Leatherman, a 41-year-old “baby,” ruthlessly defeated the 140-year-old Victorinox brand in the multitool segment. Was it strategy or just good luck?

Introduction

Leatherman, a 41-year-old “baby,” ruthlessly defeated the 140-year-old Victorinox brand in the multitool segment. Today, Leatherman enjoys superior market share, stronger word of mouth, a wider supplier network, and a higher growth rate. But how did they achieve this? Was there any strategy, or just some good luck?

Leatherman’s strategy

Leatherman knew beating the quality & brand image of Victorinox was nearly impossible, Yet they made their multitool’s more desirable to the customer than Victorinox. Instead of making a multitool that eveyone can use, they decided to give special attention to every unique set of customers.

• Are you a camper? They made Leatherman Signal.
• Too much into craft? They made Leatherman Micra.
• Gardening? Leatherman Skeletool.
• Soldier? Leatherman MUT

And the list goes on...

Today Leatherman has over 50 unique tools offering features and branding more appealing to its unique set of customers. On the other hand Victorinox has only 2 multitools, Swiss tool & Swiss tool Spirit. Because Leatherman serve’s the customers in their niche uniquely well, it tends to build a more desirable multitool, even than the historic Victorinox.

Leatherman’s Pursuit of Sustained Competitive Advantage

Converting an advantage to sustainable competitive advantage, takes more than pulling out the rabbit from the hat once in a while.

Many brands aim to offer more relevant products, to their customers, than their competition. But not everyone can manage to pull it off. A brand can always come up with a star product once in a while, but for Leatherman to come up with unique tools one after the other, they had to design the company inside out, with this Focus-Differentiation strategy at the centre.

People, Culture

Leatherman built an army of 74 people; 55 people in engineering & 19 In Art & design, all have one goal : Find customer segment with unique needs —> design a multitool with unique features & functionalities for them ——> Repeat . Victorinox, on the other hand, diversified its portfolio into various product lines say Victorinox Watches, Bags & Kitchen Crokery for example. They have a bigger R&D team, having 106 engineers and artist, but with diversified focus areas across all the products lines.

Leveraging on Database

Staying in touch of customer after sales helps leatherman finds insights for their next product design, and also gets feedback for multitool optimization. Hence they sought to design a centralized marketing contact system of profiles and data on more than 350,000 customers.

And hence Leatherman touched the G-Spot: Sustainable competitive advantage

Higher Premium

A more appealing product allows Leatherman to charge a premium. The higher margins further allows leatherman to invest more in R&D, and thereby further strengthen their competitive advantage.

Marketing Leverage

Advertising & selling a Leatherman Signal to a mountaineer is much cheaper than selling Victorinox Spirit to the same person. With precise segmentation, targetting, and positioning of ads leatherman enjoys higher Return On Ads Spent(ROAS). The amount it further passes on to retailers & affiliate program. This increases their word of mouth and thereby futher strengthens its competitive advantage.

Agile Production

Leatherman’s manufacturing facility and corporate headquarters are in the same building. This minimises the time between design & dispatch, along with the increasing number of tools. This also allows Leatherman to maintains high collaboration between R&D and manufacturing department.

Segmenting beyond Hobbies

With an army of 74 Employees, soaked in the culture of innovation, scavenging new segments to make new tools; falling out of ideas is the last thing leatherman would fear. Leatherman, after making a unique tool for al the big segments, they changed the dimention of segmentation. Now, leatherman not only has a tool for each hobby, but for different age groups, different socio economic levels, and so on. Want a multitool for your 10 year old? Leatherman Leap! Want something premium and Gentlemenish? Leatherman Arc!

Undisputed “Sustainable Competitive Advantage” in real sense

What all the strategic decisions that leatherman took, they achieved Sustainable competitive advantage, something every company is desperate to achieve. SCA, Once achieved, it is like a snownball falling from the cliff, even the forces of market make contribute to make the company grow.

Competition reduces, because new players fear to enter, and existing players start to diversify. The price of steel, brought from suppliers, can be controlled as Leatherman controls majority market and hence holds higher leverage in negotiation. Customers can be charged witha a premium price and there are no alternatives to choose from, in the market, for their specific use. Also, once someone gets a leatherman, It is hard to shift to another brand because of Interchangable add-ons, like screwdriver bits, and also beacause of the loyalty programs.

Hence all the 5 major forces of market are in support of Leatherman: Low thread of new entry, Low competitive rivalry, low supplier power, low buyer power, Low threat of substitution. This makes leatherman immune to market complexities, and hence all it can do is grow.

Conclusion

Achieving sustainable competitive advantage, as Leatherman did, is a rational process that can be strategically planned and executed. It is not merely a result of luck and fate. Leatherman’s focus-differentiation strategy, aligning all departments to create unique products for distinct customer segments, led to its market dominance. This approach allowed them to enhance customer loyalty, command premium pricing, and achieve efficient marketing and production.

I have romanticized the field of Corporate Competitive Strategies, spending most of my leisure time studying and creating strategies for companies. It is a Warfare of Capitalism, a game of chess where I analyze and make sense of every corporate move.

With my writings, I aim to inspire you to build the desire to become a market leader, a monopoly player who eliminates competition and becomes the undisputed leader. With critical thinking and strategic maneuvering, I think, this is entirely possible. I encourage you to read more of my articles to uncover the patterns in these success stories and become more objective about achieving market dominance.