Sanctions Are Like Punishing Your Spouse by Letting Them Date Other People
The next big theme is called, “Sanctions Are Like Punishing Your Spouse by Letting Them Date Other People.” That’s a funny sounding headline. What am I talking about? Imagine you had a spouse, and you don’t think they appreciate you for some reason, so you tell them, “For the next year, I’m going to move in with my family, and you can’t write to me, talk to me, message me, or touch my hand. We’re going to have no interaction. I’m going to go away for a year so you learn to appreciate me.”
What do you think will happen in that year? There’s a 95% chance that your spouse—who you applied a sanction to—is going to leave. They’re going to find someone else and build a bond with them. They may even develop such a close relationship that they realize that the relationship they have with you is not unique. It’s not the best relationship, and they leave you, or it damages your relationship forever.
The impact of sanctions from a business perspective
We don’t like to talk about politics, but we do want to talk about the impact of sanctions from a business perspective. When you apply a sanction to anything, from a business perspective, you make the choice to say you’re not going to provide a service to someone. You are not going to make what you have available to someone.
That only works if you live in a world where the service you offer is so unique that if you pull it away, the person will behave themselves because there’s no other way for them to get the service. But as I’ve mentioned in many other episodes, we live in a bipolar world where there are competing superpowers. Twenty years ago, if the leading nation pulled its services away, that sanction would hurt because there wasn’t another competing superpower to fill that vacuum.
Companies do this as well, but they don’t know they do it
I used this example at a country level to show that sanctions are when you pull a service away to modify behavior. Companies do this as well, but they don’t know they do it. Let’s assume a sanction is applied to Country A. Companies need to decide if they’re going to agree to the sanctions and work with Country A because it’s more lucrative, or are they going to honor the sanctions that were applied to Country A and work with the country that applied the sanctions to Country A.
I’ve done many advisory projects in the oil and gas sector with many leading companies, and it’s a difficult decision for them to make. Some of them make the right decision. Some of them make the wrong decision. Some of them pull out, knowing they’re making a bad business decision by leaving a country that has been sanctioned. They say they have no choice, but they’re making a choice to stick with the country applying the sanctions because they think the return is greater there. They always have a choice—even if they say they don’t.
That’s an explicit company sanction. I’m going to talk about explicit company sanctions and personal sanctions, which are more important and more insightful. We know that companies segment their markets. That’s a fact. It’s an old technique. When you segment a market, you choose to service that market. You choose to serve market A, market B, or market C. If you choose to not serve a market and that market comes to you and says, “Hey, hold on a second. Could you make these changes? It would be better for us.” As a business, you’re going to say, “We’re not going to make those changes because we’ve decided we don’t want to serve that market, and the changes we want to make are going to cost us money, and we’d rather invest that money in making changes to the segment we want to serve.”
That’s an example of an implicit sanction a company is applying to a market. They may not think of it as a sanction, but when you deliberately choose to make a service hard to use because you don’t want to serve a market, you’re sanctioning that market in a sense.
A very good example of this is hip hop and rock and roll music. I don’t know many young people who want to play drums or guitar. When the rock industry was in its heyday in the 70s, 80s and 90s, I don’t think any rock executive said, “You know what? We’re not interested in serving the primarily minority youth market.” I think they were agonizing over the question of, “How do we serve this market in a way that doesn’t alienate our core market?” They made the decision to segment their market. They picked their core market and invested in it. They applied an implicit sanction. Obviously, the rest is history because now hip hop rules the world. It is the most streamed genre in the world, and it’s going to get stronger.
Think about implicit and explicit sanctions you apply at a company level
You need to think about implicit and explicit sanctions you apply at a company level. Every time you choose not to serve a segment, and you do things that don’t actually make it easy for that segment to engage your services, that’s a sanction. At a personal level, when you choose not to engage someone, you apply an implicit sanction. You decide, “Okay, this person is unimportant and not valuable to me, so I’m going to pull away my availability, and I’m okay with it.” But you have to ask yourself, are you sanctioning the right person? By not making yourself available, you’re sanctioning your availability to that person. Oftentimes, I find we make the wrong decision there. Rather than having an open mind and speaking to as many people as possible, we have this view that this person is not important.
This is a good way to think about how you make yourself available and how a company makes resources available as a form of sanctions, implicit and explicit. Using those terms, it doesn’t sound nice when you call it a sanction, but it sounds nice when you say you “segmented a market.” Euphemisms sometimes hide bad strategy decisions.
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This is an excerpt from Monday Morning 8 a.m. newsletter, issue #27 (part 2). Many of you have found Monday Morning 8 a.m. so useful that you’ve asked us to release a book version of these newsletters. We’ve obliged and released a Kindle version, which you can find on Amazon under “Strategy Insights.” It contains the insights from previous Monday Morning 8 a.m. issues, edited into a bite-sized format that’s very easy to use. And you can learn about other FIRMSconsulting books here.
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