Absolut Vodka’s Search for Strategic Insights: Lessons for the Strategic Thinker

Lessons for Strategic ThinkersHere is a problem statement.  This article explores its resolution, applying the perspective of a strategic thinker and developing lessons applicable for other situations.

Absolut Vodka is a go-to name for ordering cocktails at the bar. But when it comes to entertaining at home, beer, wine, and other spirits are also top of mind. However, celebrations are increasingly happening in personal places – houses, apartments, rooftops, and backyards – especially in the summer. So we wanted to get people thinking of Absolut for all their house party needs.

This was the situation faced by Pernod Rickard USA, the US distributor of Absolut Vodka. Do people buy liquor for home parties because of the quality of the liquor, or for something else? What insights could be useful in constructing a strategy to effectively penetrate home-party market segment.  These are the kinds of questions that can’t be determined in data mining and “hard data” analytics.

Absolut Vodka’s Search for Insight & Strategy

To get answers to these fundamental questions, Absolut paid a research company (ReD) to apply its expertise in ethnography. ReD dispatched a team to several locations, including Min Lieskovsky who allows Graeme Wood of the Atlantic magazine to shadow her at a home party in Austin, Texas (see his article titled “Ethnography Inc.” in the March 2013 issue). She spent the evening carefully observing people, especially when it came to activities involving alcoholic beverages. Lieskovsky would watch carefully as guess arrived, greeted the hostess, and interacted with other guests. She would note what happened at each step and note the patterns (which became essential to the strategy).

The academic discipline of ethnography is associated with anthropology, and involves careful observation of native cultures.  Now being increasingly applied to business contexts, ethnographers carefully observe people (in this case, the behaviors of party goers) and objects they interact with (liquor). In this case, the researchers were searching for patterns in “the rules and rituals – spoken and unspoken –that govern Americans’ drinking lives, and by extension their vodka buying habits.”

Pattern Searching

In analyzing observations from 18 home parties in Columbus, New York and Austin, Lieskovsky and her colleagues noticed a common pattern in the giving of liquor to the hostess:

“They told anecdotes about their own lives in which the product played a central role – humorous self-depreciating stories about first encountering a vodka, or discovering a liqueur while traveling in Costa Rica or Mexico.”

The anecdotes had to do with humor and adventure. The chemistry of the liquor (Absolut’s branding premise for beverages sold in bars), was of little importance. We’ll see how this pattern was valuable momentarily, but first we need to quickly review the role of sense making in the generation of strategic insights.

Sense Making & the Generation of Strategic Insights

Sense-making is the ability to interpret patterns, where the interpretation forms a story that is relevant to the stakeholder. When we make sense of things, we take the data and look for connections. The result is the ability to gain alignment and commitment in areas that have complexity, ambiguity, or high uncertainty.

Tip: it is often useful to say to yourself, “What is interesting about this?” In this case, gifts were not about alcoholic purity.  The gift had deeper meaning revealed something about the story teller’s identity and functioned to make the giver and giftee more intimately connected as people.

Wrapping your product in story is the insight for the product developers. It is an opportunity to develop a marketing brand strategy. Maxime Kouchnir, VP of Vodka Marketing of Absolut’s distributor said, “At the end of the day, we manufacture a spirit, but we have to sell an experience.”

The core insight for marketing Absolut at home parties is to recognize the importance of conviviality and humor. People desire to be conversational and witty.

A Focused Strategy for Home Parties

Good strategies are coherent and focused. Here we have a defined market segment, and we now understand something about the motivations of the consumer.  We need to exploit it.

Given the trends for mobile computing, it was natural to develop a mobile application for home party planning. The party planner now has a tool for selecting a clever party theme. Then there are ideas for sparking conversation and wittiness. In Big Spaceship’s explanation, they said, “rather than simply telling people that Absolut is perfect for parties at home, we decided to help them host one. By creating a useful party generating tool we were able to communicate the brand’s message and give people something valuable to use.”  In the design of the app, you can draw a direct connection back to the themes found in the research of the ethnographers.

Strategic Thinkers “Go Native”

Now let’s step back.  One important learning from this example is that the strategic thinker can gain sights from “going native,” that is going into the field and directly observing the consumer experience.

Obviously, this immersion into the world of the customer takes time. So if you don’t personally think your time is better spent elsewhere, you can still practice strategic thinking by considering questions that need to be asked.  Try to step outside the normal frame to discover the crux of the matter.

Another lesson is that it’s not always about hard data. Qualitative data and observation is often the source of powerful strategic insights. Insights come from using empathy and probing for deeper meanings.  Often customers see the product entirely differently than does the product developer.

Finally, stay alert for patterns, look for interesting things, and strive to make sense of complexity. Insights will result.

How have you developed a deeper empathy for a business problem?

How Strategists Produce Strategic Insights

how strategist produce strategic insights

In my book, How to Think Strategically, I describe a map of strategic thinking. One of the most important landmarks on that map is insight. When you want to assure that you are thinking strategically, remember this:

The purpose of strategic thinking is to produce insights

 Insight is,

A person’s realization of “the true nature of a thing” and/or its relationship to some contextual factor.

 Examples of Strategic Insights

The discovery and application of  insights is central to strategyThe process of thinking strategically is purposeful in that the strategist intends to create advantage in the future. A few examples of strategic business insights are:

  • A marketeer’s realization that a customer need is not being met adequately by existing products or functions
  • An employee’s realization that an impending piece of regulation or legislation will fundamentally alter the industry.
  • An auditor’s realization that a pattern of transactions show fraud
  • An engineer’s realization that they have created a novel invention

Strategic insights are those insights that are useful for developing organizational strategy.

Three Kinds of Insights Needed for Business Strategy

In the context of organizational strategy, the strategist is searching for three kinds of insight. They are:

  • Insights about the current situation. What are the problems and opportunities?  What are stakeholder aspirations and motivations?
  • Insights about the future. What will be different, and what is preferred? Since choice of customers tends to be one of the most strategic decisions, what customers might be best to serve?
  • Insights about how to bridge the gap between present and future. These insights involve problem solving: taking into account a full range of constraints: competitive response, political will, resources, and organization.

Insights are a Neurological Flash

Research into the functions of the brain reveal  the right hemisphere a region (more specifically in the right hippocampus) is the location responsible for  insights involving verbal information. As neuroscientists continue mapping the brain, we are sure to get a better understanding of those mechanisms responsible for the practice of thinking strategically.

How to Generate Insights: Balance Thinking Hard with Detachment

Individuals have their own style of doing things. Research has not shown one best practice for generating insights. Rather than give you a cookbook, let me encourage you to apply some energy to each of these five activities.  Be patient, and insights will emerge!

  • Preparation – identifying issues, collecting and categorizing information, assembling resources
  • Analysis – actively looking for relationships and patterns in data. Continually asking questions and reframing to find new perspectives. Searching for what is interesting. Validation and hypothesis testing.
  • Detachment – Getting away from the issues and allowing the subconscious to work on the issues.
  • Articulation – Explaining the crux of the situation to others. Trial and error solutions.
  • Refinement and iteration – Returning to earlier activities.

Strategic Insights Are Those That Are Relevant and Meaningful

I earlier defined insight as  a person’s realization of “the true nature of a thing” and/or its relationship to some contextual factor.   I close out this article with exploring the final part of the definition, the “relationship to some contextual factor.”

When people hear the word “insight” they typically assume that it must be a brilliant new observation: an epiphany.  However, I find that kind of “aha” to be rare. Instead of brilliance, I keep it simple by testing it with this criteria of relevance and meaningfulness. Here’s a useful question:

Is the insight relevant and meaningful?

A relevant insight is one that is connected to current situation, future, and the bridge between the two (these were mentioned earlier in this article). Ideally, this creates some sense of alignment.

A meaningful insight is one that makes sense in a narrative. Here, I imagine myself in the future explaining how I created a successful strategy. If find that as I grapple with expressing the insight, I get a better sense of its worth and its motivational power.

Finally, a “contextual factor” is something that is external to the organization.  Examples include technological change, the economy, a social trend, etc. For example, Absolute Vodka had data that its products were purchased for drinking at home parties. But, why? It turns out that many people buy a particular brand of spirits because that they connect it to a personal anecdote; telling that anecdote to others is a way to be humorous or to relate an adventure. This insight gives the company a foundation for creating marketing and product development strategies.

Implications for Organizational Process

Because organizations do not share a single brain, strategic thinking can only be a capability of individuals. This has important implications for the process of strategy. Most importantly, a good strategy development processes should allow time for individual research, analysis, and reflection. Individuals acquire insights through conscious analysis mixed with unconscious (intuitive) cognition.

It is has been said that genius is 1% inspiration and 99% perspiration. Doesn’t it make sense that the perspiration is the act of thinking strategically to produce the insights?