Bing Got Back!

January 09, 2023

Hello my fellow tacticians and welcome back to Games & Plans! A very happy #JordanYear to everyone. Here’s to hoping there weren’t too many “following up on our chat before the holidays” waiting for you on slack after the holidays.

Thank you to all who read our launch issue and provided feedback. We’re so excited to talk business with y'all and make this thing the premier place to learn the basics of business strategy.

As a reminder, we put together a strategy index which broadly categorizes the strategic business decisions we’ll be talking about in the newsletter. You can access it HERE anytime.

New Year, New Strategy - and 2023 is certainly off to the races. In just one week we've already seen

  • 🍔 More Big Macs! The Golden Arches announced their growth strategy 2.0 (link)

  • ❌ Big Tech's personnel strategy continuing to be workforce reduction as Salesforce and Amazon are the latest to announce layoffs (link)

  • 💊 Corner store icon, Walgreens, battens down the hatches and pauses M&A growth while they consider stability strategies for their existing acquisitions (link)

But this week, two game plans *insert Peter Griffin “He said the thing!” meme* stood out to us above the rest. Let’s dive into our makes & misses.

MAKES 🏀

Microsoft Likes ChatGPT And They Cannot Lie

Last week, it was reported that Microsoft intends to launch an enhanced version of it’s search engine, Bing, powered by OpenAI’s ChatGPT.

In case you haven’t been on the internet in the last few weeks, ChatGPT is an AI chatbot developed by OpenAI (who is, in part, funded by Microsoft’s $1B venture investment). The 20,000 foot view is this: ChatGPT is likely the best interactive AI we have seen to date. It’s imperfect, but it’s powerful. It can write code or stories based on your directions, it can play games and even do your homework if you asked it to. You can read more about OpenAI, but we recommend you give the chatbot a whirl, it’s pretty wild.

Hey ChatGPT, What’s Microsoft Thinking?

If you were so inclined to ask ChatGPT this question, it would probably respond along the lines of Microsoft wanting to advance AI technologies, and scale it’s research & development efforts - which would be correct. This is an example of what we call research & development (R&D) strategy, which is a branch of functional strategy. Part of functional strategy is identifying competitive advantages for products or divisions of an organization. Via R&D, the company seeks to bring forth new product innovations that will disrupt a market. If a company doesn't pursue alternative methods of growth or expansion beyond it's core competencies, it runs the risk of being disrupted and eventually going extinct. Microsoft does R&D as well as anyone, and has landed on something interesting here in the Search market through providing capital & partnership to OpenAI so they could build this tool. If Microsoft successfully launches a version of Bing with ChatGPT that yields better search results than plain old Google, Microsoft could capture market share in a space that has long been dominated by Google.

David v. Goliath? More Like Goliath v. Goliath

Microsoft and Google are two of the five largest companies in the world, by market cap, but Google has 90%+ share of the search engine market and it’s pretty much always been that way. Because of this, Google hasn’t really been incentivized to innovate in search. It’s the old adage: if it ain’t broke, don’t fix it. That’s going to change now, according to Tony Fadell during On With Kara Swisher, Google has put a Red Team on the development of its own AI chatbot. While Google gets in fighting shape, Microsoft seems poised to launch their new and improved Bing by March, which could give it a first-mover advantage over Google.

One of the reasons we like this so much is because the strategy will create change, which should bring about new benefits (and potentially dangers) to consumers. Whether this results in users & advertising revenue shifting from one company to another, new business models in the form of subscription, or new entrants into the market, we’ll take the good with the bad because some of the best and brightest in the world are working on this. Make sure to get your popcorn ready.

Strategy News That Peaked Our Interest

  • Roku Pursues Growth & Expansion Strategy With Line Of Smart TVs (Link)

  • Automaker Stellantis (Dodge, Chrysler) Builds New Software Business Around It's Mobilisights Product Strategy (Link)

MISSES 😿

Stitch Fix Is Going To Need A Pretty Stellar Patch Job For This One

The company that specializes in outfit curation as a service (aaS) is going out of style, but they’re going down swinging. Last year, they laid off around 15% of their workforce and now, on January 5th, they’ve announced another round of layoffs - this time around 20% of their salaried workforce according to WSJ.

Stitch Fix was one of the companies that benefited greatly from COVID-19. With all of us hunkered down in doors, working remotely and finding ourselves with less expenses than before - extra discretionary spend on services such as Stitch Fix became commonplace. All you had to do was pay their styling fee and then you’d receive a box of outfits curated for you. You could keep what you wanted, and be charged for it, and send back what you didn’t like free of charge.

However, as stay-at-home mandates were relaxed, consumers shifted their buying habits back towards the in-store channel and without a brand that people feel strongly about, the Stitch Fix direct-buy market suffered as well.

The Wrong Strategies Have Consequences

In the middle of COVID, amidst Stitch Fix’s popularity, the company brought in former Bain & Co Exec and Stanford B School Grad, Elizabeth Spaulding to “lead the personalization platform into its next chapter of expansion”, but after a year and a half of layoffs and declining growth (the company has gone from $11B in Market Cap to $300M), Spaulding will also be leaving the company along with the other 20% of the workforce losing their jobs.

All of this roles up under personnel strategy gone wrong. The CEO and leadership team misinterpreted the signals the market was sending it. They looked at the trends they experienced during the global pandemic and believed that the demand for their curation services was here to stay. As a result, they allocated their capital towards growth levers such as marketing and head count, when they should have instead been focused on stability, R&D and new products.

What’s Next For Stitch Fix

It doesn’t look great. They’ve brought back the founder, Katrina Lake on an interim basis in an attempt to stabilize morale while the company looks for its next CEO. Additionally, the capital they save from the layoffs will help shrink some of their losses but they’ll need a more significant strategy than layoffs in order to get Stitch Fix back on track.

Bad Strategy Vibes

  • In A Re-entrenchment Shift, Exxon and Chevron Retreat From Big Oil Projects Abroad, Have Sights Set On Americas (Link)

  • To Offset Supply Chain Strategy Challenges, Conagra Considers Price Increases To Maintain Its Profitability (Stability) (Link)

🔥Companies Hiring & 🧨 Strategy Roles

Major League Baseball - Manager, Strategy

🎥📖🎧👀 Consumption Corner

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G&P Team