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Be Willing to Gamble on a Radical Idea

The need to be proactive—to “disrupt before you are disrupted”—is a common theme among management and consulting gurus. The reality, however, is very different. All strategic moves are, to a degree, reactive. Without change in the environment forcing management to react—rethink, modify and adapt their strategies—companies have no incentive to change. Without an incentive, there is no reason to change. “If it ain’t broke, don’t fix it” is a powerful modus operandi, whether it is acknowledged or not—and it’s often the rational approach.

It’s not about proactive or reactive strategy. Instead, the only relevant question is, “How radical is your reaction when you do see the need to react?” The stronger the brand, the bigger the cash flow, and the more seemingly secure the market position is, the more radical the change will have to be. Yet most senior executives, and especially CMOs—known for their risk aversion, especially when it comes to big brands—believe that gradual, incremental, cautious change is the preferred route.

Willing to Wager Against Them?

Those senior executives might want to rethink their game plans. Consider this: Atlantic City is fading away. Three large casinos are shutting down. A new report from the Richard Stockton College of New Jersey points out that Atlantic City’s decline is the worst of all metropolitan areas in the U.S.

On the other hand, a report from The Economist tells a story of Las Vegas’ revival. The city’s economy basically died in 2009, raising unemployment to 14%. Today unemployment is down to 7%, but the employment is not in casinos.

What did Vegas do differently than Atlantic City? Both suffer from the proliferation of casinos everywhere in this country. Unlike Atlantic City, though, Las Vegas boldly, deliberately and radically steered away from older customers attracted to gambling.

Since 2009, the average age of a visitor to Las Vegas has fallen from 51 to 45. Casino operators are essentially hiding the gambling. They are redesigning their entrances so that customers do not have to face the gambling hall at all. Some newer hotels do not have any gambling. That’s radical. So how does Vegas attract the new, higher-spending, non-gambling younger crowd? By trading on its core positioning.

Core Positioning Defined

Core positioning—or a creed—is a brand’s deeper level of positioning in people’s minds. What has Las Vegas been known for since its creation in the 1970s? If you say gambling, that’s only skin deep. Vegas has always been the “sin city,” a place that adults went to for unsupervised, irresponsible, guilt-free fun. Gambling was just part of it. In transforming its business model since 2009, Vegas’ hotels and resorts diversified into a “spring break” mecca for the 30s and 40s crowds. As The Economist reports, “Older people, who come mostly to play slot machines, are being crowded out by younger visitors who have little interest in gambling but instead spend their days getting drunk and sunburnt at poolside ‘day clubs’ and their nights at enormous nightclubs.”

Thanks to this change in strategy within the core positioning, charges from hotel rooms, shops, drinks and so on now make up almost two-thirds of the total charges on the Las Vegas Strip, up from just more than two-fifths in 1990, The Economist reports. That’s twice as large as gambling revenues. That’s radical.

Are Marketers Leading the Radical Revolution?

Radical changes to offerings typically come from the tech and R&D side. They involve innovation. Marketers can only passively wait for the developers to come up with a new and radical concept—or so goes conventional wisdom. But marketers need to change that mindset. Here’s how:

-Bring a strategic early warning (SEW) analyst into the marketing function, reporting directly to the CMO.

-Initiate an early warning discussion at the top by leading a “What if?” scenario exercise based on early signals of changing market conditions.

-Be the one to propose the “radical idea,” and set your team and the SEW analyst free to propose radical ideas. “What if we did X?”

-Always be realistic when estimating the possible downside risk to the radical move. A “worst-case scenario” analysis appeals to the conservative CFO who has the CEO’s ear. Marketers are notorious for being overly optimistic, but hype will definitely kill the radical idea.

-Organizational shielding may be necessary to help in implementing the radical idea. To catch up to the threat from Amazon and other e-commerce sites, Wal-Mart fired most of its IT development vendors and brought everything inside in a separate Wal-Mart Lab unit.

-Ask yourself and your team: What is our core positioning? What is the deepest image that we have etched in customers’ minds? If the answers come out a banal, “Our products are the best,” know that you are in more trouble than your cash flow shows.

Benjamin Gilad is president and CEO of the Boston-based Fuld-Gilad-Herring Academy of Competitive Intelligence and author of Business War Games.