Your column on Mang Inasal?s success secret is still the continuing topic of our group?s conversations. We?re a foursome of Asian Institute of Management (AIM) Master in Entrepreneurship (ME) graduates and you taught our batch. There?s one question raised during our past two weekly gatherings that we all tried answering. But we heard as many different answers as there were members. So we thought we?d pass on the question to you: ?Assuming it?s true that the five secrets you identified as responsible for Mang Inasal?s Edgar Injap Sia?s P3-billion success were correct, would these be the same five secrets that will sustain Mang Inasal?s future success with Jollibee Foods Corp. as its new owner??
A: Conventional wisdom prescribes that to do a good job at managing the future do so via the success of the past. But experience tells us that navigating the future with this mindset has proven to be a recipe much more for disaster than for success. For a more enlightened answer, we need a more enlightening framework. Because we?re talking about the future, we need a better foresighting basis for diagnosing what can sustain Mang Inasal?s success under Jollibee.
A particularly appropriate foresighting framework is in micro-economics and another one in the literature on sustainable competitive advantage. We diagnose by taking each at a time.
It?s about ?complementarities?
Stanford University professor of micro-economics and ?auctionomics,? Paul Milgrom, coined the term ?complementarities? to explain synergies from combining compatible business practices. In the case of Sia?s Mang Inasal, its sustained competitive advantage over the seven years when it scaled up to 303 stores came from not only repeating each one of its five secrets of success. The more significant factor was its maintaining the five practices? complementarity role for one another in the mix. In fact, it?s more the mix that counted in the success than the individual elements in that mix.
Let?s recall those five factors and practices that were supposedly behind Mang Inasal?s superior competitive advantage. These are: (1) Ready, fire, aim!; (2) Work your butt off!; (3) Think innovation. Copy but add something of value; (4) Think BIG!; and (5) Think marketing.
We?ll skip the explanation of each and rely on your memory to remember the Mang Inasal column three Fridays ago (or check out www.marketingrx.org or www.inquirer.net.) But what needs underscoring at this point is that none of these five practices can be said to be anything new or innovative. So treated separately, not a single one of them can be claimed to be a success secret.
The application and exercise of complementarities have shown that business success such as Mang Inasal comes from Sia?s creativity. As the innovating entrepreneur, Sia had put to work each one of the five factors of success along with each of the other remaining five practices. For example, the surprising effectiveness of his peculiar but unknown way of combining ?ready, fire, aim? with ?work your butt off? yielded an outcome whose value was greater than the simple sum of the effectiveness of each of these two. There was synergy in the way Sia paired the two. And so it must have been with the rest of the mix of his five good but very ordinary business practices.
So is sustaining Mang Inasal?s success in the future just a matter of maintaining the complementarities of its five success secrets and practices? Aren?t complementarities just another way of saying you?re managing from the past? Isn?t this basically imitating the past?
It?s about Synergy and the ?Mathematics of Probabilities?
There is some truth in saying this and that?s why we need to integrate into this discussion David Dranove?s thinking about sustainable competitive advantage. Dranove is professor of strategy at the Kellogg School at Northwestern University.
Professor Dranove?s provocative thesis came from his analysis of numerous cases of synergy. According to him, you can gain extraordinary results from just mixing but in the right proportions or levels ordinary means. So suppose under Jollibee Foods? system of doing marketing (in putting up in the next 300 more Mang Inasal stores) the new Mang Inasal is able to maintain practicing its five success secrets. Assume further that this continuation has a high probability of 70-percent success. Now, the chances of also successfully replicating all five practices in the way that Mang Inasal has done it in its first 303 stores is not going to be 70 percent.
Why 70 percent? That?s the ownership split under the acquisition and assuming that Jollibee Foods will allow the 30 percent owning Sia to have his way 70 percent of the time until the the time the number of stores reaches 300 more. Professor Dranove?s mathematics of probabilities predicts that the likelihood of maintaining the complementarities is 0.70 to the 5th power which equals 0.17 or 17 percent. So there?s just 17-percent chance that Mang Inasal will go on succeeding and repeat its success in its first 300 stores to be true for its next 300 more stores. That?s risking at less than even chance of winning!
What if there are not five but six secrets to Mang Inasal?s success? And what could the extra one secret be?
In Mang Inasal?s line of business, that?s choice of good location. Edgar Sia had the enviable knack of choosing the most suitable locations for his first and up to his 303rd store. That?s suitable with respect to his target customer segment. With six instead of five practices to maintain complementarities, the chances of future success goes down from 17 percent to 12 percent (= 0.70 to the 6th power).
But succeeding in the next 300 stores will mean that somewhere along the path toward the total 603 stores, Mang Inasal will have to shift from single market segment targeting to two or even multiple market segment targeting. That will impact the 70-percent success ratio and bring it down and therefore further bringing down the 12-percent success ratio.
All this is a form of foresighting according to marketing science. But even science is not foolproof. In fact, we hope Sia?s and the new Mang Inasal?s marketing art would remain superior over our marketing science. It?s a great marketing story to not have a happy ending.
Keep your questions coming. Send them to us at MarketingRx@pldtDSL.net or Drnedmarketingrx@gmail.com. God bless!