It seems like everyone is trying to figure out what the metaverse is and what it may mean for them. There are some who believe it is hype and many more who believe it will be a fundamental part of business as usual – but by when is unclear. McKinsey research suggests that the metaverse could be worth US$5 trillion by 2030. Gartner predicts that 25% of people will spend at least one hour per day on the metaverse by 2026.

According to a new study by PwC, two thirds of company leaders have moved beyond experimentation and within a few years, the metaverse will be an integrated part of their business. Whilst this sounds impressive, PwC state that it’s important to keep in mind that the “ultimate” version of the metaverse (fully immersive, with seamless and secure transitions among a multitude of metaverse environments) doesn’t exist yet. Some metaverse elements are entering everyday business activities, but it is still in the early stages…download full paper below:

• Add on – core product is priced competitively with the option of numerous extras (i.e. SAP, SFDC, Ryanair): an equipment manufacturer could offer content and digital solutions on a turn key basis similar to a freemium model. In turn the operator could offer mirrored services to the end user either on a subscription basis, pay as you go, or tiered membership structure (whether in or out of the gym services)
• Hidden revenue – sources of revenue come from a third party such as advertisers or other service providers (i.e. JC Decaux, YouTube): instead of the B2B buyer paying full price for hardware, software or content, the manufacturer could build an advertiser base who would target in facility users or perhaps the actual operator on back end CRM interfaces. Another option would be adding partners to the eco system of a platform that impact a consumers health journey (for example insurance companies or other health care providers). This is similar to the banking as a market place concept
• Revenue sharing – sharing revenues with other stakeholders such as complementors or even rivals (i.e. Apple app store, Amazon Kindle): manufacturers could work with app developers to offer comprehensive solutions to facilities that impact ROI such as member retention. In particular AI and ML based training will have a huge impact on adherence to exercise and the way trainers interact with customers. Suppliers could work with operators on developing journeys that tangibly affect their business and create outcome based contracts where revenues generated are shared among the stakeholders. This could also be applied to operational efficiency whereby a manufacturer is able to demonstrate better TCO (total cost of ownership) based on analytics which improve equipment uptime and decrease usage costs.
• Affiliate programs – usually based on some kind of pay per sale or pay per display (i.e. American Express, Amazon affiliate program) – a manufacturer could work with B2B customers on selling in home fitness equipment and solutions on a commission basis
• Fractionalized ownership – sharing of assets among a group of owners (i.e. Netjet, mobility car sharing): with equipment being one of the most capital intensive parts of setting up a facility, including the need to update/refresh (usually around the 5-7 year point) equipment to offer new or changing solutions to customers, suppliers can offer options to swap certain equipment between one customer and another much more frequently than the typical refresh date. This would motivate suppliers to offer comprehensive solutions around maintenance and upkeep whilst offering customers renewed options to members who seek different experiences. This could also be applied based on peak usage times. A hotel for example could get more equipment during the peak season as needed
• Ingredient branding – refers to a specific component or ingredient originating from another specific brand (i.e. Intel, Bosch): Les Mills is the classic example of a supplier creating brand pull for the facility. Peloton could be the next player in the commercial space to achieve this with content (perhaps a mix of live and virtual). How can incumbent suppliers use this to engage B2B buyers and more importantly the end user? For now, this seems exceptionally challenging
• Aikido – offering something that is essence opposite of what the market has been doing (i.e. Swatch, Southwest Airlines, Nintendo): so called lower quality (featured) products can do well if the value offered is based on features that are demanded in the market (the strategy canvas from Blue Ocean strategy maybe useful here). If, especially for cardio equipment, products are becoming highly commoditized and the battle ground is moving to the platform and eco system then manufacturers could consider making scaled down hardware with easily interchangeable consoles which act as the platform to deliver a differentiated offer. An obvious benefit is low cost production and scale economies
• Cash machine and mass customization – in the cash machine the customer pays upfront for the product which leads to improved liquidity (i.e. Dell). In mass customization (again Dell but we have seem many others including Nike and Scholl), modular products and production systems enable the efficient individualization of products: Many facility operators are looking for ways to differentiate their club from the one 1000 metres down the road. Whilst service and programming form a large basis of this differentiation, so could mass customized equipment. With the technology enabled infrastructure of IIOT and advances in e commerce capabilities along with 3D printing developments (and rapid prototyping), it is feasible to see many components of fitness equipment (without moving parts) being customized to order. There are already some examples in the car industry (such as BMW and Porsche). The overall adoption of 3D printing in mass customization is still low and challenging for traditional manufacturers. One possible alternative is to use 3D printing to print moulds used for injection moulding techniques. Not specifically related to this pattern example, I can also see in country service departments 3D printing replacement parts at much lower costs than currently and of course drastically improving after sales metrics for customers
• Flat rate subscription – here a supplier charges a customer a flat fixed fee over the tenure of a contract regardless of usage (i.e. Spotify, Netflix, Vodafone, Hilti, Porsche): This would involve a supplier having detailed TCO models and the capabilities to manage install bases across large geographies and customer types plus the willingness to accept the lower returns initially involved in this type of business model (see the Hilti example above). Recurring revenue model businesses seem to outperform traditional transactional driven firms and create certainty of expenses for operators. Such models may also involve guaranteed availability and uptime
• Guaranteed availability – in this model the customer risk is minimized by a supplier offering almost zero down time (i.e. Hilti, IBM, SAP, AWS, Otis): This is often combined with the subscription model. Using equipment sensors, big data and data analytics, manufacturers are able to monitor and respond even before equipment breaks down. The benefits for the operator and the end user are clear. If a piece of equipment cannot be fixed the supplier will replace it immediately with in country stock. This requires well developed predictive and prescriptive analytic models to accurately forecast and manage part needs. This type of service could be bundled into an all inclusive pricing model or one which separates hardware costs vs service fees, perhaps on some kind of outcome based contract
• Leverage customer data – value is created by using customer data and preparing it in beneficial ways (i.e. Airbnb, Apple app store, Facebook, Google ad words): information collected by a digital eco system about member usage and operations could provide many benefits for a business owner. Understanding how often a member uses the facility, which facilities he/she uses, and being able to test A/B interventions for different personas/user groups could have a significant impact on retention and secondary spend. This would be driven by improved member experiences where an evidence based customer journey is developed and then hyper personalised. This information can also be fed to third parties (such as health insurers and physicians) who have a stake in the adherence to a healthier lifestyle of a user. Again, the emphasis here for an operator should be on ROI and they should be asking for demonstrable evidence that the data collected is useful
• Lock in – when customers are locked into a vendor’s family of products and solutions (i.e. Dropbox, Microsoft, HP): if a manufacturer builds an eco system of connected fitness products supported by a digital application that manages not only the information from its products but the information from various 3^rd party providers that both operators and consumers use then switching to another vendor would involve considerable time, energy, psychic and monetary costs
• Prosumer – vendors enable customers to be producers themselves and can be integrated into the value chain (i.e. block chain, YouTube, Instagram, Smart Grids): obvious examples would include software support so that operators can add their own content to a suppliers digital offerings such as on demand workouts. Extending this further and fitting in with the concept of peer to peer interaction (another BM pattern), exercisers could connect with exercisers anywhere in the world (assuming they are on the same digitized offering) who have similar goals and challenges to share success stories and tips. This would be driven by AI and creates strong social bonds, another nudge towards exercise adherence
• Performance based contracting – the price is determined by the value delivered in terms of outcomes as instead to the cost of the physical product (i.e. Rolls Royce, Phillips Lighting, Xerox): whatever solution a vendor installs including equipment, digital, education or concepts, the vendor will be motivated to either reduce usage costs and/or improve revenue for the customer. This differs substantially from the more traditional fixed price service or extended warranty contracts. The term power by the hour was coined around 20 years ago by Rolls Royce and such contracts are used by firms such as GE. This type of contract has a variety of options form part fixed cost and part performance based to full performance based. This type of approach requires a deep understanding of costs and performance capabilities in order to be profitable. Of all the BMI examples, this pattern probably creates the greatest cultural challenge
• Solution provider – the vendor offers a full suite of products and services to cover the end to end needs of customers building closer and in depth relationships (i.e. Tetra Pak, Salesforce, SAP): an equipment vendor can add education, training, consulting services etc to the hardware it sells. Once the life of equipment is over the vendor can also take care of trade in and disposal. This could be extended to the operators customers in the forms of health and wellness advice/services
• Orchestrator – the company’s focus remains on its core competencies in the value chain and then actively outsources and coordinates the other activities (i.e. Nike, Uber, Osim, P&G): a fitness equipment manufacturer could focus on the traditional hardware manufacturing activities it is good at and then outsource the rest whilst managing the total  value chain in order to deliver a solution/product to a customer. For example, instead of building their own digital platform or making their own content, a manufacturer could contract with a number of partners/suppliers to create the solutions needed and offer this as a seamless solution for the customer. In a more extreme example, a vendor could focus on only parts of the manufactured product (say the consoles or motors on cardio equipment) and outsource the rest to other OEMs who may have better efficiencies
• Integrator – alternatively to the orchestrator, the integrator owns most of the activities in the value chain and if the capabilities exist may benefit from economies of scale and scope. The integrator should also benefit from lower costs and value chain stability (i.e. Zara, Exxon Mobil, Netflix): instead of partnering with content providers and digital solutions vendors the manufacturer would own these elements and be responsible for developing the solutions and products needed by customers pretty much in their entirety. This strategy could help the company be more responsive to customer needs and reduce cycle times due to internal control
• Self service – part of the value process is passed on to the customer in order to lower costs. This maybe areas that deliver little perceived value but incur high costs (such as installation or repairs). The customer can add this step and hence add to the efficiency of a process (i.e. Ikea, Car 2 Go, Fast food restaurants): manufacturers could offer online portals for B2B customers that provide technical training on simple repairs and maintenance without voiding warranty conditions. CAD files of needed parts could be delivered on line and customers can use local 3D printing firms to make parts quickly and cheaply compared to ordering and shipping ‘original’ parts. The same could be done for installation with modular products and specially designed packaging which makes install much more simple then it is currently. This may not apply to all products but could certainly apply to a significant portion
• Pay per use/dynamic pricing – in this model the customer actually pays for what they use (like a metred concept) which offers different types of customers flexibility based on the facility (i.e. mobility car or bike sharing, workout pods in China): it doesn’t seem reasonable that a high usage club and a low usage hotel should pay the same price for equipment when the usage levels will be drastically different. This also applies to warranty and service contracts. The benefits to the customer are clear and the operator could pass a similar pay per use model to its users (we already see this in boutiques and alternative facilities). For a manufacturer to offer this type of business model would involve a deep understanding of repair rates and costs based on a wide variety of usage data (such as average weight of user, average speed, average use per day etc)

There is a massive amount of confusion regarding the role of marketing in organizations. This confusion grows when you add in sales and how the two are related. It is no accident that marketing is known as a cost and relegated to a support function since many organizations believe it to be exactly that. Even more so, firms see little intersection between the overall value delivery process and how marketing actually adds value to the customer. Marketing and sales teams are often artificially separated both in work processes and in mind sets.

In his seminal article from the Harvard Business Review in 1991, Regis Mckenna stated that marketing is everything and everything is marketing – it is not a function but a way of doing business. We can even go back to the traditional text book definitions of marketing, such as those by Philip Kotler, that essentially state marketing is about the creation and delivery of customer value. Tim Ambler from the London Business School points out that trying to measure the ROI on marketing as whole is like trying to measure the ROI on eating, if you don’t do it you die! Clearly then, the measure of marketing ROI is firm profitability, although it hardly works that way in most companies.

Market Orientation

Let’s take this one step further and make it more concrete so we can conceptualize what it means when say marketing is a business process that permeates the entire organization. The market orientation literature that blossomed from around 1990 helps us to operationalize and specifically identify what it is to have a marketing culture (i.e. be market oriented). It is both a set of behaviours and a culture. This is depicted in the diagram below which also shows the how marketing and sales should be integrated.

The figure shows the explicit link between marketing (as strategy, in other words the orientation and culture of the firm), firm behaviours, and the link to the manifestations of marketing, BD, and the areas of sales team work that it affects. What this figure details is that aside from technical advice, customers demand an increasing amount of business advice and industry knowledge that is linked to the technical advice sales people provide. For a firm to effectively differentiate themselves in the eyes of the customer, they must be able to deliver a level of value (whether through industry and technical know how, responsiveness, pro-activity etc) to customers that is different from what other providers can offer. Additionally, since a marketing culture is associated with job satisfaction and engagement, it acts as a motivator for sales people to engage in individual level market oriented behaviours which are aligned with the needs of customers. In this sense, marketing in its truest form becomes a key pillar in the work of sales teams and what they deliver to customers as it is the key pillar of f

Breaking Down the Silos

This conceptualisation is good but it does not necessarily help with the wicked problem of breaking down the functional barriers between marketing and sales. It does help with both mind set and behaviours but does not go far enough in terms of practicalities.

Kotler et al in an article from the Harvard Business Review (2006), found four major themes when looking at this disconnect:

• The marketing function takes different forms in different companies at different product life-cycle stages—all of which can deeply affect the relationship between Sales and Marketing.
• The strains between Sales and Marketing fall into two main categories: economic and cultural.
• It’s not difficult for companies to assess the quality of the working relationship between Sales and Marketing (they provide a diagnostic tool in the article).
• Companies can take practical steps to move the two functions into a more productive relationship, once they’ve established where the groups are starting from.

The authors provide the following check list as a guide:

(Source: Kotler, P., Rackham, N., and Krishnaswamy, S (2006) Ending the War Between Sales and Marketing. Harvard Business Review)

The list suggests that there a number of things that an organization can consider when looking to integrate the two functions including a more defined communication process, joint decision making, cross disciplinary work (job rotations), team based structures and project based assignments. We can also see many organizations fully integrate these functions under some type of sales or channel enablement roles. These can only realise their full potential when enablement roles are not set up as distinct functions, doing so puts too much emphasis on the individual’s skill set in bridging the two functions (people are good but that is almost asking the impossible).

In another HBR article from 2019, Casciaro et al make the point that silos can be broken down most effectively by identifying activities that facilitate boundary spanning. They state,

“We’ve found that people can be trained to see and connect with pools of expertise throughout their organizations and to work better with colleagues who think very differently from them. The core challenges of operating effectively at interfaces are simple: learning about people on the other side and relating to them. But simple does not mean easy; human beings have always struggled to understand and relate to those who are different. Leaders need to help people develop the capacity to over- come these challenges on both individual and organizational levels. That means providing training in and support for four practices that enable effective interface work.”

They suggest four ways to do this:

1. Develop and deploy cultural brokers
2. Encourage people to ask the right questions
3. Get people to see the world through others eyes
4. Broaden your employees vision – i.e. through use of cross functional teams

Further research from de Waal et al (2019), published in the journal Sustainability, identifies 5 factors that are strongly correlated with breaking down silos:

1. Organizational values
2. Collaborative operating model
3. Collaborative environment
4. Leadership
5. People reward and development

All of these examples converge around a few key ideas of networked organizations, knowledge sharing, learning, and flat team based structures. This then clearly converges on change. Very broadly there are two ways to lead change. One is to change mind sets, which is exceptionally hard, and the other is to change behaviors which then leads to mind set change. For example, instead of spending considerable time on culture and change workshops (when done correctly these can be effective but time consuming and often have little impact if not integrated into firm processes), why not experiment with asking those in marketing and sales what the issues are facing both and how they could be solved. Then ask them to create cross functional teams to identify and solve the issues. This is effective because the protagonists take ownership of the issues and co create the solution. Buy in happens simultaneously – it does not need to be sold to them, nor should it be. The organization must also ensure that it itself supports this approach through training/L&D, performance management, and changing organizational forms.

The below framework provides an overview of what has been discussed. Now it is a matter of execution and that is true strategy – the how and the process.

Integrating Marketing and Sales (Source: authors analysis)

Too many so called strategies or strategy statements are ill conceived positioning statements that describe, to some degree, the ‘what’. This is a view deeply rooted in a school of strategy that relies heavily on analytical techniques and little on learning or emergence. There is almost no description of the how. It could be argued that strategy is the how and I have argued that elsewhere.

In his book (Strategy and the Fat Smoker), David Maister states: “In the last two-and-a-half decades, I have been trusted to see a large number of strategic plans from a wide variety of professional firms around the world, including direct competitors. What is immediately noteworthy is how similar (if not identical) they all are.”

He goes on to say, “Real strategy lies not in figuring out what to do, but in devising ways to ensure that, compared to others, we actually do more of what everyone knows they should do.”

What Maister is alluding to here is that many organizations know what to do, and in fact, if they executed on half of what they stated they would in fact be doing strategy as strategy is action, not declaration. This is also well encapsulated in the book by Jeffrey Pfeffer and Robert Sutton (The Knowing Doing Gap). The premise here is that firms must turn knowledge into action.

I am arguing that knowledge of the how comes from action and learning and hence strategy as knowledge and learning is about the how and execution. As you act you learn and that knowledge should be codified and institutionalized so that the strategy process can continue to evolve and transform the organization.

To reinforce this point, think about analytical approaches to strategy that use various models to ‘devise’ strategy and draw on so called examples of excellent company performance to identify the what of strategy.

This type of research suffers from a number of fallacies that are well articulated by

Phil Rosenzweig in his book, The Halo Effect:

“Much of our thinking about company performance is shaped by the Halo Effect, which is a tendency to make specific evaluations based on a general impression.  When a company is growing and profitable, we tend to infer that it has a brilliant strategy, a visionary CEO, motivated people, and a vibrant culture.  When performance falters, we’re quick to say the strategy was misguided, the CEO became arrogant, the people were complacent, and the culture stodgy.  Using examples like Cisco, ABB, IBM, Lego, and more, I show how the Halo Effect is pervasive in the business world.  At first, all of this may seem like harmless journalistic hyperbole, but when researchers gather data that are contaminated by the Halo Effect—including not only press accounts but interviews with managers—the findings are suspect.  That is the principal flaw in the research of Jim Collins’s Good to Great, Collins and Porras’s Built to Last, and many other studies going back to Peters and Waterman’s In Search of Excellence.  They claim to have identified the drivers of company performance, but have mainly shown the way that high performers are described.  My book is the first to show why, for all their claims of voluminous data and rigorous analysis, their research is fundamentally flawed—and why their conclusions about the drivers of company performance are unfounded”.

In reality, firms have an intended strategy which then seems to divert based on what Henry Mintzberg called emergent strategies into a realized strategy. This learning view of strategy can be leveraged into producing the desired behavior change needed for the successful execution that is the how of strategy. There are no better examples of this type of emergence than Honda’s foray into the US motorcycle market or Ikea’s transformation into the worlds leading furniture retailer.

Here is an example of a strategy statement for Ikea based on more traditional definitions of strategy:

offering inexpensive, instant fulfillment furniture to young white collar customers in a new shopping experience format. This is primarily achieved through organic expansion and rapid globalization leveraging and creating economies of scale and efficiencies through replication.

Ikea is an interesting choice of subject for many strategy writers as they use Ikea to provide evidence (often in hindsight) that clear strategy is based on analysis, leading to a clear position in the market. That may be the case in hindsight, but the actual story of Ikea is one of much more about learning through trial and error. The same can be said of many organizations such as Dell and Honda.

This highlights an incredibly important point. If strategy is the how, how do Ikea and other successful firms continue to innovate/regenerate whilst others, such as Nokia, could not? I believe that how can be summed up in one word – culture. You can devise the ‘best’ strategic position in the world but if it cannot be executed then it is not strategy – it is another meaningless vision statement that adorns the boardrooms of most organizations. Of course, you could also devise the ‘worst’ strategic approach in the eyes of the market (such as Nokia, Kodak, Blockbuster and many others did) and experience the same failure. Culture permeates strategy in numerous ways, from silos to mental models to personal agendas, it is culture that determines the nature of your strategy process plus the outcome of your strategy (intended or emergent).

In the book Reinventing the Organization (2019), Yeung and Ulrich provide some fascinating insight into market oriented eco systems (MOE) built by firms such as Facebook, Tencent, Alibaba, Google etc. A market oriented eco system, in the view of the authors, is an emerging organizational logic that instead of a firm being organized by traditional divisions (command and control), it is organized along team based structures supported by a platform of resources, knowledge, and skills. The approach integrates a number of theories such as holocracy, boundaryless, agile etc. In my opinion, these types of organizational forms are becoming crucial to deal with the complexity of dynamic environments and rely heavily on the ability to leverage market, learning and knowledge cultures. They also help build these cultures because team based forms are critical to realizing the value of capability driven cultures. Hence structure does not just follow strategy but rather structure influences strategy and culture.

In their latest book, Humanocracy, Gary Hamel and Michele Zanini paint a compelling picture of the end of bureaucracy and the need for more humanistic approaches to management. I believe that adhocracy and other self emergent systems are much better suited to the job than typical structures. In fact, toxic ‘strategy’ mechanisms such as yearly budgeting can be eliminated almost entirely by beyond budgeting approaches which involve the concepts of sociocracy which is very similar to the ideas of the MOE proposed by Yeung and Ulrich.

What happens if I rewrite the Ikea strategy statement above incorporating the ideas of emergent strategy that come from learning, culture, doing and iterating, including the way their strategy has evolved:

Ikea offers a range of lifestyle choices to sustainability conscious consumers anchored by home furniture as the hub of their experiences. We leverage new technologies and eco systems for instant fulfilment and visualization. This is primarily achieved through a market oriented culture that puts team based structures and innovation at the heart of what we do, creating both market driven and market driving solutions. Economies of scale/scope of learning are now more important than traditional metrics of efficiency.

This definition now shifts the concept of strategy away from unique position to something that is more around unique processes. It also identifies that learning is the centre of competitive advantage since advantage is transient. The vision of Ikea has not been changed but the how of achieving this vison has. It suggests that strategy is not something that comes from yearly strategic planning activities but rather it comes from a continual questioning of assumptions about the beliefs of the organization. Firms need to move from a know it all culture to a learn it all culture in the words of Satya Nadella (Microsoft CEO).

In summary then, this is what strategy is, and is not:

Strategy is as much about the how as it is the what. The strategy process needs a major overhaul in most organizations and must move towards a knowledge and learning perspective.

When will science finally hit the gym floor? We have been through the aerobics era, the bodybuilding era, HIIT, functional and many other trends (and some fads). What we need is a common foundation guiding all of this, I believe that to be the scientific era (evidence based).

I define the scientific era as knowledge provision on the gym floor that is grounded in empirical evidence on what works and what doesn’t, how something should be done, and how it shouldn’t. Too much of what we see on the gym floor is dominated by intuition, anecdotal evidence, teachings passed down, and in some cases, pure nonsense influenced by the media and so called fitness gurus (with no qualifications to be speak of).

In fact, evidence based practice is mix of a few factors which are well encapsulated in the below explanation by Alan Aragon:

Let’s take an example:

Women in Asia are still generally worried about lifting weights due to the myth that strength training will make them look bulky. ‘I don’t wanna get too muscular’ is probably the most oft heard phrase when a woman is newly introduced to weights. So they tend to focus on cardio and classes such as Pilates etc as they believe it will give them a toned and long, lean muscle look.

Step in the quasi experts and celebrities such as Gwyneth Paltrow and the belief that long lean muscles can be achieved by their espoused methods whereas lifting weights will give you a bulky look, and bang the myth becomes reality!

I am not saying that Pilates or Yoga are not effective methods of training. I am saying that claiming these are capable of giving you long lean muscles whilst weight lifting will make you bulky is utter nonsense. The science is clear, muscle length and shape is predetermined and even intense stretching over extended periods of time seems to have little influence. Although training or long periods of inactivity can affect muscle length that effect is short lived and I imagine invisible to the human eye. What a woman sees as ‘tone’, is actually muscle growth and/or body fat reduction. Tone is essentially a level of leanness achieved by exercise and nutrition. Toning is bodybuilding because it is muscle growth. You can’t tone up! You build muscle or you don’t. So claiming that weight lifting will make you bulky and more ‘womanly’ methods will make you look toned and lean is not science, its nonsense. Its even more nonsense to claim such forms of exercise are going to deliver better results than HIIT for leanness.

Let’s take another example:

The explosion of so called functional training has been a boon to the fitness industry. Its also been a double edged sword! A plethora of equipment and training methods to choose from, many of which are not based on any type of science. The whole word functional is exceptionally confusing also. Functional depends on your goal. If isolated quadriceps strength is needed (ie. An 80 year old women who has problems getting of the toilet due to a quad and hamstring strength imbalance), then a leg extension or smith machine squats could be highly functional.

Standing on a bosu ball and curling 10kg DBs is functional for nothing, unless you live on a planet with bosu balls for ground! It doesn’t improve your balance and it doesn’t more greatly engage your core than standing on a stable surface and lifting the amount of weight you are normally capable of lifting when not standing on something wobbly. Walk into any gym nowadays and watch trainers assigning all sorts of nonsense exercises in the name of functionality. Yes, it’s great that this seems to have opened a new segment to the health market but at the end of the day, people want results safely. Many of these types of exercises and programs offer neither. Hence the large degree of disillusionment often associated with our industry.

I suppose linked closely to all this are the fitness professionals in the club. Most complete their one time certification and then seem disinterested to know more. They are more like professional counters than professional trainers. I am still amazed at the amount of trainers I see allowing terrible exercise form, have the audacity to talk on their phones, and not even record the workouts of their clients. How is this still acceptable?  

If your trainers are not even remotely familiar with works of some of the people below then something is terribly wrong:

• Alan Aragon
• Brad Schoenfeld
• Bret Contreras
• Dr Jade Teta
• Nick Tumminello
• Eric Helms
• Prof William Kraemer
• Prof Steven J Fleck
• Dr John Rusin
• Joel Seedman
• Dr Donald Chu
• Dr Jim Stoppani
• Mike Boyle
• Mark Rippetoe
• Eric Cressey
• Prof Stuart McGill
• Dr John Beradi
• Dr Kelley Starret

Ultimately, if science is going to hit the gym floor, it must hit the management of these clubs. I don’t just mean in terms of education, policies, and procedures related to how trainers will work with members. I mean how management actually works with the fitness staff themselves. Management science and know how in terms of innovation, motivation, and people development.

The recent announcement of Peloton laying off 2800 employees again sheds light on the pervasive organizational phenomenon of downsizing. Whatever euphuism is used (rightsizing, restructuring, and yes even smart sizing), downsizing is often the pain experienced by employees for the missteps of management. This is not to say that cost cutting by downsizing per se is wrong for the long term viability of the organization, but rather, the way in which downsizing is done has a huge impact on whether such an initiative can be deemed a success.

Far from thinking just about the potential cost savings from letting a certain percentage of the workforce go, firms need to the think deeply about lost knowledge, the morale and motivation of those who remain (survivors), the perceptions of the market place, as well as the impact on the customer and the ability of the company to deliver on its value proposition (or changing proposition). In addition, the firm should think seriously about the impact on those let go and how they are treated. Not only for human reasons but also for the very real likelihood that the organization will look to re-hire many of these same people should performance improve (there is wealth of research which shows this is often the case as firms yo-yo from hiring to firing in short term reactions to the market).

Download the paper below

Had the pleasure of talking to Craig McNeill on the mPowered podcast re all things strategy and marketing in the fitness industry – you can listen here: https://membr.com/podcast/robert-sawhney-beating-competition/

Much of what has been written about strategy and strategic management is based upon the assumption that strategic choice is actually a viable option for most firms and that resource issues are non problematic. That assumption may hold for large firms but not for SME’s. The vast majority of firms are SME’s and a large number of these are in fact micro enterprises. Whilst one may talk about geographic diversification and market expansion so readily for large firms based on a premium image and heavily differentiated service, the options for SME’s can be severely limited due to a number of factors:

1. Lack of time to explore new opportunities
2. Limited market information and research capability
3. Lack of marketing and management expertise
4. Money restraints
5. Lack of accessibility to investment
6. Lack of human resources

The list is not exhaustive but essentially highlights the key factors that affect a SME from being able to consider opportunities in the same way that larger firms can. These issues become even more pronounced when the SME is considering internationalization. Bearing in mind the resource limitations often faced by SMEs, this article will provide knowledge to the owner/operators of these firms that can help them to overcome such barriers and compete effectively.

I Strategy for the SME

I have criticized a number of existing strategic management concepts in terms of their applicability to the dynamic environments that most businesses operate, this questioning can be extended to their application to the SME and indeed the issues faced by such firms exacerbates the problems inherent in the concepts so readily applied to larger firms. For example, use of portfolio management tools (such as the BCG matrix or the GE matrix) are problematic for the SME. Classifying a business based on such concepts as market share or growth have inherent limitations for smaller firms. The very nature of such firm means they tend to operate in only a few service markets and it is quite possible that the majority of their revenue could stem from markets that would be considered declining ones under portfolio prescriptions yet still highly profitable. If one wanted to take a poorly performing business (as prescribed by a portfolio approach) and divest of it, where would one get the money to invest in growing markets that were not yet profitable? Similar problems can be found in the use of Michael Porters three generic strategies. For example, if a niche strategy is successful and hence the niche market itself becomes attractive to other larger firms, what stops the larger firms acquiring the needed expertise in that market and hence competing directly with the SME? It is exactly these types of issues that face small firms and little direction is given to them in traditional writings in strategic management and marketing.

In their excellent book, Competing for Markets: Growth strategies for SME’s, Khai Sheang Lee and colleagues identify a number of generic strategies that can be utilized by small firms (Asia focused) and in particular, consider the reaction of larger incumbent firms. The generic strategies described by the authors are:

• Niching – if the SME can offer a service to an ignored segment of the market that is differentiated and provides a competitive advantage, then it can use a niche strategy. For example, small architectural and design firms rely heavily on the knowledge and creativity of the founding partners and through work have gained prominent positions in niche markets even on a global scale.
• Substitution – a small firm can enter a currently served market by offering a substitutable, but differentiated, service, particularly if a niche strategy is not sustainable over the longer term. Basically, the firm is a second mover and benefits from the market development activities of larger firms. The firm should take care to differentiate its service from competitors either through the service itself or through marketing activities. For instance, new health clubs in China could take advantage of the growing fitness market developed by offering a similar service to larger international chains (with a lower price) but differentiating itself through a focus on local cultural knowledge. It would be self defeating for the larger firms to copy this approach as they focus on their international experience and scale of operation.
• Free riding strategy – in product marketing there are various forms of free riding but in services it tends to be limited to an imitation strategy. A SME can benefit from second mover advantages by entering a market that is already developed and well served by larger firms. By offering a service that is the same as the incumbent firms the SME does not need to bear the costs of market development and the risks associated with being a first mover. A small firm can take a small piece of a market (or its associated service market) by riding on the coat tails of the development efforts by larger firms. An obvious example would be the growth of coffee culture led by Starbucks that allowed numerous local brands in various markets to benefit from the market development efforts of Starbucks.

These generic strategies take into account the resource limitations often faced by smaller firms and the fact that creating a competitive advantage is not always as easy as it seems when prescribed by consultants and other expert sources. They also take into account competitive reactions of the incumbent firms in terms of their ability to retaliate or accommodate. Again, it should be stressed that strategy is not a static concept and whilst a small firm may pursue one of the generic strategies discussed it will, over time, need to adapt to changing market conditions and adopt an alternative strategy altogether if necessary.

In reality, a particular strategy may not fit neatly in to the three generic strategies prescribed but that does not devalue them. Small firms tend to be more limited in their strategic choice than larger firms and by using the strategies described and their appropriate decision frameworks a smaller firm should be able to enhance their strategic decision making in line with what the firm can offer and the conditions of the competitive environment.

II Marketing Effectiveness and Success/Failure in the SME

It has been well documented that marketing in small firms is quite different from marketing in larger firms. The inherent resource constraints that small firms face means they rely heavily on networks of contacts and although they are aware of general marketing concepts they do not apply them in the same way that larger firms do. For example, planning tends to be a more formal process in larger firms yet more ad hoc in small firms. Whereas certain marketing experts may lament the lack of formal planning in smaller firms, much research supports a less structured approach in smaller firms. This is known as entrepreneurial marketing and in fact can be just as readily applied to large firms as well as smaller ones.

Not only do the marketing practices of small and large firms differ, they should, the limited resources of SME’s means they cannot adopt scaled down practices of large firms or text book theory and expect to achieve satisfactory outcomes. The marketing competencies often associated with SME’s are:

	knowledge
	experience
	communication
	managerial judgement
	networking

When considering the success or failure of SME’s, there are essentially two categories to be considered: external and internal. External factors would consist of environmental factors such as the economy and competitors. Internal factors include things such as management, availability of resources and strong leadership. Much research has examined the main factors that affect SME performance and includes both service firms as well as manufacturing firms.

Research in Singapore by Theng and Boon (1996) examined the failure of SME’s and the factors perceived to be the most important causes of such failure. The results found that external factors (finance and labour issues) were important, but that internal factors (short sightedness, lack of management expertise, low initiative and entrepreneurialism) were more important in determining the poor performance of a small firm. Lin (1998) also reached a similar conclusion in her study of SME’s in Taiwan as management skills and concepts of the business founders were considered the most important factors when compared to employee skills and concern for production. This was also related to superior business performance.

III Conclusion

The SME faces a different environment to that of large firms and hence its decision making should be based on the resource limitations often facing such firms. Such firms should take an entrepreneurial approach to marketing and strategy and strive towards developing those competencies that create successful SME’s. Moreover, when looking to external resources to enhance the firms marketing capability, the SME owner/partner should seek expertise and education that is rooted in the context of the specific situation they face. Scaled down text book theory offered by many institutes (such as trade associations and private firms) is not wholly applicable to the smaller firm and indeed may even be detrimental.