note 7 development team pushed battery technology to the bleeding edge. By inaccurately assessing the technical risks, their exploding phones became an infamous example of the perils of pushing too far. Their vision of a quick-charging, oversized smartphone (that wouldn’t catch fire) was an illusion—or, more accurately, a nightmare.
To avoid disasters like the Galaxy Note 7, it is important to be brutally honest in your technical feasibility assessment to determine if your hoped-for technology is at the bleeding edge. The worst-case scenario is ignoring the warning signs and launching something that is unsafe or has failings that significantly damage your reputation.
Find yourself at the bleeding edge? Don’t resort to a frontal assault
Even if you lean too hard on expecting a breakthrough at the bleeding-edge and realize the breakthrough is not coming, all is not lost.
The natural, human reaction in such situations is to go back to a frontal assault approach. This is usually the wrong approach. Instead, find a different exposed flank to attack. Imagine if Wendy’s could not figure out the fresh beef delivery infrastructure and tried to compete with McDonald’s by out-working them in frying frozen patties; it is unlikely Wendy’s would be around today.
The frontal assault in business is essentially a “we will just work harder than they do” approach. Trying harder by attempting to do what your competitor does better than they do it is a very tough road.
If you find yourself in the situation where the technology vital to creating differentiation becomes an illusion, there are better alternatives than attempting to “gut it out” with a direct attack on the target market. Look closely for other highly differentiated technology that may be hidden in the work you or your team have already completed. You probably still have opportunities to attack an exposed flank; you just have to dig deeper to find them.
Case study: A hospital bed upstart mistakes bleeding edge for leading edge
The battle for the hospital bed market began in the early 1980s. Hill-Rom, the venerable healthcare division of Fortune 500 company Hillenbrand Industries, had pushed its final competitor out of the U.S. hospital bed market and controlled a virtual monopoly.
Their only challenge came from the small Kalamazoo upstart, Stryker, which began to develop a few niche products (specialty beds) like had features like in-bed scales, for high-demand areas of the hospital, having identified a vulnerable flank in Hill-Rom’s med-surg bed monopoly.
After many back and forth competitive battles in these new specialty bed markets, Stryker had established a reasonable hand, carving out specialty niches and converting about 15 percent of the med-surg bed market to specialized beds. By early 1991, Stryker decided to go on the offensive and made a momentous decision to take the battle to Hill-Rom’s main market. It seemed the next logical step.
A “brilliant” plan
In devising their plan of attack, Stryker’s medical division did many things right.
They formed a sizable off-site development team with the mission to develop and launch an innovative medical–surgical bed. They staffed the team with several veteran engineers and augmented it with talented new hires that had expertise in areas outside of Stryker medical’s core competencies including aptitudes useful in developing key new technologies for advanced patient surfaces and mattresses. The off-site team was highly stretched, which helped give them an esprit and special energy like many startup groups. Their overall go-to-market plan, on paper, was also compelling.
Stryker had identified what they believed was a highly exposed flank in Hill-Rom’s dominant position in the med-surg bed market. Research revealed that an important element of Hill-Rom’s strength in med-surg beds was that the company also competed in a large (over $500 million) business, renting beds outfitted with patient surfaces that had advanced skin-to-surface pressure reducing technologies. Using breathable fabric similar to Gore-Tex, a powerful blower would inflate air mattresses on the rental beds to essentially float the patient on a semi-permeable low-air-loss surface. For patients with compromised skin, the low-air-loss technology was a godsend.
Stryker’s official plan was to out-flank Hill-Rom’s “for sale” and low-air-loss “rental” market by masterfully developing innovative technologies to create a combination product. It would be the best the med-surg bed ever made, including many of the benefits of Hill-Rom’s expensive rental-beds.
Stryker believed that the savings inherent in purchasing over Hill-Rom’s exorbitant rental costs would present a value proposition to hospital customers would be infinitely compelling. Hospitals could replace their med-surg beds with this advanced product, revitalize their floors, and save millions in rental fees. Hill-Rom would be trapped, because they had built an immense infrastructure to support the rental-bed market. The plan hinged on developing an effective, low-cost replacement of the low-air-loss technology.
The illusion of technology that does not exist
It sounded brilliant, but the realities of executing such an ambitious plan would far overreach the technical capability of Stryker or any other company at the time.
The fatal flaw was in their technical assumptions. Lacking in-depth experience in the low-air-loss technology, Stryker’s planners and engineers did not realize the complexity of attempting to offer low-air-loss on a “for sale” basis. These types of miscalculations are often very hard for senior managers, venture capitalists, or even entrepreneurs themselves to discern. After all, most good business plans attempt to extend the current limits of performance, or go beyond commonly accepted boundaries. The problem is that if you push beyond the possible, the vision becomes an illusion—a bridge too far.
It would be nearly a decade before the technology existed to build such a bed. The plan was tantamount to attempting to develop the iPod in 1985, long before miniature hard drives, flash memory, high-speed PC connectivity, or energy-efficient microprocessors existed in any meaningful form. The Apple analogy is a good one because that company and its founder Steve Jobs were especially skilled at timing their product innovations just right. In other words, they knew how to push the envelope on the leading edge, but not the bleeding edge.
Reassessing the plan
By the latter stages of the development project, Stryker’s leaders realized that they would not be able to bridge the technology gaps. They reacted as many entrepreneurs do upon realizing that key elements of their plan will not come to fruition: They looked at what they had, and decided that they could still be successful by simply working harder than Hill-Rom.
After all, they had carved out positions with specialty beds by beating Hill-Rom’s highly vaunted sales force in many of those battles. Moreover, their sales team was now more tightly focused. The new bed divisional leadership became convinced that just delivering a “better” bed (than Hill-Rom) could carry the day.
This type of reassessment happens frequently. The team had put their heart and soul into developing the bed, and were excited about what they had created. Even though it would not replace rental beds, the new product had features that were lauded by floor nurses who were given sneak previews. The talented bed sales team was confident that they would win with the better, more innovative bed.
As more customers began previewing the product, enthusiasm heightened. The unique networking technology, lower height, modern appearance, optional in-bed scales, bed-exit warning systems, and other technological advances gained positive customer reviews. They became convinced that that betting their success on dozens of such small advantages in a direct frontal assault would take a chunk of Hill-Rom’s market share. But this was a miscalculation.
Pickett’s charge: Frontal attack failure
Using an American Civil War analogy, Stryker’s plan as actually executed was akin to Pickett’s charge at Gettysburg, the disastrous Confederate frontal assault by the army’s most valuable assets across an open field into the heart of the Union’s well-prepared and entrenched position. This horrific loss turned the tide of war, leading to the South’s eventual surrender. Like Pickett’s soldiers, Stryker’s sales reps marched into the strongest part of Hill-Rom’s position.
To win, Stryker’s reps would have to convince executives in hospital C-suites that the Stryker bed was worth trying. With no compelling differentiated technology that might resonate with hospital leadership, the two-dozen small feature improvements were unconvincing. Even though the floor nurses overwhelmingly preferred Stryker’s bed, hospital administration had strong historical relationships with Hill-Rom. Buying new beds was a fifteen- to twenty-year commitment, and most saw no credible reason to take a risk on Stryker.
Hill-Rom was also well prepared for the assault. When the valiant Stryker bed sales team charged, they were met with the full force and ferocity of Hill-Rom’s marketing and sales might. The company had not become a near monopoly because they easily gave up ground in their homeland.
Hill-Rom had world-class information systems, with data that gave a complete view of the type and age of beds for every hospital in the country. They knew which hospitals may be in the market for new beds. Every time their sales and marketing leadership discovered that Stryker was in an account, they moved swiftly to block. They had the ear of hospital administration and would sew seeds of doubt about Stryker’s quality, offer lower prices, bundle other products into the deal, or renegotiate with significant trade-in allowances. Moreover, Stryker’s bed had come in way over cost.
Shortly following the bed’s launch, Stryker’s bed division found itself stuck with a product whose cost came in 70 percent over target. Salespeople became so desperate for orders that they sold the beds for 30 percent less than Hill-Rom was getting prior to Stryker’s market entry. To make matters even worse, Stryker’s bed had to undergo a massive recall shortly after the first units were shipped.
A year after the sales launch, like Pickett’s valiant Georgians, the battlefield was littered with exhausted Stryker salespeople, tired-out service technicians performing recalls, and a demoralized home office. The medical division’s profits were suffering, and the bed business was strained to the breaking point.
Lessons learned for today’s startups
There are two critical lessons in the story for any small business or startup:
Lesson #1: A technical capabilities assessment is crucial
The fatal flaw in Stryker’s plan was the belief that they could develop the technology necessary to match the capabilities of the rental beds and offer it on a “for-sale” basis.
There were many reasons that the market for beds with low-air-loss mattress and other advanced features had become a rental market: the fundamental technologies were expensive to implement and required considerable cleaning and maintenance. Breakthroughs were needed to achieve similar effectiveness with a “for-sale” product that would not require such extensive cleaning and maintenance, and those proved too difficult to develop. The enabling technologies that would catalyze development of “for sale” low-air-loss surfaces were years away.
When Steve Jobs’ team developed the iPod, all of the critical enabling technologies either existed within Apple or were just coming of age in the arena of consumer electronics. Apple’s engineers had to refine them and package them together, but they did not have to invent them from scratch. Similarly, the iPhone, perhaps the greatest consumer electronic product ever launched, pushed the envelope just far enough. Multi-touch existed in Apple’s labs and low power consuming microprocessors were coming out that could handle a complex, PC-like operating system. Apple took risks, but they were calculated risks.
Stryker fell into the trap of the illusionist, attempting to go too far beyond the possible. A more thorough and brutally honest assessment of the state of the art could have led them to find a different and genuinely exploitable exposed flank in Hill-Rom’s med-surg bed dominance. But, when you believe in an illusion, the allure of it is incredibly compelling. Plans are developed and sold to senior management or investors, egos become attached to it, and the train inevitably heads toward the proverbial wall at the end of the tunnel. Similarly, Samsung’s management and engineers became vested in the fast charging capability for the Galaxy Note 7, and it would have taken great courage to pull the feature after they began to understand the risks and the need for more testing.
Lesson #2: Attack a vulnerable flank
Once Stryker’s bed division leadership realized that developing a bleeding edge bed that would be able to harvest some of Hill-Rom’s market share was a pipe dream, they proceeded to make their second fatal error.
They could have looked for a different vulnerability in Hill-Rom’s position, but their previous model for success in the hospital stretcher markets, where better features typically won deals, turned out to be a liability. Winning the endorsement of nurses in the emergency room or recovery room where the nurse managers frequently made the purchase decision was an effective strategy for stretchers. It also worked for specialty beds. On the patient floors, however, the nurses were ancillary to the decision-making process. Med-surg beds were a significant purchase, and hospital administrators, not nurse managers, were the decision-makers.
Not fully understanding the strength or importance of Hill-Rom’s relationships with administration, Stryker’s bed division leadership decided that a “try-harder” frontal assault would work—they assured themselves that the illusory low-air-loss flanking attack was not essential. Similar to Confederate commander Robert E. Lee, who believed in the superiority of his rebel soldiers on the eve of Pickett’s infamous charge at Gettysburg, they became convinced that their superior sales team would carry the day. Competitive fires flared, and like Pickett’s brigade, who thought victory would come if they could just charge fast enough and yell loud enough to break the Union line, Stryker’s reps pressed into the fray. They woefully discounted the degree to which their success in specialty beds was because they were attacking exposed flanks in Hill-Rom’s med-surg monopoly.
After several years of struggle with frontal assaults and two wholesale changes in the bed division leadership, Stryker eventually found a path to success in the med-surg bed market. But, if they would have reacted differently upon recognizing the folly of their first flanking attack, it is likely they could have avoided much of the personal and career carnage. They needed to dig deeper to uncover a different exposed flank in Hill-Rom’s formidable position.
Four years after their initial launch, Stryker found that flank and started having success. The sad part is that the technology needed to exploit this exposed flank was actually completed in the initial bed development program. They could have seen success much earlier by maintaining a focus on convincingly differentiating the new bed from Hill-Rom’s offerings in a fashion that would resonate with the hospital’s C-suite executives.
A key patented technology in Stryker’s bed was a bed-exit warning system that would reliably indicate when a patient was likely to fall out of bed. Hill-Rom had a significant weakness: unreliable bed-exit technology that raised an alarm only after the patient had already fallen. High numbers of patient falls from the bed-side, with associated costs and liabilities for the hospital, were a huge hidden issue. Stryker eventually repositioned and relaunched their bed as the Stryker Secure Bed, the safe, secure alternative, with proprietary technology that could help dramatically reduce patient falls and address other patient-safety issues that were problems with Hill-Rom’s beds.
With Stryker at the forefront, the issues associated with falls gained heightened awareness. Progressive hospitals began to understand that falls were costing them and the healthcare system millions of dollars. Over time, the secure bed saw Stryker gain upwards of 50 percent share in the med-surg hospital bed market. If the bed leadership from the original program had maintained a determination to attack a flank of the enemy, they may have been able to keep their jobs and see great success by adopting this approach years earlier.
In the final analysis, when Stryker called a halt to their version of Pickett’s charge and refocused on a genuinely exposed flank in Hill-Rom’s bed technology, success came. There was a great deal of hard work and many epic sales battles in hospitals throughout the country, but with differentiated features that mattered to decision makers, Stryker broke Hill-Rom’s monopoly in med-surg beds and became a major player in the equipment market for the general hospital room.
Their path to victory was strewn with significant financial losses, ruined careers, and painful personal hardship. In all that carnage, there were valuable lessons from which planners and leaders can learn. When up against strong competition, ensure you identify and attack an exposed flank in the competitor’s position, something they will have great difficulty responding to.
If you base your flanking attack on developing new technology, ensure you go no further than the leading edge of what is possible. Conduct brutally honest technology assessments and genuinely understand the capabilities and limitations of your team and of the technology extant in the industry. Many great business plans entail pushing the technology envelope at the leading edge. However, many notable failures push too far and end up on the bleeding edge.
Finally, should you find that your hoped-for differentiating technology is far out on the bleeding edge, don’t do what Samsung did and launch the Note 7 anyway. Recognize the situation for what it is and find another exposed flank to attack. A natural tendency in these situations is to become overconfident in your team and believe a frontal assault will work—but don’t try to out McDonald’s McDonald’s.
Find another flank with clear differentiation that matters to the decision makers in the target market and go after it with vengeance. The success you are seeking will still come.