It’s April 9, 1892. You live in Buffalo, Wyoming, which is the county seat of Johnson County. A bitter range war has been raging ever since the winter of 1886-87 when a series of blizzards with temperatures of 40-50 degrees below 0° followed an extremely hot and dry summer. Thousands of cattle were lost and the larger ranchers began to appropriate land and control the flow and supply of water in the county.
Jack Flagg, a small rancher just rode into town and excitedly stammered out that a bunch of the larger ranchers had killed Nate Champion, a friend active in the efforts to organize the small ranchers. The sheriff has recruited a posse of more than 200 men to go after these criminals and you’re riding with them.
Willing to Kill for It
Early Monday morning you catch up with them at the TA Ranch on Crazy Woman Creek. They take refuge inside a log barn. Ten of the gunmen try to escape, but you beat them back, killing three. One, however, got away, contacted acting Governor Barber who telegraphed President Harrison. The President sent in the 6th Cavalry from Fort McKinney to whom the invaders surrender early Wednesday morning, ending the confrontation...for now.
Everything on this planet is finite; there is nothing that is infinite…water for example. There are a limited number of gallons of potable water on the planet. You might not be able to count them, but that does not make them infinite. It’s just too tiresome and too inconsequential to do so. If we add need to the mix, say for the survival of crops, livestock, and ourselves, a hugely important dynamic occurs. We begin to value, even prize, the thing we crave, so much so that in extreme situations we’re willing to kill for it.
The Value Matrix and Razor Blades
The Value Matrix© below indicates the degree to which you are likely to value something:
It posits the scarcer the thing and the more you need it, the more you value it. So if a product or service resides in Quadrant 1 where both scarcity and need are the highest, it’s more likely to be valued than something that resides in quadrant 4. An often overlooked phenomenon is both scarcity and need can be created. Don’t think so? Consider razor blades. Gilette has convinced us that, after shaving, it is imperative our face be as smooth as glass. In order to accomplish the task we absolutely NEED to use a blade with five shaving surfaces.
You say, “OK Jerry, I’ll give you that, but what about scarcity. Razor blades aren’t scarce.” I respond, as does Lee Corso, “Not so fast, my friend.” Blades may not be scarce, but shelf space is. Just like water there isn’t an infinite amount of shelf space; it’s finite. As of January 31, 2012 the average Walmart store contained 162,018 ft2 of which about eight ft2 was devoted to razors and blades. That’s .005% of the average Walmart store. It’s not as if P&G, Gilette’s owner, doesn’t have clout at Walmart. As P&G says in its annual SEC filing on form 10K for the 2011 fiscal year, “We are well positioned in the industry segments and markets in which we operate -often holding a leadership or significant market share position.”
Other Examples
Let’s take another look at the Value Matrix, but let’s populate the other quadrants with examples:
Each of the companies in the quadrants is a well-known brand with a leading position in their industry. Now, you decide. If you had the choice, in which quadrant would you want your business’ products and services to take up residency? You may not care where you live, but it sure matters where your business lives, and you want its zip code to be 00001. Why…..because that’s where the best margins are.
Sources: Wikipedia; Companies’ 10K’s for fiscal year 2012.
