By Stephen C. Harper
Executive summaryIf the markets you are in are not that promising in the next few years or if your company is not positioned to develop significant and sustainable competitive advantages, then your company’s future is in doubt. Creating the future involves embracing the prelude to Star Trek. Your corporation must be prepared to boldly go where it and possibly no other company has gone before. Creating the future involves seeing what others do not see, thinking thoughts others do not think, and doing what others have not done. In some cases, it involves more than just developing innovative products and services. It may involve developing new product or service platforms.
<Some of the material in this article originally appeared in The Ever-Evolving Enterprise: Guidelines for Creating Your Company's Future by Stephen C. Harper. Reproduced with permission of ABC-CLIO, Santa Barbara, Calif., © 2011.>
There is a story about two sculptors who were given large blocks of marble to create works of art to be placed in a wealthy person’s garden. The first sculptor did not take out his hammer and chisel right away. Instead, he walked around the block studying the veins in the marble. When the sponsor asked the sculptor why he was taking so much time studying the block, he responded, “The object is already in the block. I just have to find it and let it out by chiseling away the nonessential pieces.” The second sculptor took a completely different approach. He walked right up to the block and started cutting away sections of the block with a high-speed pneumatic chisel. When the sponsor asked why he did not spend the amount of time studying the veins in the marble, the sculptor exclaimed, “I am the one who determines what the object will be!”
There are some interesting parallels between how the sculptors approached their challenge and how companies approach the future. Many operate like the first sculptor. They study the market and try to find opportunities to pursue. Other companies operate like the second sculptor. They position themselves to create opportunities by being bold and innovative. As Alan Kay, who was a fellow at Apple Computer noted, “The best way to create the future is to invent it.” Ironically, neither sculptor will get referrals if the sponsor is not delighted with the sculptures.
Which is the most appropriate strategy for executives who want to lead their firms into the future? The answer may be a hybrid of both strategies. For your company to succeed in the years ahead, it will need to be customer-centric and innovative. Companies usually can be classified by whether they use a market-pull or a sales-push strategy. Corporations with a market-pull strategy do not start with innovation. Instead, they look for people or institutions that are in search of a business that can develop innovative solutions to problems. Other corporations use the “If we build it, they will come” business strategy. They develop innovative products and/or services and then send their sales teams out to find customers. Proctor and Gamble has been very effective in identifying and solving customer problems. 3M has been very effective in developing innovative products and then finding customers.
Many firms pride themselves on being innovative. Yet being innovative is only of value if customers value the innovation and are willing to pay for it. Engineers are notorious for wanting to make products with all sorts of features. Yet there is a difference between features and benefits. Features are like accessories. Some appeal to the customer, and some may be considered irrelevant to the customer. Benefits, however, are valued by the customer to the point that the customer will pay for them. Too many products are over-engineered. They are too sophisticated or too complicated for the customer. The number of features also increases the likelihood of breakdown, which reduces customer satisfaction, loyalty, repeat purchases and referrals. It also adds to the product’s costs.
Nintendo’s Wii is an excellent example of what happens when an innovative firm probes the market and tries to identify sources of frustration. It found that many people who had tried their competitors’ gaming systems considered them to be too complicated or that their hands were too uncoordinated to play the games. Nintendo also found numerous people were “non-customers” because of what they heard from frustrated consumers. Nintendo challenged its designers to come up with a system that minimized the need for manual dexterity and hours (or in some cases days) of learning. Wii’s game-changing simplicity enabled people of all ages to operate the system right out of the box. Even though Wii was an overnight success, it took years before Microsoft could come up with a system to challenge the Wii.
There is a story about two managers supervising teams of workers who are cutting their way through a forest. While one manager is busy measuring the group’s progress, the other manager climbs a tree and yells down, “We’re in the wrong forest!” Your company cannot be successful in the years ahead if it is not in the right market(s) with the right products and services with the right systems, people and resources.
Tony Hsieh, an investor in Zappos who then became CEO of Zappos, noted that positioning your business is like playing poker. He wrote in his book Delivering Happiness that if you want to increase your odds of winning, you need to make sure you are sitting at the “right table.” He also noted that you need to have the right strategy for the players at the table and recognize when you should change tables.
Peter Drucker coined the term “strategic planning gap” to reflect the gap between where the corporation wants to be at some point in the future (its vision) and where it will be if it does not change what it is doing. A key ingredient in creating your company’s future involves recognizing whether the path your firm is on is the right path and if is moving quick enough to get to its targeted destination. The sooner you realize you cannot continue what you are doing, the sooner you can get on the right path and accelerate your company’s efforts.
The moral to this story is that if the markets you are in are not that promising in the next few years or if your corporation is not positioned or will not be able to develop significant and sustainable competitive advantages, then you have four options: (1) find a market space that offers more lucrative and lasting opportunities, (2) find a way to develop significant and sustainable advantages where you are, (3) find a situation where you can do both, or (4) find a way you can sell your business or liquidate its assets while you can still get something for a company that is destined to be worth little or nothing. Drucker suggested that companies do a reality check by asking a very probing question. To paraphrase Drucker, "If you were not in the business you are in today, would you get into this business?" If the answer is “no,” then the next question is, "How can I get out of the business – fast?" Drucker also observed that if you stay in any business long enough you will go out of business.
Creating your company’s future recognizes that one’s time horizon affects the extent you can make changes. Economists have an interesting way of differentiating short term, medium term and the long term. In the short term, all you can do is make the best of what you have at your disposal. It’s like playing cards. In the short term, you cannot ask for a new set of cards; you have to do your best with the cards you are dealt. In business that means getting the most from your current products, services, processes, people and so forth. In the medium term, you are able to make moderate changes. In the medium term, businesses may improve their products, develop their people’s talents, enter adjacent markets and modify various processes.
The true value of the economists’ differentiation is how they define the long-term. In the long term, everything can be changed. In business, that means you can explore and exploit emerging markets, develop killer apps and transform almost everything else. In the long term anything is possible. The late C.K. Prahalad made an interesting observation about how executives should look at the future. He noted in a column in Harvard Business Review that “Executives are not constrained by resources but by their imagination.”
Although executives may say they think about the future, the evidence indicates otherwise. A few years ago, Prahalad and his co-author, Gary Hamel of Competing for the Future, studied the extent senior executives actually think about the future. They found that on the average, senior management is devoting less than 2.4 percent of its time to building a collective view of their company as a whole for what markets the firm should serve, what technologies it should master, which customers to tailor its products and services to, and how to get the most from its employees. Their research raises the question, “If the top executives of some of the top companies are not focusing on their company's future, then who is?”
Someone once defined luck as what happens when preparation meets opportunity. That isn’t luck; it is visionary leadership. Visionary leadership uses anticipatory management to sense opportunities and proactive management practices to seize them. Anticipatory management is based on the approach Wayne Gretzky used that made him a great hockey player. When he was asked how he scored so many goals, he noted that most players play the puck where it is; he skated to where the puck would be. His ability to position himself to seize the opportunity and his ability to execute the appropriate actions to beat the goalie contributed to his success.
Proactive management plays a critical role in creating your company’s future. Creating your company’s future involves offensive and defensive dimensions. The defensive dimension involves making sure your firm does not fall prey to one version of Murphy’s law, “If something can go wrong, it will – and at the least opportune moment.” This includes doing an extensive vulnerability analysis to identify, prevent or at least minimize setbacks. It also involves making deliberate and timely efforts to stop the bleeding caused by miscues and missteps that sap the corporation’s energy, resources and morale. Even if your company’s defensive efforts are successful in preventing, reducing or minimizing the setback, your firm will not be in a position to excel. A medical analogy illustrates the point. The absence of illness is not the same as being healthy. It is like having the right weight. That does not mean that your cardiovascular system is capable of doing a marathon or even a sprint. It does not mean you have the mental dexterity and sharpness needed to find out what you truly are capable of doing.
In most sports having a good defense keeps you in the game, but it usually takes a good offense to outscore your competition. That also applies to business. The offensive dimension in creating your company’s future encompasses the “Three I’s” of strategic management. The first “I” involves making strategic “inquiries.” The inquiries often lead to strategic “insights,” which may identify strategic “initiatives” that will give your company a decided competitive edge. In terms of strengths, weaknesses, opportunities and threats (SWOT), you reduce your company’s vulnerability to competitive threats by reducing or eliminating your competitive weaknesses. SWOT analysis also stresses the offensive dimension by stressing the need for companies to develop strengths that enable them to capitalize on current and emerging market opportunities.
Albert Einstein noted, “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” New realities call for a new breed of leaders. Jack Welch noted that revolutions start with ideas. Breakthrough thinking involves seeing what others do not see, thinking thoughts others do not think, and doing what others have not done.
Breakthrough thinking requires having contempt for the status quo. Breakthrough thinking involves constantly looking for better ways to do things and better things to do. Breakthrough thinking involves challenging conventional wisdom, prevailing assumptions and mental models. It also involves having the courage to share your “outside the box” thinking. Can you imagine how the idea of building a horse on wheels and filling it with soldiers went over with the military strategists whose conventional strategies had failed in their efforts to storm the walls of Troy? Can you imagine how the idea of launching B-25 bombers from an aircraft carrier to do a surprise attack on Japan in World War II was received?
The bar is being raised every day. Customers expect more for their money. They expect products and services to be quicker, better, less expensive and be provided in a more convenient manner. In short, they want it their way, not your way. The ability of customers to access your competitors’ offerings by just pushing a few keys means your corporation cannot take them for granted.
Your company has to be better than your competitors, and to be better it has to be different on the things customers value and are willing to pay for. This is why “value-added” innovation is so critical today. If your firm is not markedly better, then it is irrelevant. Innovation applies not just to products, services and processes. It also can apply to business models. Numerous businesses were blown out of the market by companies that provided revolutionary approaches to improving their customers’ lives in B to C markets and enhancing their customers’ profitability in B to B markets. Companies like Amazon, Southwest Airlines, Netflix and Dell computers changed the way the competitive game was played in their corresponding markets by offering customer-centric products and services at an unparalleled level of selection, information, cost, convenience and/or customization
Your company’s strategy must be designed to generate a targeted level of profit by creating sustainable competitive advantages that create and maintain customers. Creating your corporation’s future involves embracing the prelude to Star Trek. Your business must be prepared to boldly go where your business and possibly no other business has gone before. Breakthrough strategies involve more than just developing innovative products and services; they may involve developing new product/service platforms. Apple demonstrated the value of developing new platforms when it moved into music, phones and other innovative electronic devices with eye-catching designs and user-friendly interfaces.
Numerous companies have demonstrated the value of breaking away from the crowd. Netflix initially provided an alternative to retail video stores by using the postal service. Its recent move into streaming video at a very economical rate demonstrated that the market is a constantly moving target. Netflix recognized that what worked well yesterday will not work as well today and may be obsolete tomorrow.
General Motors developed OnStar because it recognized that people wanted to have more than a car; they wanted a system that provides peace of mind. Starbucks recognized people wanted a coffee “experience” that would provide them with a “third place” when they were not at home or at work. Facebook recognized that in an impersonal world people want a way to connect with others. Skype provided a means for people to communicate face-to-face all over the world for a nominal cost. YouTube provided a vehicle for showing videos. The founders of Zappos recognized that the retail shoe industry had not tapped the power of the Internet. Conventional wisdom thought people had to try on shoes before they would buy them. Zappos took the risk of buying a pair of shoes out of the purchase equation by providing a one-year return policy and free shipping, including return shipping.
If you want to develop a breakthrough strategy, then try to identify ways to make your competition irrelevant. You will not do it if you try to match the industry’s best practices. You will not do that if you focus exclusively on your current customers and your current competitors. You need to be focusing on who you want your future customers to be and who may be your future competitors. Breakthrough strategies in most cases cannot be linear and incremental extensions of what most businesses are doing. The strategy time horizon matrix in Figure 1 profiles four different strategies.
Breakthrough strategies will not produce exceptional results unless they are accompanied by numerous other dimensions. The following list is not exhaustive, but it profiles key components.
Cutting expenses to the bone and doing all sorts of financial gymnastics are not strategies for creating your company’s future. You will not create your company’s future by complaining about the economy, competition and government regulations. You do not create your company’s future by waiting for things to get better – by waiting for the rising tide that raises all ships. You do it by driving a stake in the ground now by dropping the things that should not be done, by reducing the things that need to be reduced, by increasing what should be increased, and launching the initiatives that will create your company’s future. Click here to take the Creating Your Company’s Future quiz to learn if your business is positioned to be an ever-evolving enterprise.