Be the Threat

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.

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.  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.  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.

Co-Author Robert Bradford

Co-Author Dana Baldwin

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