COVID-19 has brought many businesses to their knees. Ambitious growth strategies have been replaced with survival tactics.
Many headlines seem to suggest that these decisions are purely reactive, “defensive” moves, like the shift to WFH (work-from-home).
For example, here’s what one retail consultant said: “There’s no other option [besides moving online]… Otherwise, you let someone else have your business. That’s why even Costco … TJ Maxx … are going online.”
But one of the most under-appreciated strategies in business is one from the martial arts: the “judo strategy.” Or taking your competitor’s strength and turning it to your advantage.
Say there’s a stodgy incumbent that relies on cultural perks like unlimited snacks to attract top talent. A savvy startup that can quickly reposition itself to have perks for a remote-first world (think: Zoom poker tournaments) can exert a seamless judo move. “Enjoy perks? We have the best digital perks in town.” The incumbent’s previous strength now shifted to the startup. Coinbase is a great example of this.
We’ve seen examples of strategic judo across our Flagship portfolio recently.
For example, brick-and-mortar stores historically had a strong advantage: discovery. Browsing in-store had an element of intimate exploration that the internet found tough to match. But Facebook, sensing an opportunity during quarantine, just launched Shops which enables its users to connect their Instagram discovery to purchasing. Judo move.
Many strategies these days are in fact reactive, don’t get us wrong. But some go beyond just that – they react by taking their opponents’ momentum and siphoning it for themselves.
Judos can be very lucrative investments if identified before the herd catches on.
Have a great weekend,
EXM Research
What you own
(+) Facebook +10%: Announced launch of Shops, a way for businesses to set up free storefronts on FB and Instagram. Will include an Instagram shopping tab, shoppable live streams, etc. Zuckerberg intimately involved.
(+) Apple +3%: Starting to buy older shows for its TV+ platform, stepping up its challenge to Netflix. Likely realizing that the formula for streaming success is a mix of both old and new content (like Seinfeld + Stranger Things on NFLX).
(~) Uber +6%: Cutting 3,000 more jobs, closing 45 offices, and reevaluating bets in freight and self-driving tech. Brutal but necessary cuts, they say.
(~) Netflix -4%: Now proactively helping subscribers who aren’t watching cancel their accounts. Talk about operating from a position of strength.
(-) Disney +8%: Lost its head of streaming video, Kevin Mayer, to the viral short video app TikTok where he’ll now be CEO.
Weekend reads
The End of Podcasting’s Innocence (8 min read)
Bullish take on Spotify: “Everyone knows that music is a tough business to be in. But it becomes decidedly less tough if you have leverage in the form of say, millions of customers who use your service to do something other than listening to music… The reality is that Spotify has the scale, not to mention the capital.
Amazon Wants to Innovate Its Way Out of the Pandemic.(3 min read)
Building its own testing lab, backing an immunology study, and more. “It’s part of the culture to build it yourself.”
“There’s No Other Option”(5 min read)
Costco, Gap and other retailers are sweetening their online offerings, but it’s coming at a cost.
A detour
“To secure ourselves against defeat lies in our own hands, but the opportunity of defeating an enemy is provided by the enemy himself.”
– Sun Tzu
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