M.012 SLOAP strategies: Finding value in the spaces between
Why stuck-in-the-middle positions might be goldmines
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Think about the last time you walked through an urban area. Then, try to recreate in your mind the physical surroundings of your walk. What do you see?
If you are like most, you probably see buildings, houses, roads, bridges, intersections, bus stops, public squares, parks, restaurants, shops and cafes. And this makes perfect sense. We tend to notice the spaces around us that are occupied by something.
The next time you walk the same route, try to actively look for something different. Instead of paying attention to the buildings, the roads and the parks; try to take note of the spaces that are left idle as by-products of the former.
This might be an empty void of concrete under a bridge, a small empty lot squeezed between two buildings, a few square meters of useless asphalt at the corner of an intersection, or the square meters in a parking lot that are too small or angled to fit a car.
These idle, ignored and useless by-product spaces are called SLOAPs, which stands for Space Left Over After Planning. You might not recollect having seen many SLOAPs, but you will be surprised how many you notice when you actively scout for them.
What makes SLOAPS interesting is that creative architects, developers and skateboarders have all shown that they might have value hidden below their apparent uselessness.
This begs the question: do SLOAP positions also exist in the competitive landscape? And if so, how can we unlock their potentially hidden value?
What is a SLOAP?
Before looking at the possibility of SLOAPs in the competitive space, let’s have a closer look at the origin of the concept.
Originally, SLOAPs referred to the idle, useless and weird spaces that often appeared between streets and modernist architecture that didn’t follow conventional street and urban patterns. Today, the term refers to all urban spaces that emerge as seemingly useless by-products of the plans of architects and city planners. Spaces that are considered too small, too weird or too unsuited to be useful by conventional standards.
Thirty years ago, a group of skateboarders in Portland discovered one such SLOAP. A large concrete area under a freeway. It was deemed unsuitable for infrastructure, filled with litter, and served mainly as a shelter for homeless people.
But where infrastructure planners saw useless space, these skateboarders saw something different. They saw a potential skatepark, with concrete flooring and a roof providing cover for the rain. Armed with shovels, concrete, and DIY enthusiasm, they built their own skatepark without asking anyone for permission.
Today, the Burnside Skatepark is known to skateboarders worldwide, and have inspired similar parks to be built in SLOAP spaces under freeways globally. Increasingly often with municipal blessing.
It’s easy to shrug off SLOAPs as useless, but the skateboarders of Portland are only one of many who have demonstrated that they may have value hidden in plain sight.
The infill architecture movement builds creative homes in small, weird lots squeezed between existing buildings that have been deemed unsuitable by conventional building standards. Old train tracks have become public parks, run-down factories transformed into galleries and start-up incubators, and idle rooftops transformed into urban farms, basketball courts or solar panels.
While all these examples are nice, the more interesting question is whether similar dynamics also play out with SLOAPs in the market space? Are there potential value hidden in plain sight there too?
SLOAPs in the competitive space
Much can be said about strategy, but its essence is to make decisions that help a firm distinguish itself from its competitors. They choose to do something, and not to do something else.
A key reason why firms cannot just do everything is because many of the choices they face will have trade-offs between them. Trade-offs exist when different choices are incompatible with each other, because they pull in different directions. Becoming better at something, simultaneously makes you worse at something else.
Trade-offs can emerge from both the demand and supply side. On the demand side, trade-offs arise when customer perceptions make it impossible to serve two different segments with the same offering - even if the activities and resources needed to produce the offering are similar. On the supply-side, trade-offs arise when the activities or resources needed to compete in different positions are fundamentally incompatible.
To avoid falling prey to bad trade-offs, firms focus their strategies. When they do, they implicitly create market space left over after their strategic planning. And just as in the urban spaces, these left-over positions often appear unattractive because of the mentioned trade-offs.
In strategy, we often call such positions “stuck in the middle” positions. Positions whereby firms trying to be good at too much, become good at nothing. Positions every strategy book would advise you to shy away from.
The more counterintuitive point is, however, that just as urban SLOAPs can hold hidden value, SLOAP positions in the market space might also hide attractive opportunities just waiting to be unlocked. This becomes possible when the trade-offs that formed the conventional positions are based on assumptions that can be challenged or made irrelevant with creative strategies.
A telling example is the story of Nespresso. Forty years ago, the market for coffee had at least three distinct positions. You had instant coffee for convenience, filter coffee for quality at home, and cafes and coffee shops for high quality espresso-based coffee. The space between them seemed like a classic “stuck in the middle” position.
But Nestlé saw opportunity where others saw nothing. They challenged the assumptions that the perfect cup of espresso couldn’t be made in an affordable way at home. Their first Nespresso capsule espresso machine was launched in 1986, and with that they started building a new position for affordable, high quality espresso in your own house.
The Nespresso example demonstrate that SLOAPs also in the market space may have hidden value waiting to be unlocked with creative strategies. The natural next question then becomes one of value capture: Once value is created, how can one prevent established companies in the adjacent positions to also jump on the opportunity?
Why competitive SLOAPs are naturally protected
The answer is both elegant and counterintuitive because the same trade-offs that created a SLOAP in the first place may actually contribute to shield the position from competition by established actors later.
The skateboarders that created the Burnside skatepark were never worried that city planners would find interest in building skateparks. And the infill property developers know that much of the knowledge, competence, and activities needed to build smart architecture in weird lots, is a poor match with what it takes to build conventional buildings. Essentially making conventional developers unable to effectively compete in the infill position without making large changes in how they already prioritize and operate.
The same dynamics will also play out in the competitive space. The original trade-offs create natural barriers for the incumbents in the nearby positions. If they try to compete in the SLOAP, they will be worse at their established position. The makers of high-end espresso machines for cafes couldn’t easily attack Nespresso’s position without doing harm to their existing strategies.
So just because one company has found a way to create value out of a SLOAP position by circumventing or making established trade-offs irrelevant for them, doesn’t mean that the same trade-offs don’t bind the incumbents in nearby positions.
This creates a beautiful paradox: the assumptions and trade-offs that make a competitive position look unattractive to established players may also be the very things that later on protect newcomers who figure out how to occupy that space.
Finding value in between
SLOAPs are thus potentially valuable positions hidden in plain sight, where incumbents in adjacent positions will struggle to challenge newcomers. This leads us to the practical challenge: how can we find them?
The short answer is that you need to know what you are looking for, you need to actively look, and you need to do something creative with what you find.
Just as you can train yourself to notice urban SLOAPs by actively looking for them, you can develop the ability to spot competitive SLOAPs by systematically questioning the trade-offs that created existing market positions.
Start by mapping your competitive landscape: What are the established positions today? What are the key trade-offs that created these positions? Are there imaginable market spaces left between the established positions?
From here, we can actively question the assumptions that underlie the identified trade-offs: Can the trade-offs be circumvented or made irrelevant?
This type of analysis might seem abstract, but remember the Burnside skatepark. That useless SLOAP beneath the freeway wasn't obvious unless you knew what to look for and could see the world differently from the incumbents.
The same holds true for competitive SLOAPs: The potential value of a stuck-in-the-middle position cannot be properly assessed if evaluated on conventional standards. Instead, we must actively reject the assumption that a SLOAP is useless, and think creatively about alternative ways to occupy it.
While we easily start to notice urban SLOAPs if we actively look for them, identifying SLOAPs in the market space is arguably harder as we can’t just use our eyes. But being hard to find is also what makes competitive SLOAPs potentially attractive. They aren't obvious. After all, conventional strategic planning has implicitly deemed them useless.
Wrap up
Even though SLOAP positions might hold hidden value, most won’t. Just as every SLOAP in the urban landscape cannot become a skatepark or an architectural innovation. But for those that do, the very trade-offs that made them unattractive to conventional players might become the moat that protects your position.
What makes this particularly exciting is the scale potential.
Urban SLOAPs are naturally constrained by physical space. A few square meters here, a small lot there, and a weird angled space over there. Even the most creative use of an underpass or rooftop is limited by physical constraints.
Competitive SLOAPs, on the other hand, are not necessarily constrained by the physical world, and can in principle hide potential value at any scale. It can even lay the foundation for entirely new market categories, like Nestle did with Nespresso.
And that is exciting.
So the next time you look at your market’s competitive landscape, try to notice the spaces between established positions. They might just be classic stuck-in-the-middle positions with bad trade-offs. But they could also potentially be something more.
Because sometimes, the most interesting opportunities lie in the spaces others have left over after planning.