The Boring is where Greatness lives.

Wal-mart’s formidable strength in physical retail can be attributed to a lot of things, but primarily its everyday low-cost pricing strategy.

During the early days of Wal-Mart, Retailers had a lot of cool things it did to keep pricing low — competitive intelligence, flexing their muscle power to extract the last possible dime from suppliers and using fancy systems and processes to track and reduce inefficiencies — all things Wal-Mart did too, pretty well.

What made Wal-Mart finally sell a tube of toothpaste for a few cents lower than their competition — and in effect dominate the American physical retail was in their willingness to do the boring things — those things competition thought was too low for them to tackle.

Wal-Mart faced competition from giant retailers who believed distribution and logistics were aspects of the business that just had to be taken care of somehow so they can do the ‘actual’ work of being true merchants.

Sam Walton figured out early that owning the distribution and transportation system, right from the point a good leaves the suppliers or vendors premise is integral to offering that last few cents in discount which would make all the difference in discounting retail.

Wal-Mart painstakingly built massive warehouses manned by several hundred or at times, thousands of hourly wage employees, connected to stores by a massive fleet of Wal-Mart trucks and a team of drivers the size of a small army.

They did it all while their competition was busily out-sourcing their distribution, concerned their crisp white shirts would catch a smell of sweat. Meanwhile, Sam was out there knee-deep in truck grease.

The numbers boiled down to this — Wal-Mart’s distribution system only spent less than 3% to ship goods to their stores, while it costed their competition around 4.5% to 5%. This basically meant that when they both sold the same good at the same price, Wal-Mart kept an additional 2.5% in profits. Which in discounting is the distance between death and survival multiplied by 5.

Wal-Mart’s ability and willingness to view distribution and transportation as a competitive advantage, not as some afterthought or necessary evil and allocate capital and key people to manage it — made a huge difference.

The same goes for today. Jeff Bezos in a recent talk said that you only need to love 50% of your work, the remaining you do because you need to.

Most of its customers would agree that Zappos’ competitive advantage is its customer support. While most of their competitors gladly outsourced support to South Asian Countries for dirt cheap economics, Zappos did the hard work of setting up a team of support staff right out of the HQ. It was expensive for sure, but in the immortal words of its late founder Tony Hsieh “Never outsource your core-competence.”

Nike had plenty of cool and glamourous things to keep itself busy. Phil Knight still found time to get his hands dirty by visiting, finding and dealing directly with the right manufacturers to create Nikes. This saved Nike from middle-men, low-quality work and the severe problem of unreliable suppliers it faced during its early days — almost threatening the existence of the company itself.

IBM failed when it thought that the hard task of creating the operating system to run its computers was best outsourced. Apple won when it did otherwise.

We might not enjoy all the aspects of the work we do, but our ability to come out on the top lies in figuring out which part of boring we could take head on to make for competitive advantages, and do it graciously.

And as a wise man once said, the future belongs to the few of us still willing to get our hands dirty.




Growth Obsessed Fractional CMO.

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Tijo Philip

Tijo Philip

Growth Obsessed Fractional CMO.

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