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Be the Threat

by Robert W. Bradford, President/CEO

Do you feel your company is threatened by changes that are happening in your industry right now or could be in the near future?  This can be a bad thing – but you might be able to turn the threat into an opportunity, as well.

To begin, threats can exist for many reasons, but the most strategic threats occur because something in your value stream is undergoing a fundamental change.  The best examples, in recent years, have been changes brought about by technology, such as the impact of online travel websites on the travel agency business, or the impact of the cell phone on landline phone business.  Fundamental changes do not always have to be caused by technological change, though.  It’s possible for a shift in regulation or business practices to dramatically change an industry, as well.

One important factor to remember when you are threatened by such changes is that the changes will only occur because someone wants something to happen differently.  It may not be your company, or your competitors who want to see change, but strategic changes, as a general rule, tend to happen because a customer or supplier group either chooses to meet their needs in a different way or – in the case of regulation – are required to meet their needs in a different way.  Thus, fuel-efficiency standards, which drove a greater use of plastic in automotive trim, led to changes in demand for chrome plating in auto manufacturing.

Almost always, these changes will seem to be something to avoid, because the way you have done business in the past won’t work in the changed market.  People who used to sell pay phone equipment, for example, find a greatly diminished market for their products because consumer cell phone use has dramatically reduced demand for the product.  People who sell paper accounting forms find that the use of electronic tax filing has also diminished product demand.  One of the most important lessons to learn from the experience of companies that faced this kind of threat in the past is that you cannot prevent the threat from happening, nor can you control the rate of change that comes with the threat.

In some cases, such as the tax form industry, the inevitability of the threat means you must find ways to adapt to the new world in which your product is less in demand.  Many companies would react to such a threat by downsizing, but the strategy of becoming the threat calls for you to ask a fundamental question:  Is my company’s strategic competency limited to the current, threatened product (or service), or is there a competency that can jump from the old product to the newer, threatening product.  Using this strategy, the tax form manufacturer would get into the business of writing tax software, and, as another example, a DVD video rental company would move into the business of renting movies online.

Obviously, this possibility isn’t always viable.  The pay phone manufacturer, for example, may find difficulty gaining the manufacturing expertise to make cell phones, and a company that makes great internal combustion engines might not excel at making motors for electric vehicles.  This can happen because the strategic competency which made your company successful is very closely tied to the old technology or practice which is being displaced.  In such cases, the strategy of being the threat is a poor choice, and you should instead look for applications of your relevant strategic competencies to less threatened markets (for example, the pay phone manufacturer, being adept at making sturdy and secure telecommunications equipment, might make airport check-in kiosks or automated teller machines).

For many of us, however, the threat is not a fundamental threat to the existence of our company – it is simply a threat to the way we used to do business.  Markets that are being transformed by such threats are fertile hunting grounds for upstart companies that are not married to the old way of doing business.  It is not unusual to see a Netflix rising over the ashes of the videocassette/DVD rental market, for example.

How can we assess (a) whether our company can be the threat and (b) how to make this happen?  The key to both of these questions lies in our strategic competency.  The main way that your company distinguishes itself in creating value for customers is the thing that will determine whether your company will be a nimble survivor or a has-been that should have jumped to a new market or product.  To assess this, pay careful attention to the adaptability of your competency to the new world presented by the threat.  If your competency is not too closely tied to the old way in your market, you can probably be successful in jumping from the old world into the new.  If the competency is closely tied – your strategic planning should steer you towards new uses for your competency, rather than struggling to apply your competency to a dwindling market.

So, let’s say you have a strategic competency that will enable you to create value in the new world created by a strategic threat.  How do you make your company into the threat?  Here are a few ideas from companies I have seen successfully make this jump:

  1. Don’t delay getting any missing capabilities or technologies – acquire them if you have to.
  2. Closely examine your company culture and push hard on adjustments that will drive your employees to embrace the new world.
  3. Pay careful attention to compensation and other practices that may create incentives or disincentives to change.
  4. Understand that some key employees will have difficulty making the change – and be willing to re-train them and even let go of them if they will become a drag on your agility.
  5. Remember that the rules of the game may be changing fundamentally, and closely examine how you may need to change your strategic thinking to succeed in a dramatically changed market.

While these aren’t the only ways to assure success at becoming the threat and surviving a shrinking market, they are the most common ways of fostering revolutionary innovation that will confound your competitors and – hopefully – delight your customers.  Of course, a good strategic planning process will help your thinking in this immensely, and could possibly lead to the innovation that makes your company king of the hill in your evolved markets.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

© Copyright 2011 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.