Augustín, the president of the retailer Emilia, strongly believed in his strategy shift in pricing model. However, what did he NOT do beforehand to validate his idea? Why is that important? What could have gone differently (e.g., what findings could he have discovered earlier, before losing 211 million euros in revenue), and why?
The key is in the question, which is that Augustín did not validate his idea. As we’ve learned in class, it is critical to identify and test core assumptions. Augustín had a strategy shift idea which he hypothesized would appeal to a newer and wider audience. However, he did not validate his hypothesis through testing and experimenting, which likely could have helped to mitigate the dramatic revenue loss. Through testing and experimenting—”the lifeblood
of successful retailing”—he might have been able to empathize with his customer base—middle-aged women, for whom discounts and promotions offer value, confidence, and loyalty. Coupled with recognizing the value in prioritizing these customers, Augustín might have then implemented a strategy shift that aligns well with the values of Emilia’s customers. From the article: Augustín is so out of touch with his customers that he’s unaware that his strategy already appears condescending to them, as a board member points out.
Pretend that you were recently consulted to advise Augustín – what course of action would you recommend, and why?
Augustín is taking giant steps when small ones would be more effective. Equally as important as testing and experimentation is effectively leveraging the results of your experiments. The whole point of experimenting is to see what response you get and adjust your strategy accordingly. These reactive adjustments mean that a higher-level four-year plan (though vision is certainly of utmost importance, of course!) can and should be broken down into “smaller, iterative cycles” that are conducive to evaluation, adjustment, and growth. This would include checking in on metrics, revisiting objectives, and restacking priorities, to support a flexible, quickly adaptable system. Likewise, small adjustments, rather than solely a complete abandonment, could be made—for instance, bundles of the same product that simply serve as a form of discount or “family bundles” to leverage the middle-aged woman customer persona, and reward and loyalty programs for long-term customers.
