Strategy at Work: Teachable Moments from The News - Issue #45 (March 24, 2025)
In This Issue: New Glass Approach – A Competitive Advantage? The Continuing Debacle called 23&Me
Photo by: Chance Agrella at Freerangestock.com
New Glass Approach – A Competitive Advantage?
Competitive Advantage is a concept that is meant to describe the elements of a business that make it truly exceptional. A truly exceptional business is one that is not only able to get customers to bypass competitors and buy from them, but also one that is substantially profitable while doing so.
The first element (getting customers to bypass competitors and buy from you) requires REAL differentiation. That means having elements of the business offering to customers that is substantially different. This would preferably be elements that are relatively rare compared to the competitive set, have a runway of time when the competition will not try to match what you have, and is not easily substituted by other means.
The second element (being highly profitable) requires a sufficient (and hopefully growing) customer group that values you differentiation and is willing to pay you substantially more than your costs.
This is how I started my discussion of the decision failures at Southwest Airlines just a few weeks ago. Into the exact realm let’s consider what is being done at Corning (and their associated Glass Manufacturing associates).
Corning set the world on a new course with thin, tough Gorilla Glass that has helped make possible today’s mobile devices. The Wall Street Journal reported:
“In order to win over Steve Jobs and land Apple as a client when it first started making iPhones, Corning offered Apple a fresh twist on its existing process for making glass for LCD displays and other applications, which yielded a new kind of chemically strengthened glass.
Traditional glass, called soda-lime glass, is made by floating molten glass on top of molten tin, which is a cheap and effective process but leaves microscopic flaws. With Gorilla Glass, molten glass with different additives than soda-lime glass cascades in a waterfall as thin as half a millimeter, which rapidly cools and is cut to size, yielding glass that is nearly flawless. The glass is also chemically strengthened, making it resistant to scratches and chipping.”
So, where do you take that technology / capability? How about the billions of windows that exist in every home and business? Windows are the source of most energy loss in an HVAC system. It’s long been known that you can dramatically increase the thermal capacity of a window by layering it (sometimes with unique gasses in between the layers). Unfortunately, more than 2 layers becomes too thick, too heavy, and too expensive to be practical.
Corning teamed up with Alpen windows and have perfected a system that utilizes 3 – 4 layers of ultra-thin glass that can be manufactured in any size, with each pane being less width than a credit card.
Rare? Compared to the competitive set, the company has a substantial lead in technology, history, and a long pilot approach. The windows produced provide more insulation capability than a well-insulated wall. At this point – Yes.
Durable? The processes are known. The primary manufacturers of windows are established in their processes, are worried that customers won’t pay extra for this capability and have not shown a history of willingness to invest in new manufacturing capabilities. If this were a full-blown analysis, we would examine each one for their: 1) strategic interest, 2) financial capability, and 3) organizational capability. This will do for now!
Substitutable? Wow. Many, many substitutes that are good (we can see through the window, it doesn't break, it provides decent insulation, etc.). The key here would be the definition of the perfect customer – something that Corning is still struggling with. There is no regulatory mandate that would compel buyers (other than its capability to withstand hurricanes – which is remarkable). Its ability to move past Substitutable will be the key to its competitive advantage.
Sometimes organizations have a remarkable product or service capability. The key to growth in different markets is not whether it can be done, but who would be willing to buy it from us (preferably for sizeable price above costs) and would be eager to bypass competitors and buy from us.
Makes customer definition a critical step!
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The Continuing Debacle at 23andMe
I have written about the extraordinarily poor leadership at 23andMe previously. The now former CEO (because she intends to buy the depleted company out of the bankruptcy she put it into) owns 49% of the stock.
The approach to strategy taken at the organization is an example of why so many founders are NOT the right people to take a company into adulthood. Of course, one can easily cite founders who stayed with their organizations long term and were successful. Interestingly, those (while hailed in the press) are in the minority. Founder success is highly correlated with unique skills that include a deep understanding of the market competition and the desires of potential customers. It is quite difficult for those same founders to be flexible enough to change as the market changes (darn those competitors – they won’t just let us make money).
Having been an early leader in the DNA direct-to-consumer business, the model was based on the WOW factor of genetic insight and the hope that it alone would carry the day. It was a simple business model, with a simple premise and should have been a profitable one.
23andME never made a single penny in profit! Yet the CEO took home over $40 million in the past 2 years alone.
In a set of moves to address the one-and-done nature of the DNA testing business, she tried subscription models, developing designer drugs, and various approaches to monetize the DNA information they have collected from paying customers (I love how she claims this data was crowd-sourced… it was paid for by customers who expected privacy).
The company is a classic example of how a leadership (in this case fundamentally one person) throws money, employees lives and time at various ideas without any consideration of whether it would constitute a REAL competitive advantage.
Every time an organization plans to enter a new domain; they need to reset the competitor list and evaluate whether they will be able to develop a set of competitive advantages. This should be done long before any actual moves are made by the organization.
Subscription models work well when there is an ongoing desire / demand from customers for content related services. In the case of 23andMe, there was little or no reason to continually check for ‘advice’ about their health. There are thousands of sites with health advice. Furthermore, the specificity of that advice relative to an individual’s DNA proved to be far more generic than pitched.
Developing Drugs from scratch. OH MY!!! Really nothing that can be said here other than DON’T DO IT!!! There are many that have that capability and many more that don’t but keep losing money. Partnering with GSK was a good first step, but 23andMe wanted to do far too much of the development.
The idea that one could monetize the DNA database is quite complicated. Privacy issues that blossomed with a data breach were exasperated by complicity in law enforcement efforts to use these databases to find criminals.
23andMe has probably seen the end of its useful life unless the organization can get past the whims of a single individual and see if they can craft together something that constitutes a viable business model. It is far more likely that Anne Wojcicki will prevail in acquiring the business out of bankruptcy and continue the same failed approaches that led them to where they are now.
What does the business really have? It has detailed DNA data on more than 15 million individuals. It has NOTHING ELSE, nor does it have any real prospects for being able to fund something that would constitute a potential competitive advantage.
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Please let me know (cbamford@bamfordassociates.com) about any issues or (even better) recommendations you have for improving the value of this newsletter to you. If you see a news story about a company strategy that looks fantastic or terrible, please reach out to me.