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The eight principles of strategic authenticity
B. Joseph Pine II and James H. Gilmore
There’s been a change in the answer to the question, ‘‘What do consumers really
want?’’ Yes, consumers want low costs and high quality – value for their dollar – but
they also want to enjoy the experience of their purchase, and they won’t if it’s tainted
by fakery, phoniness, and manipulation. In a world where businesses offer more and more
deliberately and sensationally stage experiences, consumers increasingly choose to buy or
not buy based on how genuine they perceive an offering to be. Authenticity is becoming a
critical consumer sensibility. Executives must therefore learn to understand, manage, and
excel at delivering authenticity. To be blunt, businesses must get real.
The foundation of meeting this challenge is crafting an appropriate strategy. The problem is
that executives often lay out strategies that prove not just difficult but, given the company’s
heritage and current circumstances, impossible to achieve. They point their people to goals
they cannot possibly attain, and adopt strategic positions that their customers cannot hope
to appreciate or even comprehend.
Gunning for a strategic position that is not achievable, pushing your people to do the
impossible, and forcing your customers to view a completely ‘‘new you’’ means that you, as a
company, are aiming outside of the realms of possibility for what you are today. It does not
meet the key standard of authenticity: it is not true to self. Moreover, it means forgoing those
possibilities that are both profitable and that customers perceive to be authentic. It
inexorably leads to disaffected employees, stockholders decrying misdirected strategies
and customers wondering what happened to the company they thought they knew.
So how can leaders tell the difference between bogus and authentic opportunities without
having to suffer through a customer rebellion, a storm of bad press, and stockholder
disaffection?
Understanding strategic limits
To begin examining this distinction, consider the innovation history The Walt Disney
Company, a global experience powerhouse formed in the imaginative mind and skillful
hands of its founder, Walt Disney. The company started as the maker of iconic, entertaining
cartoons, shifted into family films and TV shows, and later created theme parks dedicated to
bringing families together with shared experiences. After the death of its founder, however,
the company lay rudderless for over a decade.
When Michael Eisner took over in 1984, he realized that the Disney-created characters
formed the core of the company’s identity, and set out to better leverage Mickey Mouse and
his companions while creating wholly new characters – such as, Ariel, the Little Mermaid,
and Simba, the Lion King. The company made strategic acquisitions and strategic alliances
that fit solidly in what we call its ‘‘execution zone,’’ the set of decisions and actions that a
company can make and still be perceived as true to self.
DOI 10.1108/10878570810870776 VOL. 36 NO. 3 2008, pp. 35-40, QEmerald Group Publishing Limited, ISSN 1087-8572
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B. Joseph Pine II and
James H. Gilmore are
cofounders of the firm
Strategic Horizons LLP
located in Aurora, Ohio
(pine&gilmore@
strategichorizons.com).
Their newest book is
Authenticity: What
Consumers Really Want
(Harvard Business School
Press, 2007).
However, in the 1990s the company lost its way as the thirst for still further growth caused it to
move far outside its tradition of family-oriented, character-driven experiences. In particular,
rather than producing and distributing Disney fare for whatever TV channels could best
present it to kids and their adoring parents, in 1995 it acquired its own distribution arm,
Capital Cities/ABC. This was the network that, from Charlie’s Angels to Desperate
Housewives, had become known for celebrating the exceptional female body, tightly clad. In
an acquisition even further afield, two years earlier The Walt Disney Company bought the
Miramax movie studio, a very edgy producer known for making films rated R and even
NC-17. In other words, in searching for growth, Disney effectively excluded the very young
audiences at the heart of its heritage.
Various groups, some questioning its family values, called for boycotts of Disney. And
financial performance suffered, as the strategy simply didn’t work. Had management
understood that such strategic moves would place the company outside of its execution
zone – beyond where it could operate and still be perceived as authentic – it could have
made different decisions that would have enabled it to grow while preserving its traditions.
With a proper recognition of the important of authenticity to its strategy, for example, Disney
could have:
BPurchased Nickelodeon, the highest-rated daytime channel in the United States, rather
than Miramax. The company waited until 1983, four years after Nickelodeon premiered, to
launch The Disney Channel and has yet to catch up.
BCreated the world’s first theme store for kids, with experiences worthy of admission fees,
rather than wait for the American Girl company to do it.
BSold off ABC to focus on the true jewel in the Cap Cities crown, sports-suffused and
family-friendly ESPN.
For companies that try to operate outside their execution zone there is little likelihood that the
resultant offerings will be perceived as authentic. Such is the case with The Walt Disney
Company today. Because of the decisions it has made in the past couple of decades, the
Disney brand has risked its solid position in the hearts and minds of America’s families.
Today, CEO Robert Iger ought to take restoring authenticity as his foremost goal as he
remakes the company. The Financial Times credits Iger with rediscovering ‘‘a fondness for
the sort of innovation so beloved by its founder’’ and refocusing movies away from Miramax
and its other adult studios and on to the Disney brand.[1] According to other observers he
has ‘‘re-imagined Disney.com’’;[2] rethought Disney’s worldwide portfolio;[3] and restored
the Mickey Mouse Club, while graciously giving credit to Michael Eisner on the one hand and
his management team on the other.[4] His boldest move: buying strategic partner Pixar in
early 2006 and thereby re-establishing Disney animation back within the heritage of Walt
Disney the founder.
With this Disney lesson in mind, use the following eight principles to guide you in delineating
your own execution zone. Doing so will help you stake out viable, powerful, and compelling
competitive positions – strategies that are both achievable and authentic.
1. Study your heritage
A company’s present and future strategic positions build on its past. To remain true to
yourself, you must study your heritage and thereby define your innovation and marketing
possibilities in the light of your unique origin and subsequent history. You cannot take actions
antithetical to your past and think people will view you as authentic, for the easiest way to be
perceived as phony is to repudiate your heritage.
‘‘ To discover your firm’s authentic strategic opportunities, use
these eight principles to peer into your future. ’’
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Seek to understand your corporate past as well as the effects of its heritage on the realities of
your present competitive positioning. What strategic decisions from the past reverberate
now and into the future? How might your heritage point to what you could do, or should not
do, in the future? What limitations do your origin and history place on what you might say?
Which roads less traveled would help your company endure as its own unique self? Which
paths not taken should be forever forsaken? Answering such questions helps gain a solid
grasp of your past, and provides the means to demarcate your present.
2. Ascertain market and industry positioning
More than your past influences the nature of your present position. Surveying your
immediate environment provides an important context for devising a compelling,
achievable, strategic direction for your enterprise.
Remarkably, too many managers fail to comprehend what kind of innovation is happening –
right here, right now – in their industry and to their business. You need look back no further
than the dot-com crash for evidence that managers misjudged their growth position;
thousands of companies did not recognize how they, along with other Internet startup
‘‘businesses,’’ had no real sources and few prospects of revenue. Undoubtedly, the Internet
represented a novel platform for innovative business model. But from the outset, the most
successful companies found ways to explicitly charge for output, thus initiating an authentic,
value-based relationship with customers. How did so many miss this? They simply mistook
their strategic position by misconstruing the immediate environment.
3. Gauge your trajectory
Once you fully understand your history and current position, you should determine the
direction and speed at which you are moving. This lets you avoid both meandering around
aimlessly and foolishly trying to go places your company has no possibility of reaching.
As an example, consider the situation of mass producers of processed food that now wish to
take advantage of the trend toward wellness. Some, however, are incapable of credibly
appealing to consumers seeking natural foods because for decades they have been making
and selling foods that were anything but. For them, the proper trajectory forward might
involve appealing to the desire for healthy living via some other route, perhaps with no-carb
lines, genetically engineered nutriceuticals, or leveraging some other non-natural R&D
expertise. Strategic positions such as these could be achievable, something that a me-too
‘‘natural’’ position never would.
A trajectory assessment can help you determine if your innovation is on the right path, or if it
needs a course correction. What strategic opportunities open up before you? What if you
took a different tack and rethought where you are headed based on a better understanding
of your heritage and current positioning?
4. Know your limits
Being true to what you are as a company also requires determining the limits of your
execution zone. This lets you winnow down your future possibilities to those that are
definable, achievable, and valuable.
Start by eliminating the phony positions that lie outside of your execution zone. These are the
strategic options that must be ruled out because of past decisions. Because innovation
attempts in these areas will be perceived as inauthentic, they cannot be successfully
implemented by your organization nor comprehended by your customers. Think of the
resources squandered on such inauthentic brand extensions as Cheetos lip balm, Salvador
Dalı
´deodorant stick, Chicken Soup for the Soul pet food, and Diesel Jeans wine – products
that branding firm TippingSprung identified as among those that ‘‘seemed least to fit with the
brand’s core values.’’[5]
You can best set the limits of your execution zone by defining the set of actions you will not
do. These may be behaviors you will not display, offerings you will not undertake, markets
you will not pursue, channels you will not employ, businesses you will not establish, and
competitive arenas you will not enter. A company should keep in mind its body of values in
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determining the proper limits. Howard Schultz of Starbucks, for example, relates that while
he ‘‘started out with a long list of . .. things Starbucks would ‘never’ do, I gradually learned
the need for compromise. What I don’t do, though, is compromise our core values.’’[6]
For Schultz, that came down to four things the company would never do: franchise, put
chemicals on its coffee beans, sell beans in plastic bins in supermarkets, and ‘‘never, never
stop pursuing the perfect cup of coffee by buying the best beans and roasting them to
perfection.’’[7] CEO Jim Donald calls these taboos ‘‘invisible guardrails.’’[8] Marketing SVP
Anne Saunders further notes, ‘‘If you know where your brand lines really are, you can push
them.’’[9] And if you don’t know where your limits are, they will push back right at you
whenever you try to go beyond them.
Discern the widest possible execution zone within which you may strive and outside of which
you refuse to stray. Only by knowing your limitations can you maximize your realistic options.
5. Stretch your execution capabilities
Different companies move at different speeds. If you have been lumbering along,
performing adequately perhaps, but doing nothing special, then don’t expect to suddenly
achieve a strategic position very far from where you are today. Instead you should seek to
accomplish a series of doable goals that successively stretch your capabilities, increase
your speed and flexibility, and make reaching strategic positions at the far edges of your
execution zone increasingly likely over time.
Montblanc provides one such example. It turned a hundred years old in 2006. For eighty-five
of those years it remained in the ‘‘writing instrument’’ industry. Jan-Patrick Schmitz, president
of Montblanc North America, pointed out, ‘‘We are a brand which has very serious roots and
a very valued history.’’[10] It therefore needed to move slowly as it shifted away from a brand
based solely on writing instruments to more of a luxury and lifestyle brand.
Its first move was into the related desk accessories category in the early 1990s; a few years
later it ventured into cuff links, key rings, and money clips – essentially items people carry in
their pockets, just like pens. Only after gaining acceptance with these offerings, and a
reputation for a certain design aesthetic that made each of its products recognizably part of
a single identity, did it move farther toward the edge of its execution zone in 2005 by adding
lines of jewelry.[11] The lesson: Whatever best defines you, follow it into new possibilities for
creating value.
6. Scan the periphery
Businesses within a single industry routinely anticipate new competitive battles. More
difficult is seeing future competitors that are difficult to detect until it may be too late.
Watch for new competitors who are innovating along three dimensions of competitive reality
– offerings, capabilities, and customers.[12] Some potential rivals may enhance their
offerings by going where their R&D and incremental improvement activities take them. Other
rivals continually refine their capabilities, and others focus on serving a particular set of
individual customers so thoroughly that they effectively lock them in.
San Antonio-based United Services Automobile Association (USAA) provides a model for
moving willfully across the competitive space of other businesses to offer whatever its
individual customers need, and therefore also furnishes a warning to companies that do not
scan their own periphery for such customer-focused competitors. While USAA started out in
the automobile insurance business, it now competes with all manner of insurance
‘‘ You cannot take actions antithetical to your past and think
people will view you as authentic, for the easiest way to be
perceived as phony is to repudiate your heritage. ’’
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companies, but also with Wells Fargo in banking, Merrill Lynch in brokerage services, Fannie
Mae in mortgages, American Express in both credit cards and travel services, and even with
Wal-Mart in consumer goods – not to mention a host of other jewelry, furniture, and clothing
retailers. These companies invariably view their competitive spaces based on their
traditional industries, while USAA bases its competitive space on the needs of its armed
forces members.
7. Formulate your strategic intention
Whether or not your competition comes from the periphery or your traditional industry, you
won’t surpass your competitors just by seeing what they do and trying to do it bigger, better,
or faster. In today’s environment, having greater availability, lower costs, or higher quality
rarely provides the winning strategy. You do it by staking out that one future position among
all possibilities that both meets those past imperatives and induces your customers to
perceive your offerings and your company as more authentic than competitors.
Very few companies are perfectly positioned for future growth via incremental innovation.
Even a company that is in exactly the right spot will not likely be comfortable there as old
competition improves, new competition appears from the periphery, and customer demands
change over time. Positions that provide the greatest competitive advantage often lie away
from the center of your execution zone.
8. Execute well
If you apply the previous seven principles proficiently, then ‘‘all’’ you have left to do is
execute well, year after year. Consider Toyota, a company that arguably executes better than
any other in the entire world, and has for close to four decades. It made a commitment then
to a future that lay far beyond its line of horizon: to become the world’s highest-quality car
manufacturer.
Few today can remember when Toyota cars were laughed at in the United States; its first
foray into the market, the Toyopet, proved a complete dud in the late 1950s. By applying the
lean production tenets of the Toyota Production System, however, Toyota kept improving
quality year after year after year, finally gaining a toehold in the US market in the mid-1960s
with the Corona and Corolla.
As quality improved, so did the value proposition of Toyota cars. As a result, it surpassed
Volkswagen as the top import in 1975. Under pressure from Detroit, by 1984 the American
government forced the Japanese to agree to voluntary import quotas. Toyota responded by
building its first full-production US plant in Georgetown, Kentucky, with the explicit focus of
becoming less Japanese and more American.[13] Moreover, according to a New York Times
Magazine profile, ‘‘Its marketing strategists have been trying to establish an aura of
American authenticity since the early 1970s.’’[14] The company succeeded in being
accepted as authentic by the environmental crowd with its Prius, by young, hip adults with its
the Scion line and now it’s aiming the Tundra at ‘‘true truckers’’ desiring ‘‘truck-driving
authenticity.’’[15]
In the first quarter of 2007 this Japanese company surpassed Ford Motor Company for
second position in the US and General Motors as the number-one vehicle manufacturer in
the world.[16] This directly flowed from its ‘‘overarching principle’’ to ‘‘enrich society through
the building of cars and trucks’’ and its core value of continuous process improvement.[17]
The phrase ‘‘the relentless pursuit of perfection’’ applies to more than just its Lexus luxury
‘‘ Watch for new competitors who are innovating along three
dimensions of competitive reality – offerings, capabilities,
and customers. ’’
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unit. The entire company seeks to execute flawlessly – and immediately correct the process
whenever a failure does occur. That is the Toyota Way and has been for decades.
So to discover your firm’s authentic strategic opportunities, use these eight principles to peer
into your future until you determine where you should go. And then treat that future not as a
destination but as a guide to the path before you. Such a process provides the best means of
ensuring you not only have a future but that it will be an authentic, vigorous, and prosperous
one.
Notes
1. Matthew Garrahan, ‘‘Iger’s Bold Steps at Disney Extend His Honeymoon Period,’ ’ Financial Times,
October 2, 2006.
2. Ronald Grover, ‘‘How Bob Iger Unchained Disney,’’ BusinessWeek, February 2, 2007, p.79.
3. See Eric Pfanner, ‘‘Disney’s World Seeks Ubiquity,’’ International Herald Tribune, June 13, 2005, and
Merissa Marr, ‘‘The Magic Kingdom Looks to Hit the Road,’’ Wall Street Journal, February 8, 2007.
4. ‘‘It was because of Michael that I was able to hit the ground running,’’ and ‘ ‘The story shouldn’t be
about me. It’s about the team.’’ Ronald Grover, ‘‘How Bob Iger Unchained Disney,’’ BusinessWeek,
February 2, 2007, p. 74.
5. ‘‘TippingSprung Fields Third Annual Brand-Extension Survey,’’ Tipping Sprung, www.tippingsprung.
com/releases/2006extensionsurvey.html
6. Howard Schultz and Dori Jones Yang, Pour Your Heart Into It: How Starbucks Build a Company One
Cup at a Time (New York: Hyperion, 1997), 165.
7. Ibid.
8. Jennifer Pellet, ‘‘Lessons from Brand Leaders,’’ Chief Executive, October/November 2006, p. 31.
9. Ben Elgin, Michael Arndt, Roger Crockett, Kerry Capell, and Moon Ihlwan, ‘‘Protect Your Culture,’’
BusinessWeek, August 7, 2006, 56.
10. Julie Bosman, ‘‘Venerable Maker of Pens Turns to Young Designers,’’ New York Times, August 7,
2006.
11. Ibid.
12. For a concise exposition of our view on how managers should really view these three dimensions –
as economic offerings, scripted capabilities, and individual customers – see James H. Gilmore and
B. Joseph Pine II, ‘‘Beyond Goods and Services: Staging experiences and guiding
transformations,’’ Strategy & Leadership, Vol. 25, No. 3, May-June 1997, p. 10-18.
13. See ‘‘Why Toyota Is Afraid of Being Number One,’’ BusinessWeek, March 5, 2007.
14. Jon Gertner, ‘‘From 0 to 60 to World Domination,’’ New York Times Magazine, February 18, 2007,
p. 58.
15. Ibid.
16. Martin Fackler, ‘‘Toyota Set to Lift Crown from GM,’’ International Herald Tribune, December 22,
2006.
17. Gertner, ‘‘From 0 to 60 to World Domination,’’ p. 38.
Corresponding author
B. Joseph Pine II can be contacted at: bjp2@aol.com
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