From Bust to Boom: A Town Reinvented

Leavenworth, WA. It was once a bustling town on the eastern side of the cascade mountains. Then it went bust, and lost relevance. But the town rallied, a plan was made, the locals executed, and now it’s a booming community once more.

What a great example of stretching… starting with Inspiration to initiate change… followed by a Strategy to be executed… and ultimately leading to a model of Success.

Before the Bust
Leavenworth boasts of the proud heritage of the Native American Yakima, Chinook, and Wenatchi tribes, who hunted for deer and elk, and who fished for salmon along the Icicle River. Eventually, the area was settled by gold miners, fur trappers, and pioneers. However, when the Great Northern Railway laid its tracks by Leavenworth in the late 1800s, and the town became a divisional hub in 1893, Leavenworth was soon bustling with opportunity. Rail workers arrived and made Leavenworth their home. A dam was constructed nearby, to provide power for locomotives to travel through the tunnels of the Cascade Mountains. The Lamb-Davis Lumber Company was incorporated and established along the banks of the nearby Wenatchee River. A sawmill was built, and logs were floated down to the millpond for processing. A hugely successful fruit industry was launched along Icicle River and the neighboring valley. Ultimately, the influx of jobs led to a population boom in Leavenworth, reaching around 1,000 in the year 1906, the year that Leavenworth was incorporated.

Heavy winter storms, snowslides, and avalanches hit the Great Northern Railroad’s section through the Cascades. In 1910, one of the worst blizzards in the Cascades’ history led to the Great Northern Railroad’s decision to reroute the railroad tracks away from Leavenworth to a less hazardous stretch. As a result, the divisional hub was moved further east to Wenatchee. Then the sawmill closed in 1926. Businesses collapsed, the local economy suffered, the high school was condemned, and what had once been a thriving community became a desperate and desolate mountain town. Busted.

Two men from the community, Ted Price and Bob Rodgers, are credited with initiating a change that would alter the future of Leavenworth. They bought a Cafe in 1960, remodeled it with a Swiss-Bavarian theme, and named it the Squirrel Tree. With the beautiful mountains as its backdrop, the alpine-themed restaurant became a hit, and it sparked a movement.

The townspeople came together, and in 1962 they formed L.I.F.E., Leavenworth Improvement For Everyone. Various community committees were spun up, and in 1964, it was decided to update the entire town to reflect an alpine Bavarian theme. Price and Rodgers organized a trip down to Solvang, a Danish-themed town in California, which served as an inspiration for Leavenworth’s transformation. Once the remodeling was underway, the marketing efforts to bring in tourists kicked in, including the establishment of various seasonal festivals.

Today Leavenworth is a known tourist spot in the Pacific Northwest, and with over 2 million visitors each year, it is clear that the strategy initiated over half a century ago has led to long-term success. The Autumn Leaf Festival, Oktoberfest, Maifest, and the very popular Christmas Lighting Festival are just some of the main events that draw crowds every year. Affirmation of Leavenworth’s success include that it was cited in Time magazine as one of the Top 10 Places to Find Holiday Cheer, and that it was listed by The Lonely Planet as one of the Five great German towns in the USA.

A Recent Visit
After hearing from many friends of the fun that they had at Leavenworth, I recently took my family out for a long weekend to experience Leavenworth first-hand. We had a great time, and can now attest ourselves to the town’s hospitality, charm, and tourist appeal. There’s something for everyone at Leavenworth, and in our case, the fond memories include laid-back fireside dining at the Munchen Haus, ice cream cones, salt water taffy, miniature golf, a walk along the waterfront, play time at Smallwood’s Harvest farm, and an engaging visit to the bookstore, A Book For All Seasons, where we picked up Leavenworth (Images of America Series).

A Remarkable Story
The history of Leavenworth is fascinating, and as a California native who has biked through Solvang, the so-called ‘Danish capital of America’, it’s been interesting to learn about the connection between the two cities. The determination of the local Leavenworth community to put itself back on the map after going bust, and it’s ability to deliver on a creative and ambitious strategy to reinvent itself as an authentic Bavarian village is inspiring. It took great personal and financial risk on the part of the townspeople and business owners, and what was achieved is remarkable.

A Visual History
The historical pictures included in Leavenworth provide a poignant visual accompaniment to the story of a town that has gone through so much change in the past 150 years. The imagery of Native Americans, prospectors in front of their log cabins, and miners at the mine, are a reminder of days long gone by. Then the depiction of the railroad, the locomotives, the sawmill, and all of the business development that accompanied the period of early growth serve to highlight the major cultural and economic transitions that took place. Later, the impact of the L.I.F.E. program on the community, and the remodeling of buildings after the Bavarian theme, demonstrate not only the commitment and hard work that was involved during a difficult phase in Leavenworth’s history, but also the pride in the transformation that would lead to a new town identity.

The Next Chapter
I wonder what the future has in store for Leavenworth. I worry about the footprint of more than 2 million visitors each year, passing through a small town of barely 2,000 people. How long can Leavenworth support the increasing level of traffic? What is the impact on the local population, and on the environment? At what point does it become too much, and what will the town do to handle the burden of its own success? Perhaps the town is already being stretched to find new solutions, and maybe there are current challenges that require new sources of inspiration, new strategies, and new paths to success.


The Strategy Paradox

I remember the day my father came home, proudly, with a Betamax videotape player and a movie: Bedtime for Bonzo, starring Ronald Reagan and Bonzo the chimpanzee. Our very first home movie night via videotape ushered in a new era, in which we controlled what we watched.

Move aside TV Guide.

At the time, neighborhood video rental stores were popping up everywhere, and the nearest one to our house was but a short bike ride away. The convenience and affordability of selecting movies and watching them from the comfort of our own home was a new luxury. We could now select the right content (our movie picks), via the right channel (videotape cassette), and watch at the right time (whenever we wanted). That was “On Demand”, ‘80s and ‘90s style…

Be kind, rewind.

I recall vividly that video stores initially offered a wide selection of both Betamax and VHS videotapes. But at some point the balance started to shift, and the Betamax sections of neighborhood stores started to shrink, while the VHS sections grew. Eventually we were relegated to picking movies from just a single aisle, and then from just a couple sad shelves, at which point it became abundantly clear that we had placed our consumer bet on the wrong horse in the race to videotape market dominance.

What happened to Betamax? What led to its rapid surrender of market share to its VHS competition? Was the utter collapse of Betamax the result of an ill-conceived business strategy? Poor execution? Sub-par product? Misunderstanding of its customers?

In The Strategy Paradox: Why committing to success leads to failure (and what to do about it), Michael E. Raynor suggests that Sony’s Betamax suffered from the Strategy Paradox, whereby “strategies with the greatest possibility of success also have the greatest possibility of failure”. Raynor argues that Sony made reasonable commitments in a campaign built for market dominance, in which Betamax was a great product designed to provide customers with the best home movie experiences.

Sony made a strategic bet on product differentiation, by focusing on the optimization of high-fidelity picture and sound quality, at the expense of manufacturing. Matsushita’s VHS, on the other hand, pursued a cost leadership strategy, by offering a cheaper product that was easier to manufacture, and therefore to license.

Sony and Matsushita each hedged their bets on their strategic value propositions, for which there were many trade-offs. For example, with its larger cassettes and slower tape speeds, Matsushita’s VHS offered two-hour recording capability, while Sony’s Betamax tapes were just shy of the two-hour mark, which meant that they couldn’t be used to record two hour broadcast television movie specials.

The Strategy Paradox dissects the Betamax / VHS history in great detail, and also explores many other interesting technological developments, including the transitions from LPs, cassettes, and CDs, to digital media. Further case studies break down the competitive strategies employed by companies such as Microsoft, Johnson & Johnson, and the telecommunications industry.

Ultimately, Raynor lays out a framework that companies can apply to successfully navigate the unpredictable future. He suggests that strategic uncertainty should be managed by hedging bets on possible futures, in order to be best prepared for the unknown yet to come.

Back in the day when I rode my bike to the local neighborhood video store to pick up a movie rental, I was keenly aware of the shifts in product selection as a consumer. But I was oblivious to the cutthroat competition that was taking place between Betamax and VHS. There are many lessons to be learned here, with respect to product differentiation and company strategy, and if you’re curious to dig deeper into these questions, challenges, and mitigating solutions, I recommend checking out The Strategy Paradox.