In the world of strategic planning, it’s easy to get swept up in the latest technological wave. AI, in particular, often promises a silver bullet for efficiency and cost savings. But a recent story from Ford offers a powerful, pragmatic lesson for mid-market business leaders: sometimes, the best solution isn’t the newest one.
Ford, a company synonymous with manufacturing innovation, recently found its advanced AI quality control systems falling short. Despite the promise of automation, these systems weren’t delivering the expected results, leading to ongoing costs like warranty coverage and recalls. Their solution? They rehired 350 experienced human engineers – the “gray beards” – to not only oversee operations but also to train younger staff and, critically, to train the AI tools themselves. This move is already saving them hundreds of millions of dollars.
So, what does this mean for your mid-market business?
The ‘So What?’ for Mid-Market Leaders
For businesses with limited resources, a misstep in technology adoption can be incredibly costly. Ford’s experience highlights several crucial strategic considerations:
AI is a Tool, Not a Replacement: The Ford story underscores that AI, while powerful, is most effective when it augments human capabilities, rather than attempting to replace them entirely. For complex tasks requiring nuance, judgment, or adaptation, human expertise remains paramount.
Value Your “Gray Beards”: Experienced employees possess invaluable institutional knowledge and tacit skills that are difficult, if not impossible, to codify into an AI system. Strategic planning must include how to retain, leverage, and transfer this knowledge. Don’t let valuable human capital walk out the door in pursuit of unproven automation.
Strategic AI Adoption Requires Pragmatism: Before investing heavily in AI, mid-market companies must conduct rigorous pilots. Define clear, measurable objectives. What specific problem are you solving? Is AI truly the most efficient and effective solution, or can human ingenuity, perhaps supported by simpler tech, do it better or more cost-effectively?
Resource Constraints Demand Caution: Unlike a giant like Ford, mid-market businesses typically cannot absorb “hundreds of millions of dollars” in AI-related failures. This makes careful planning, phased implementation, and a strong focus on ROI even more critical. Prioritize solutions that have a clear, demonstrable impact on your operational reality without excessive risk.
The Human Element in Training: Ford’s rehires aren’t just doing the work; they’re training the next generation and the AI. This highlights the critical role of human trainers in making any new technology truly effective. Your strategic plan for technology integration must include a robust human-led training component.
Actionable Takeaways for Your Strategy
Don’t let the siren song of AI lead you astray. Here’s how to apply Ford’s lesson to your strategic planning:
Realistic Assessment: Before any major tech investment, clearly define the problem and realistically assess if AI is the best, most cost-effective solution.
Pilot Programs: Always start with small, controlled pilot programs. Measure results rigorously against predefined KPIs before scaling.
Hybrid Models: Explore how AI can enhance your human workforce, rather than aiming for full automation, especially in critical quality control or customer-facing roles.
Invest in Experience: Actively engage and empower your experienced employees. Their wisdom is a strategic asset for training both new hires and new technologies.
Total Cost of Ownership: Factor in not just the purchase price of AI, but also implementation, integration, training, potential failure costs, and the ongoing need for human oversight and intervention.
Ford’s journey reminds us that in strategic planning, balancing innovation with practical reality, and valuing human expertise, often leads to the most sustainable and profitable outcomes. Don’t just chase the future; build it intelligently, with a clear understanding of what truly drives value for your business.
I spend a lot of time around motivational speakers. These people tend to be very positive, and always talk about how we should transcend our limits. This is a useful way of thinking, but the word “limit” can also mean something very real that should NOT be passed.
When you think of the limits your business has, both types probably come to mind. Your business has limits that should be smashed through so you can go to the next level. There may also be limits which simply need to be understood so you can adapt to them and – possibly – use them to increase your profitability.
The first type of limit is easy to spot. I saw it recently in a company where certain activities had
slowed down to a near standstill because of bureaucratic paperwork. In key strategic areas, the company simply was not moving forward because every step required three or four times as much effort as it was worth. The key to spotting this issue is to watch for this type of statement: “If we didn’t have to wait for requisition approval, we could have gotten this done a year ago.” The phrase “if we didn’t” often carries the key concept – WE are slowing ourselves down, so this is a self-imposed limit.
The second type of limit is almost always systemic in nature. To give a simple example, if you put a pair of fruit flies in a jar with a banana, there will shortly be many more fruit flies. Wait a little longer, and the number of fruit flies will double…and so on. The jar, however, will never become completely packed with fruit flies because there is a real limit on the number of fruit flies that can grow this way. In this case, the limit is the food source – the weight of the fruit flies in the jar can’t exceed the weight of the banana, because all of the creatures in the jar grow from that food source (and use some of it up as energy).
How does this relate to your business? Quite simply – in many, many ways. Businesses use up all kinds of resources – suppliers, employees, raw materials, customers. While some of these can grow over time (markets, for example), all of them will impose a limit on how much business you can do at any point. If you sell cell phone parts, it is unlikely that you can sell a number of parts exceeding the human population of your markets. That is a limit, and if your company is very successful, you might approach such a limit someday.
How does understanding limits help us in strategic thinking? There are endless ways, but here are five critical ideas that you may want to apply:
Look for the self-imposed limits in your business and remove them
Find the hard external limits and look for ways around them
Unavoidable hard external limits will define the nature of competition
Understand how system dynamics may change your limits over time
Hard limits often cause cyclical fluctuations – anticipate these
Each of these ideas can be the basis for major undertakings in your business which will have incredible results. If you are interested in any of these, please comment and I’ll cover it in more detail in my next article. If you are interested in learning more about strategic thinking please listen to my webinar by clicking here.
One of the most useful tools for good strategy analysis is systems thinking. Some people think this means you have to treat your business like a computer program, but really it’s simply a way to think through all of the connections that affect your business and how it both operates and competes in the marketplace. It doesn’t hurt to understand computers, but systems thinking can be used by anyone.
The basic concept of systems thinking is that we can understand complicated systems by learning how the pieces of the system connect to each other and change the behavior of the system. Let’s use a simple example. If you go to a restaurant, sometimes they may be able to seat you right away and some
Author, Robert Bradford
times you may have to wait for a table. This is the result of a fairly simple system. There is a finite pool of resources – tables – which can be used to convert customers from one state – “waiting for a table” – to a second state, “seated at a table”. If all the tables are empty, this process takes very little time – you speak to the host or hostess and are seated at an empty table. If all of the tables are full, it will take longer, as you wait for the current occupants of a table to finish their meal and leave, and then wait for the server to prepare the table for the next set of guests.
So what determines whether you have to wait for a table? There are several variables and processes that will affect this system. First, the number of tables is important. If you have a thousand tables, it will take a lot of customers to fill your restaurant, while if you have just two tables, your restaurant will be full as soon as the second customer group arrives. Clearly, the rate at which customers arrive is also important. When customers arrive faster than existing customers can finish their meals, the restaurant will start to fill up. When the restaurant is full, a line for tables will form, and it will increase in length as long as new customers are willing to wait in line. Another key variable is the rate at which customers finish their meals and leave the restaurant. For a restaurant owner, it’s very important for customers to finish and leave quickly during busy periods, because otherwise the restaurant fills up and a line forms. Unfortunately for most restaurant owners, many customers like to sit around after a meal, especially if the restaurant environment is pleasant. Benihana tackled this issue by making the meal a show with a clear beginning and end, which creates the expectation that guests will leave shortly after the chef finishes. This clever approach allows Benihana to turn their tables more quickly, and has generated above average profits for the chain over the years.
It’s clear that a business situation like a restaurant can improve its efficiency and profitability by tuning the processes that fill up the restaurant and create lines for tables. For example, one simple way most restaurants can reduce lines is by raising prices. As a result, it makes sense for a popular restaurant to have a more expensive menu – especially during busy hours. This has two beneficial effects: it reduces the aggravation of waiting for tables for the customer, and it increases the profit of the restaurant. Of course, if all of the customers disappear, it may be that prices have been raised too much, but this, too can be tuned by a smart, attentive manager.
Can you use this type of thinking in your own business? I’ve seen many situations where customers ask a company to do difficult and sometimes expensive services to support customers. If you don’t charge a premium for such services, you will, of course, tend to see an increasing demand for such services. If, on the other hand, you charge for such services, you may put a damper on demand for those services. If a product line, for example, is unprofitable because of expensive customer demands, pricing may be used to bring demand into line with your capacity to serve such customers. At the same time, increased pricing will improve the profitability of sales to those customers who are willing to pay the higher price.
Naturally, we sometimes see a terrible situation where using pricing to manage demand is very difficult, because some competitors may not charge for the same service. In such situations, the behavior of competitors may well drive down profitability for the entire market, and a different set of strategic responses may be in order.
In my next article, I’ll look a little more closely at some kinds of processes that we can think about when using systems thinking to assess our strategy. If you would like to learn more about strategic thinking please listen to my webinar by clicking here.
As you may know from Simplified Strategic Planning, strategy is the course or direction of an enterprise. In business, this revolves around three basic questions:
What do we sell?
To whom do we sell it?
How do we beat – or better yet, avoid – competition?
Strategic thinking is a specific approach to thinking that relates directly to these questions. While there are many different approaches to strategic thinking, here are some that we have seen to be productive in strategic planning:
Systems Thinking
Strategic Planning Expert Robert Bradford
Understanding How People Think
Understanding the Nature of Your Assets
All three of these approaches present some difficulty to most managers because they require a mindset that is distinct from the mindset required for optimal tactical performance – that is, the way managers think about their business on a day-to-day basis.
The first approach, systems thinking, could be the subject of an entire book – or even series of books. It basically involves conceptualizing your organization as a part of a larger system. This is one of the most concrete approaches to what some call “big picture” thinking – seeing your organization as a consumer of inputs and a producer of outputs. In strategic planning, it’s critical to understand that some inputs – such as demand for your product, or price sensitivity – will affect your organization in ways that are beyond your control. It’s also important to recognize that some things you do (investments, training, supplier choices and so on) will have an effect on important inputs. The thing that makes systems thinking difficult for many is the fact that – in a dynamic environment – your outputs will change your inputs, and over a long period of time this effect will have a dramatic impact on the success of your organization.
The second approach, understanding how people think, can be as important as systems thinking. In Simplified Strategic Planning, we devote substantial bandwidth to the concept of specialty/commodity thinking, because it is one of the little-understood concepts, which can make or break an organization. You might see this approach as a version of systems thinking that applies to specific groups in your system (i.e.… customers, suppliers), but it is also important to recognize that organizations and markets as systems are defined by the way the people in those systems think. In other words, the way a group of customers thinks about their willingness to spend money will affect the functioning of the market system of which they are a part.
The third approach to strategic thinking, understanding assets, is one we have been exploring with clients extensively in the past ten years. Again, some of the greatest benefit from good strategic thinking comes from penetrating analysis of one of the least understood facets of this approach, the strategic competency. Unlike other assets, strategic competency clearly appreciates with greater use, meaning that a strategic plan based upon a well-defined strategic competency can yield increasing returns over time.
These are three of the most critical and conceptually difficult facets of strategic thinking we tackle on a daily basis with our clients. How are you using these ideas in your organization? What challenges do you see in their use? If there is anything we might do to help in this area, please contact us. If you are interested in learning more about how to have your employees think more strategically and align their actions with the corporate strategy please click here to listen to our webinar on strategic alignment.
Estimates are, simply put, numerical assumptions. In strategic planning, we must deal with a variety of estimates. Some of these estimates are partially under our control (such as our sales number for the coming year) and some of them are completely out of our control (such as the growth rate in the domestic economy).
In strategic planning exercises, I often notice that participants are troubled by estimates. Some attempt to side-step their discomfort by avoiding the use of estimates, while others make estimates but make mistakes in their treatment in planning.
Those who avoid the use of estimates in strategic planning are pretending they are avoiding error. Nothing could be farther from the truth. The underlying reality of many estimates is critical to proper strategic decision making, and by avoiding their use, one inadvertently commits the error of pretending that no estimates are needed – and that none have been made. This is often covered up by the use of the assumption that nothing will change, or by the use of naïve projection (the assumption that past trends will continue in the future). By pretending that no estimate has been made, the transgressor opens the planning process up to some of the most common causes of assumption errors, which can lead to nasty surprises.
The fear of estimates lies rooted in the fact that we treat numbers differently than other data points. Some fear to quantify assumptions because quantification implies a certain type of accountability, which only adds to the stress felt when making decisions using uncertain information. While this higher level of accountability does exist, to some extent, it is not something to be avoided – especially in a learning organization. Treated properly, numerical assumptions create a greater opportunity to learn and hone one’s predictive skills, which is a very desirable result in strategic planning. When people seek to avoid the accountability of estimates on strategic planning homework, it’s a good idea to point out gently – but firmly – that we will have the estimate requested, but that no one will be punished for making an incorrect prediction.
Another issue noted above is when estimates are treated like facts. Some estimates – notably sales forecasts – are notoriously unreliable, and should be treated with great caution. Just because someone has quantified their assumptions does not mean that the assumptions have taken on greater weight or veracity. What it does mean is that you have the valuable ability to monitor the assumption for correctness and make necessary changes in your plans if the assumption turns out to be inaccurate.
In my experience, one of the greatest tools for managing and using estimates is systems thinking. Simply put, this approach to making assumptions calls for us to formulate a simple (or sometimes not so simple) flowchart of the variables that might cause numbers to change, and use this flowchart to test and often improve upon the numerical assumptions we are using.
How do you make the estimates called for in your strategic planning? Do you notice any of the errors identified in this article? What steps might you take to reduce the likelihood of these errors? To learn how success can sometimes lead to assumption errors please click on success.
Customer preference is the currency that most of us in business seek. But what do we know about customer preferences – and how can we manage them, strategically? Most of us have a real blind spot when it comes to actually thinking like a customer and finding ways to set ourselves apart from the crowd in clearly discernible ways.
For an example, let’s consider how we behave as customers in the hotel industry. When most people choose a hotel, they will do it for one of six reasons:
Convenience (including Location)
Price
Type of lodging
Atmosphere
Service
Habit
That’s it. It’s not that complicated a decision, although having just the right combination of these six factors can be a complicated management challenge. Note that the last item, habit, usually arises because a hotel repeatedly satisfies two or more of the other factors. Also, some factors – such as service and atmosphere – can interact and either intensify the benefit of the other or detract from the other.
The reason that hotels are not all the same is that customers are not all the same. Some customers are far more interested in price than other factors. They routinely buy hotel rooms online, selecting by price, and may come to prefer a chain such as Motel 6 or Red Roof Inns. Other customers may have a strong preference for lodging with certain amenities, or a high level of service. They may tend to spend more time reading hotel reviews and might prefer a chain like Marriott or Wyndham. Top-end customers are willing to spend quite a bit extra to get everything – atmosphere, service, amenities and convenience. For these customers, “service” means more than “good service” – it means the hotel staff goes out of their way to make the guest feel welcome and appreciated.
Naturally, any hotel would like to offer the best of all of these to their guests, but each of these elements requires resources – both time and money. Some hotels try to move “up” a level by putting money into the property, décor, and higher end consumables like soap. These things do make a difference, but for the guest who expects convenience or service, they are not a substitute. Indeed, I have encountered business travelers who absolutely hate an otherwise fine hotel chain simply because the internet service is difficult to use, or because the check-in process takes too long.
A hotel can spend time and money on any of these factors, and many do. There is some efficiency in simply moving up from commodity to specialty strategies for quite a few hotels. The greatest efficiency, however, lies in cultivating habit with repeat customers. Once a specific customer has a hotel experience that fits closely to his or her ideal, the hotel has much lower costs getting that customer to book another room in the future.
The key to doing this in the hotel business – or any other business – is not to push on all fronts at once. No hotel embodies the epitome of all six factors. Rather, successful businesses in any industry are much more likely to find a substantial segment of the market and match, as closely as possible, the preferences of that segment. This is why there are certain clusters of strategy in the hotel industry, with two or three chains setting up properties and operations that look fairly similar to their competitors.
Interestingly, it is unlikely you will see a breakaway success in these clustered groups, because similar strategies tend to drive commodity behavior in the customer. Greater success can usually be found by pushing just a little farther towards one specific type of customer than your two or three closest competitors. If you are willing to endure a little pain and actually give up advantages that draw certain customers in order to appeal to your target customer, you may actually get a lock on that type of customer in the marketplace, and start to build a group of habitual customers. This effect explains the success of brands like Residence Inn, Four Seasons and Holiday Inn Express. Perhaps the best indicator of the success of these strategies is the eventual proliferation of copycat brands – which, of course, may lead to the necessity of pushing your brand even farther into your chosen segment.
The dynamic ebb and flow of customer preference can be a daunting challenge to companies that are used to resting on their laurels. Where is your company in this process? Are you trying to be all things to all customers or are you highly segmented? How will you know when it’s time for a change to that strategy – or when your strategy needs to be fine-tuned? Take the time to look at how your company matches up with your customers’ preferences, and you will likely start to pull ahead of your competitors. To read more about unearthing customer preferences please click here. (https://www.cssp.com/CD0912a/ListeningToCustomersForMarketShareGain/)
Events threaten us strategically for three reasons: They threaten our customers, they threaten displacement of our products or services, or they threaten our competitive position. Each of these types of threats contains an opportunity for innovation hidden within.
One of the most basic threats we face is one that threatens our customers. Simply put, some threats will diminish the customers available to us. In a business-to-business environment, this may be a threat to our customers’ markets. Consumer markets may be threatened by anything that reduces the customers willing to purchase our products or services. An example of diminished customer base would be a decline of alcohol sales due to legal changes or taste. The concurrent reduction in capital and supplies purchases by alcohol manufacturers would be a good example of this type of diminished customer base in a business-to-business arena.
The second type of threat is the threat of displacement. Simply put, this is a change that causes existing customers to meet their needs with an alternate product or service. A good example of this is the replacement of most film photography with digital photography.
The third type of threat is cost-based. Sometimes, outside factors may dramatically change the cost structure of an industry, resulting in diminished supply, higher prices or lower quality. Government regulation of the use of cyanide in manufacturing would be a good example of this, as would the effect of natural disaster destroying significant capacity in a supplier market.
Of these three types of threats, the first is the most difficult to turn into opportunity. This is because diminished demand is usually a choice made by the customer. If consumers choose, for example, to drink less beer, your beer-related sales are very likely to decline no matter what you do. In such situations, it is best to look for the “silver linings” that come with the cloud of diminished demand. The first is a likely change in the mix of competition – some competitors are likely to go out of business or greatly diminish. The second, which may be related in some cases, is the possible increase in specialty-related behaviors around your product or service. For example, if people choose to drink less beer, you may discover sales of specialty beers will gain a greater share of the beer market.
Displacement threats are easier to recast as opportunities. There are two important types of displacement-driven opportunities you may find. First, you may become part of the displacing dynamic, in effect destroying your old business in order to participate in the new business. When Sony embraced CD music as a replacement for cassette tapes, they were destroying their old Walkman Cassette product line in order to maintain a position in the ongoing market for music players. The second type of displacement-driven opportunity is to exploit the nature of the non-displaced customer. For example, as transistors replaced vacuum tubes in stereo equipment, a small portion of the market resisted the displacement, preferring the “warmer” sound of vacuum tube based amplifiers. By becoming a niche player specializing in the preferences of the high-end stereo enthusiast, a tube-based manufacturer could build higher margins and sustainable sales even in the face of a large-scale displacement of the vacuum tube.
Cost-based threats can sometimes be treated this way, as well. In many markets, the most externally visible changes based on cost can be exploited as opportunities to create visibly specialty-oriented products. For example, as competing motorcycle manufacturers shifted to alternate materials in the 1970s and 1980s, Harley Davidson leaned the other direction, refusing to replace steel with plastic, for example, and in some cases making design choices that preserved the older look and sound of earlier Harley Davidson models. While manufacturing costs became somewhat less competitive, the distinctive look and sound of a Harley appealed to the specialty customer who was willing to pay a significant premium for a distinctive motorcycle.
In addition to these examples, there are some basic questions you should ask when examining your threats for opportunities. First, why is the threat happening? Is it driven by customer preference, laws, or economics? How will these changes be viewed by the customer? Will all customers disappear, or will some stubbornly stick with the old way? If your industry moves, as a whole, to react to these threats, what advantages might accrue to a company that does not “change with the times”? Is there an opportunity to better serve a subset of the customer base by going against the flow?
These, and similar questions, can help you to uncover the upside of the threats you face in your business. If you are interested in seeing how we can help you to profitably adapt to the changes that threaten your industry, please be in touch! If you are interested in reading more on this topic please click on threats.
I’ve come across references to a “new” strategic planning tool called the “business model canvas” in a few places recently. As with other “new” tools, it does offer a different way to structure how you think about your business. But how new is this tool, really?
The most common approach to the business model canvas is to segment your thinking about your business into a small number of topics – such as customer segmentation, channels, customer relationships, value proposition, key resources, key activities and key partnerships. In some ways, this appears to match up to Porter’s Five Forces model, though it can – and will, in practice – ignore key environmental forces. This limitation saves critical time in the process of assessing and communicating strategy, but may lead to critical errors in strategy formulation in industries where environmental forces are in tremendous flux, such as health care.
Customers vs. Channels
The basic business model canvas – correctly – places great emphasis on the flow of value to the customer. Interestingly, channels are treated entirely separately from customer segmentation, despite the fact that the value proposition may be more advantageous to channels (fitting into a retail channel’s distribution strategy, for example) or to customers (offering a superior product or service regardless of how well it works for any channel). Failure to assess these advantages holistically can be crippling. A product which flows smoothly through a specific channel may have very low appeal to customers, and risks rapid displacement if other channel concepts become widespread. Similarly, a product which has high customer appeal may still stagnate if the dominant channel architecture does not fit key attributes of the product. In many industries – manufacturing or service – it is the holistic compromise embodied in your value proposition which really determines your success or failure at any given time, and separate assessment may create a blind spot around this phenomenon.
Strategic Competency; the Importance of Differentiation
I find the canvas approach to assessing “key resources” and “key activities” to be interesting. In Simplified Strategic Planning, we began a practical application of Prahalad and Hamel’s concept of Strategic Competency, which has become a cornerstone of the most successful strategies of recent years. In practice, using the canvas categories, you would likely find your strategic competency somewhere in one of these two boxes – but, unfortunately, other strategic assets might be mixed in with competency in “key resources” and the core competency may or may not be recognized as the focus of the most important “key activities”. Still, many companies may find they can correctly identify strategic competency using this categorization, so it may be useful. Indeed, it may be a useful tool for identifying strategic competency in a more thorough strategic planning process. That being said, a thorough examination of strategic competency backed up by market data is a far better way to approach this critical part of the strategic planning process. Most importantly, I would contend that the fact that most people have approached strategic competency incorrectly, and failed to adequately use the tool to build clear differentiation is the main reason why people like to back up to a more simplistic approach such as “critical resources” and “critical activities”. There is no substitute for competency-based differentiation, and true differentiation of a focused competency is the single biggest factor in strategic success.
Adaptability to Changing Business Conditions
One of the main advantages that has been touted for the business model canvas is the ability to “pivot” your strategy and rapidly change the structure of your business to fit new strategic realities. The very simple analysis of a few key strategy elements may indeed be useful for some companies in this area, although deployment and execution aren’t really a strong suit of this approach. Certainly, a strong, objective, competency-based strategic plan can be a much more useful tool for rapid adaptation to environmental change, especially since the business model canvas can be used to dangerously skirt critical issues. Part of any strategic planning process should be a rigorous monitoring process which allows for course corrections when business conditions change. Monitoring is key to the success of any strategic planning process (click here to learn more about monitoring). At best, the business model canvas is a novel tool for business model innovation in industries where certain environmental variables (regulation and technology, for example) are more constant. As a replacement for a simplified model of strategic planning and execution, it shows many shortcomings.
Have you used this tool in your business – or wondered how you might change your approach to innovation? I’d be very interested in using simplified strategic planning as a tool to flesh out, test and execute the ideas you have generated – or want to generate. Please let me know your experiences, both good and bad – it’s the best way we all can learn about tools that can aid the strategic planning process.
If you would like to discuss strategic choices around innovation please contact Robert Bradford at rbradford@cssp.com.
Looking over action plans with a client this week, I was struck by a comment one of the team members made. “Some of our action plans” he said, ” have delivered great results, and improvements to our top line and our bottom line…and some have just generated meetings and activities and no results.” When we considered some of the objectives that had – and had not- delivered results, I noticed a couple of things. 1. Specificity is key to getting results. This is true of objectives – the more specific the result, the more likely the action plan is to produce a real result – and it is also true for the steps in action plans. When doing an action step “Attend ABC trade show in November” is far easier to act on than “Research customers and competition in our new market”. With objectives “Sell $5 million in product to the medical market” delivers results – and “Balance workload between our plants” just generates analysis. 2. When you don’t know what to do, you can waste a lot of time not knowing it. This makes writing action plans really hard sometimes. When writing an action plan, you have to at least know enough about the objective to figure out what steps to take. Many of us take the expedient – and frustratingly unproductive – step of having meetings to determine our next steps. No matter how you disguise it, a plan to plan is going to end up wasting someone’s time. If you don’t know what to do, or what all the steps will be, it’s perfectly OK to go outside your company for help. In fact, it’s often the very best thing you can do. You can rent this help with a consultant, or bring the capability in-house by hiring a new person from the outside, but you can often short-cut past years of trial and error just by getting someone who understands what you are trying to do from outside your company. One caveat: when looking outside your company for expertise, be sure you are getting expertise that will truly fit your need. Hiring an expert to help you sell to the IT industry can be great, but if you hire someone with 10 years of commodity experience to work in your specialty company, don’t be surprised if most of that experience is counterproductive. 3. Focused, dedicated resources make a bigger difference than all the meetings in the world. Having someone split their time between strategic and non-strategic tasks is a difficult reality in the world of small to mid-sized companies. Even in larger companies, this expedient is hard to avoid. But when it comes to strategic objectives, it is far too easy for someone to postpone working on the new problems – ones we don’t know how to tackle – to make time for the old problems, which we do know how to tackle. Over and over, I have seen this effect slow down and even stop action plans – and over and over, I have seen companies succeed when the objective is big enough to warrant a dedicated person who doesn’t have old, familiar problems to fall back on.
So what can you do to take advantage of these lessons? First, make sure you press your team hard on coming up with specific, measurable results as objectives. Second, take the time to figure out what needs to be done before writing the action plan. This may require some time and money, but it will lead to much better execution down the road. Third, don’t be afraid to bring in outside expertise – and dedicate it to your objective. Finally, consider dedicating a person to the objective full-time. Anything big enough to be one of your company’s top strategic objectives could well be big enough to warrant a full-time, experienced caretaker – and the part-time, inexperienced caretaker you had in mind might not drive the same results, even if that would be quicker and easier.
If you would like to discuss strategic choices around innovation please contact Robert Bradford at rbradford@cssp.com.
Leadership is a double-edged sword. On the plus side, leadership in your industry means that every possible competitor will have to play catch-up with any strategic choices you make – you will be defining the game of strategic competition, and this can lead to extremely strong profitability. On the minus side, leadership requires that you constantly push your company outside of its comfort zone. You won’t always know what to do – or even, in some cases, what you are doing – and you will end up making mistakes along the way. This is the main reason most companies fail to effectively pursue a leadership position – it is scary and bad things can happen if you do it wrong.
Author, Robert Bradford
The good news about strategic leadership is that the main perceived disadvantages are not real. This is not to say that leadership isn’t scary, nor is it to say that things can’t go wrong. Rather, those problems will exist whether you are in a leadership position or not! In other words – you will make mistakes whether you are leading your industry or trailing it. True, more people will notice the mistakes of the leader, but the sad truth is that companies that “play it safe” make just as many mistakes – and have the added disadvantage that the market never perceives an advantage to innovation “safety”.
So, if we accept the mandate to lead our industry, how do we pick the “BIG Things”? What really makes the difference between incremental innovation and industry-leading innovation? There are three main innovations that will tend to lead industries:
1. Innovation that is TOO DIFFICULT for most competitors.
2. Innovation that is TOO EXPENSIVE for most competitors.
3. Innovation that most competitors are UNWILLING TO PURSUE for any other reason.
If your strategic planning has helped you find a strategic competency that works in your industry, chances are that certain types of innovation you can pursue will fit neatly into at least one of these categories. This is because one of the great side-effects of competency-based strategy is that it leads organizations to focus on things that are easier for them and harder for competitors. For example, it is no secret that user-experience based design is a strong suit for Apple. What this means, strategically, is that Apple products may not always be the leading edge of what is technically possible – but the experience of using an Apple product will always be better. Why? Because it is more intuitive, simpler and has been designed for “feel” rather than features. Is it possible for a competitor to get this right, and effectively compete with Apple? Certainly – and in some rare cases, competitors can give Apple a run for their money – but at the end of the day, Apple will win at this kind of competition because it is now easier and cheaper for Apple.
If you want to compete effectively with Apple, you can do so by focusing your strategy on the things Apple doesn’t do as well – technical features, open-sourcing, and commodity pricing. This combination is exactly why Google’s Android operating system is so successful in competing with Apple’s iOS. It is not that one system is better than the other – rather, Android has strengths that would be difficult for Apple, and vice-versa. In terms familiar to those of you who have read Simplified Strategic Planning, iOS is dominating the specialty end of the market, and Android is dominating the commodity end. Make no mistake – the sheer volume numbers will favor Android – but the profit numbers will favor iOS.
To further dissect this particular example, let’s look at what the “big things” are in the cell phone market. What do users actually care about? Here is a short list of reasons why you might be satisfied/dissatisfied with a phone:
Style
Quality of service (i.e. no dropped calls, etc.)
Applications (i.e. what can I do with my phone?)
Ease of use
Price
Quality of components (i.e. camera, controls, etc.)
As you may surmise, it would be virtually impossible for one hardware manufacturer to win on all of these features. So is one of these the “big thing” in the cell market? The answer is no – any one or two of these items can qualify as a big thing when you are considering strategic leadership. The important thing is to develop the strategic ability to win so decisively that the market clearly acknowledges your leadership. This, just being a little better than HTC on quality of service will not yield a leadership position for Apple. Likewise, having one or two little design advantages over Apple doesn’t get you the style crown or the ease of use crown. It is only where the market perceives clear superiority that industry leadership results – and the benefits of true leadership only come after the market begins acting on that perception.
To see how this might play out in a different arena, let’s look at some very strange developments that are occurring in another market – television entertainment. Interestingly, some of the same players (Apple and Google) are taking a strong interest in this market. Also interesting is that there are two very clear channels for innovation – hardware and content delivery. As of the writing of this article, Netflix appears to be dominating content delivery through a strategic approach to content acquisition and marketing, but services such as Hulu and Xfinity are taking increasing market share. One could also argue that Google’s YouTube and Apple’s iTunes are also part of this market, since video content can be delivered by any of these channels. So – what are the big things you need to dominate in order to lead the video content market?
Content library
Pricing
Ease of use
Portability
That’s it. There isn’t much else that would drive a winner here. Netflix has the lead right now because their content library is great, but they are also very strong on portability (I can use Netflix on my iPhone, my Windows PC and my Nintendo Wii, and it doesn’t matter who my phone or broadband provider is). Apple gets pretty strong marks on ease of use, but isn’t necessarily a clear winner here since YouTube, Hulu and Netflix are all pretty darn easy to use. Leadership on pricing may turn out to be a giant-killer for someone who wants to de-throne Netflix, but success with this approach will take well-negotiated content and delivery deals along with a very large volume of users. Interestingly, many, many other players, including Intel, for some bizarre reason, are trying to gain a foothold in this business by becoming “virtual cable TV operators”. Without a strategic competency that can yield industry leadership in one of the big things, these me-too initiatives don’t stand a chance.
So who will come out on top in the video wars? Again, there is no sure bet. Apple is betting that integrating hardware with a content ecosystem will yield profitable, committed customers – and their business model does seem to prove that is correct. Google seems to be taking a more open-source approach, which, again, fits their competency and business model. Netflix will have to pedal harder and harder to stay in this race, and will face continued challenges from the owners of pieces of its downstream distribution system, such as cable companies. However, if they continue to lead on portability, there is a good chance that Netflix will retain market leadership in the foreseeable future. This is because portability isn’t even attractive to most of the big competitors in this space, with the possible exception of Google. You can, however, count on some of the distribution network players (such as Comcast), to attempt to use the power of their position to either gain traction with their own video offerings (like Xfinity) or gain some favorable concessions from the bigger players in this market.
How about your industry? Do you have a clear idea of what the big things are that you might dominate? How do those things stack up against your strategic competency? In my next article, I will discuss some ways to pick the big thing you focus on – and how to feel OK about letting go of the other big things.
Watching companies respond to massive changes in the current strategic environment, I am struck by how much we tend to overemphasize the present when planning for the future. In strategic planning, it is vital that you do the best job you can to anticipate future trends that will shape the strategic environment of your industry. Unfortunately, this is impossible to do with 100 percent accuracy. What we must do, however, is the best job we can, especially when dramatic changes will change the competitive structure of the industry.
I can remember doing strategic planning with manufacturers in the 1980s, and hearing over and over again that Japanese companies were going to own the entire planet. Now, some Japanese companies have done OK since then, but overall, the Japanese economy has been in a genuine slump for almost a decade now, and is even farther from recovery than the US economy is. The key point of this example is that the present is NOT the future. The present only has clues to what the future may bring, and sometimes we may mis-interpret those clues.
In strategic planning, it is vital to analyze WHY the future will be different – and why the current changes we see today may or may not continue into the future. For example, many businesses today are concerned about China’s growth as a manufacturing power. When thinking strategically about such an issue, we need to break it down into probable causes to be able to assess whether the current trend, growing Chinese economic influence, will continue in the long term. Some possible causes such as less strict environmental and labor regulations, when compared with Europe and North America, seem to be fairly stable and likely to remain over the next five years. Others like lower relative labor costs show signs of changing fairly quickly. Recalling the rapid change in relative costs in Mexico around the time of the enactment of NAFTA, we can see that labor cost advantages can be temporary and subject to rapid change. None of this is to say that China will not be a growing economic power in the next few years, but rather that there are reasons why that trend would continue, and reasons why it may slow down, or even (in the case of serious political upheaval) reverse.
In strategic planning it is far too easy to rest your assumptions about the future on a simple continuation of the present, the predictions of experts or the conventional wisdom of others in your industry. None of these is a good substitute for clear-headed analysis, based on systems thinking, which will give you a much better picture of the future that is yet to come. Make sure you allow the time to take a close look at such issues in your strategic planning, and consider having an outside resource with expertise in this type of strategic thinking challenge the assumptions upon which your plan for the future is built.
Are changes in your industry right now or possible changes in the near future threatening your company? This can be a bad thing – but you might be able to turn the strategic threat into an opportunity, as well.
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. One is the impact of online travel websites on the travel agency business. Another is the impact of the cell phone on landline phone business. Technological changes are not always the cause of fundamental changes in an industry though. It’s possible for a shift in regulation or business practices to dramatically change an industry, as well.
Remember – when you are threatened by such changes, 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 like something you should avoid.
There is no longer a market for pay phone equipment, for example, because of consumer cell phone use. Furthermore, the use of electronic tax filing has diminished product demand for paper accounting forms. One of the most important lessons to learn here is that you cannot prevent the threat from happening. You can, however, control the rate of change that comes with the threat.
In some cases, the inevitability of a strategic threat means you must find ways to adapt to the new world.
Although many companies would just downsize, the strategy of becoming the threat calls for you to ask some fundamental questions. Is my company’s strategic competency limited to the current, threatened product (or service)? Otherwise, is there a competency that adapt to the newer, threatening product? Using this strategy, the tax form manufacturer would get into the business of writing tax software. 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. 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 you should apply your relevant strategic competencies to less threatened markets. For example, the pay phone manufacturer might make airport check-in kiosks or automated teller machines.
For many of us, however, the strategic 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. Upstart companies not married to the old way of doing business look for markets affected by such threats. 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 way your company distinguishes itself by creating value for customers determines whether your company will be a nimble survivor or a has-been. 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, you can probably jump into the new world. If the competency is closely tied, your strategic planning should steer you towards new uses for your competency.
So, let’s say you have a strategic competency that enables 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.
Don’t delay getting any missing capabilities or technologies – acquire them if you have to.
Closely examine your company culture and push hard on adjustments that will drive your employees to embrace the new world.
Pay careful attention to compensation and other practices that may create incentives or disincentives to change.
Understand that some key employees will have difficulty making the change. Be willing to re-train them and even let go of them if they will become a drag on your agility.
Remember that the rules of the game may be changing fundamentally. Closely examine how you may need to change your strategic thinking to succeed in a dramatically changed market.
These aren’t the only ways to assure success at becoming the threat and surviving a shrinking market.
They are, however, the most common ways of fostering revolutionary innovation that will confound your competitors and delight your customers. If you’d like to learn more about strategic thinking and more specifically the importance of being the threat, Simplified Strategic Planning is a great place to start. For great ideas on how to improve the quality of your planning, contact me at rbradford@cssp.com. Consider holding a one-day workshop on Simplified Strategic Planning.
Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc. He can be reached at rbradford@cssp.com.
Dana Baldwin is Senior Strategist with the Center for Simplified Strategic Planning, Inc. He can be reached by email at baldwin@cssp.com.
