Category: Competitive Strategy

Denise Harrison

Note:  This article is part of a series taken from Denise Harrison’s article March to a Different Drummer originally published in Compass Points in August 2002.  Although this article was written in 2002, this discussion is timeless.

“Get big fast or go home!” was the mantra of venture capitalists. Webvan spent $830 million to expand into 26 cities at once only to file for bankruptcy after its overly ambitious strategy failed. E*Toys had a market capitalization greater than that of ToysRUs its first day of trading. Greed, irrational exuberance, call it what you may, but common sense was not part of the tune. Good business strategy is based on market knowledge and strategic focus – focus on what you do best and in areas where your competitors are weak.

In recent years many companies saw the Internet expansion as a key trend to enhance growth. Pundits argued that the new economy was immune to business cycles. Webvan embodied growth mantra – to what end?

“Webvan Group, Inc. said it shut down its online grocery-delivery service and will file for Chapter 11, marking one of the most spectacular and expensive failures of the Internet era. Webvan poured $830 million into high technology warehouse facilities and a 26-city expansion plan that most observers have since said was too ambitious.”
The Wall Street Journal, July 10, 2001

This is only one example of how companies assumed the Internet was the “land of opportunity,” pouring millions of dollars into plans that were ill conceived and based on invalid business models.

During this dot.com boom, Intelligent Information Systems (IIS), Durham, NC, a software-consulting firm, evaluated a variety of potential growth strategies. IIS was clearly differentiated by its high quality standards and its commitment to total customer satisfaction. To many companies, “quality” and “total customer satisfaction”, are just buzzwords, but to the team at IIS these phrases are driving principles. While many technology firms in the Research Triangle Park were taking advantage of the lucrative public offerings, the senior management team at IIS knew that a public offering would cause the company to lose its focus on customer satisfaction and zero defects. After a public offering, associates would be imagining what they could do with their newfound wealth, watching the stock price daily, hourly, assessing minute-to-minute their net worth. This myopic self-interest would cause the company to lose its competitive advantage.

They had a difficult decision to make during a critical time frame, but 20/20 hindsight shows that the II management team chose the optimal direction and course for their firm by focusing on the key areas that set the company apart from the competition.

eBay is another company that turned down easy cash as it focused on its long-term success. It focused on its customers, the sellers of products on eBay’s online auction site. As traffic grew on the site, advertisers asked eBay to participate in lucrative advertising contracts. Short term, these contracts would have significantly enhanced eBay’s revenue and profitability. However, when the sellers on eBay’s site complained about competition from the advertisers, eBay reduced the advertising on the site. eBay focused on the customers who had made it successful to date. If these customers had not remained loyal and had jumped ship to try other auction sites, competitors would have been more successful at competing against eBay.

As eBay expanded, large companies looked to it as a distribution channel, sometimes to unload excess inventory, sometimes simply to have another sales channel. To protect its original customer group, eBay does not offer volume deals or special deals to these large companies. Everyone must play by the same rules. While some of eBay’s original participants feel threatened by the new, larger companies selling through the site, many think that the added participation will drive more traffic to the site, enlarging the overall customer base for all participants’ products.

We will continue this series and discuss Historical Examples in a future post.

To learn how to take your strategic planning to the next level, please listen to our webinar:  Why Isn’t My Strategic Plan Working?.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

By Denise Harrison

Over the years CVS has transitioned its business from a traditional drug store format to become more of a health care company.  Why?  Some trends indicated that more profitability came from its sale of prescription drugs, so a focus on health care rather than consumer products made sense.  To further its movement into being a healthcare provider, it purchased MinuteClinic and opened MinuteClinics providing routine diagnosis, screening and vaccinations in many of its stores.  CVS is now the biggest operator of health clinics and dispenser of prescription drugs in the US.  Surprised?

What Would CVS Give Up to Continue its Focus on Providing Healthcare?

Focusing on transitioning from drug store to healthcare provider may seem like a no-brainer – but what did this move mean that CVS would have to give up?  If the company was truly focused on health and wellness, how could they continue selling cigarettes? Thus, in 2015 it made the decision to stop selling tobacco products – losing $2 billion of CVS revenue.

Gutsy move – maybe.  Or were they just seeing the trends and positioning themselves for the future?  Some statistics on smoking adults:

1965:  43%

2014:  18%

As you can see the trend away from smoking is significant and if this continues down to below 10% as is expected, tobacco products will become a declining revenue source.  In addition, with cigarettes off the shelves, partnerships with regional hospitals were easier to form.

Key Take-Aways

• Do you have a vision of what your company needs to look like in 10 years? An idea of what it will take to be successful?
• Are you willing to give up current business to focus on positioning your company for future success?

Giving up revenue and profit is a difficult decision, but companies who are willing to make these tough choices may position themselves for long-term success.

If you are ready to assess what it will take to make your company successful in the future, please contact me at: 910-763-5194 or harrison@cssp.com and we can discuss how to develop a strategy that will position your company for future success.

To learn how to take your strategic planning to the next level, please listen to our webinar:  Why Isn’t My Strategic Plan Working?.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

 

 

Innovation — Leadership Strategies for the Competitive Edge
by Thomas D. Kuczmarski
210 pages, 1995, NTC Business Books
$37.95

As you would expect in a book entitled Innovation, the author, Thomas Kuczmarski, compellingly presents the need for innovation to be alive and well in virtually every organization—including yours! What comes as a pleasant surprise is that he has provided a very practical, “how to” book. He blazes a clear trail for you to follow in establishing Innovation as a key element, and perhaps the key element, of your continued success.

The author writes with the authority of one who “has been around the block many times.” He has been a brand manager with Quaker Oats and a consultant for hundreds of small to Fortune 100 companies while with Booz, Allen & Hamilton and his own company. He has boiled down the learning from this in-depth experience into an integrated methodology for introducing and sustaining innovation in organizations.

His most fundamental concept is the definition of innovation: Innovation is a Mindset. Hence, much of the book conveys how to build a holistic innovation culture that supports the nuts-and-bolts of innovation. Successful innovation takes both.

Here’s the best overview of this book—the author’s own:

Recipe For Successful Innovation

“Start with a CEO who believes in, conveys optimism about, and consistently commits resources to innovation. Add a new product strategy and technology portfolio. Develop and activate a consumer-driven development process.

Next, mix in several dedicated and upbeat teams of multi-functional members. Motivate them with a reward structure based on performance. Add a set of values and norms for the organization to believe in and act on.

Simmer for approximately five years. Be sure to convey passion and stir regularly. Watch carefully that the innovation mix doesn’t burn and keep the heat regulated. Make sure you’ve already started a new batch before removing the first one from the stove. Assess success by using a previously developed measurement system.

Serves thousands of shareholders, employees, and customers. Enjoy!” The content is not only thorough but is presented in a format with lists, assessment questionnaires and diagrams that make it easy to read the first time and then put into practice. Here’s a sampling of these meaty lists:

• Top 10 Innovation Insights (interestingly, the first of which is “failure is an intrinsic part of innovation”)
• The CEO Innovation Mindset Test — 20 probing questions
• The Innovation Creed
• The Three Innovation Platforms — (1) planning for innovation, (2) defining a staged development process, (3) crafting a holistic innovation organization
• The Eight Building Blocks of an Innovation Mindset
• The Innovation Blueprint
• The Innovation Strategy
• Characteristics of an Innovation Team Member
• The Top 10 Innovation Indices

Intriguing lists? Read Innovation and find out more. Give Thomas Kuczmarski a chance to fulfill his hope for readers; “It is my hope that when you turn the last pages of this book, you will be as strong a believer as I am that, by capturing and cultivating innovative ideas within your organization, you are ensuring its future growth.”

Score another 10 on the Ambler scale—this time for Innovation—Leadership Strategies for the Competitive Edge.

For information on how to take your strategic planning to the next level, please listen to our webinar: Why Isn’t My Strategic Planning Working?

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Tom Ambler is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at ambler@cssp.com

Ask strategic questions

Once a client was chatting with me and mentioned something about my strategic planning: I ask weird questions.  Not so weird, in my mind – but my favorite questions are always strategic. Furthermore, they always lead to excellent discussions about the sources of value in business and how you can create more.  This is the essence of competitive strategy (beating or avoiding competition).

As a result, I created a list of fun questions that I like to pose in the strategic planning process.  I don’t recommend tackling them all at once.  In Simplified Strategic Planning, however, there is a concrete, data-driven process that creates a framework for addressing these questions.  That being said, you might want to think about how to incorporate these key questions into your own strategic planning.  Otherwise, pick up a copy of Simplified Strategic Planning, and learn a structured approach.  This could save you time and give you better answers.

First strategic planning question – Why do our customers choose us?

I think of this as THE question for business strategy.  There are many, many possible answers.  In most markets, however, the decision seems to boil down to about 3-5 variables that dynamically drive customer preference.  For example, in the airline industry, low fares, convenient schedules, and extensive network explain a huge portion of ticket purchases.  Likewise, in banking, convenience, relationships and fee structure seem to be the top drivers.  You don’t have to be the best in all of the factors, but you do need one or two.  Those one or two must lock in a sustainable customer base for your business.

Second – How will technology change our industry even more?

Of course, most of us are currently riding some of the biggest waves in the market oceans already.  If you think those changes are big, you may be surprised at what the future has in store.  We are wearing computers.  We are tinkering with the chemical and genetic makeup of familiar products.  Our world is getting smaller and more segmented.  These factors – and dozens like them – will not stop changing to give us a breather.

We will continue to be buffeted by technological changes that can wipe out entire industries. In addition, they spawn entirely new ones.  When was the last time you used a pay phone? And your cell phone?  Just a second ago?  Again, in strategic planning, we don’t need to get these 100% right.  However, we need to ask this strategic planning question, so we can move to the front of our industry.  Better yet, we need to ask this question, so we can escape the next wave, if it’s heading for disaster.

Third – If customers could change ONE thing about our industry, what would it be?

I like this strategic planning question, because it forces us to look at the problems of our industry from the customer point of view.  Good market segmentation might lead us to very different answers for different customer groups. On the other hand, some of the best opportunities to grab new market share come from the customers’ frustrations.  Are there unmet needs or preferences?

If your industry is highly oriented towards operational efficiency, there may be opportunities in becoming more personalized and human.  If your industry offers a plethora of choices, a simplified product may be welcomed.  Whatever the frustrations are, it’s likely you (and your competitors) have great reasons for creating the frustration.  Also it’s likely someone will come up with a clever way to sidestep it, leaving the rest of the industry playing catch-up.  Therefore, be sure to ask this strategic planning question!

These are just three of the best strategic planning questions I like to use.

Naturally, if you’d like us to drill into your team with these and other penetrating questions that will improve your market share, contact me at rbradford@cssp.com. Do you have any questions that you find useful in your strategic planning?  Please comment below and let us know!  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.

 

By Denise Harrison, Senior Consultant

Note: The original article was appeared in Compass Points January 2008

WD-40 Faces a Growth Challenge

WD-40 faced the growth dilemma — the chairman’s goal was to grow the business by $100 million from new products…introduced during the next three years (Gary Ridge, Wall Street Journal, May 23, 2006). This would be difficult for a product like WD-40, which has been in existence for over 50 years.  To meet the challenge the WD-40 Team Tomorrow looked for new and/or underserved customers. They knew WD-40 was present in many households, but primarily in the garage — where it is used to solve a variety of problems. WD-40 fulfills five basic functions:

CLEANS

DISPLACES MOISTURE

PENETRATES

LUBRICATES

PROTECTS

What about applications inside the house? The Team Tomorrow set out to find the answer.  They found inside the house there were many potential uses. But why was the product not used inside? Research showed several issues:

1. The WD-40 was in the garage — the can was not convenient to store in the house.
2. WD-40 didn’t smell very good.
3. The WD-40 can sprayed too much when a spot application was required.

The team set about making the product indoor-friendly. They developed the pen application. The idea was a pen-like product that could deliver WD-40 in a small dose at a specific point. It is pocket-sized, fitting everywhere from glove boxes and desk drawers to backpacks and purses. The WD-40 No-Mess Pen does this without messy overspray and with minimal odor!

The No-Mess Pen® is now a global product for WD-40 with many years of growth expected. What can you do to re-invigorate one of your old products or services? Look for potential applications in a different environment and see what needs to change to make your product work for that specific environment.

For more information on how to take your strategic planning to the next level please listen to our webinar: Why Isn’t My Strategic Planning Working?

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc. She can be reached at  harrison@cssp.com.

© Copyright 2015 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

M Dana Baldwin, Senior Consultant

Do you know what your customers really value?  What are they willing to pay for that you can bring to the market place?  What is important to them that you can provide?  Does this give you an advantage in the environment in which you work?  Can you use this advantage to improve your competitive position?

When you learn what your customers value, then you can build on these values to gain an edge in the market place.  While price is almost always a consideration, what the customer really is looking for is a solution to a problem.  When all other factors are essentially equal, then price will be a determining factor.   So, if you have you listened well enough to determine what the problem is, deeply enough to realistically provide an optimal solution to that problem, then you actually can compete effectively for the customer’s business, even against a lower priced competitor.

Listening to your customer is the key in this type of situation.  You should be asking structured questions that probe your potential customer’s needs and wants.  These questions should generally start by seeking what problem areas the customer is experiencing in the range in which you can supply solutions, and what the criteria should be for helping to resolve the issue.  Only when you have enough information to fully and deeply understand the customer’s situation, needs and preferences, should a proposed solution be explored.

What if your competitor is lower priced?  If the main factor in your competitor’s position is price, it could be likely that your lower priced competitor is not as knowledgeable about your customer’s needs as you are.  The reason for this is that often, lower priced competitors concentrate on lowering costs of the product or service, and not on responding to customer’s higher level needs and preferences.  This should give you a real competitive advantage, when you have done your homework.  By asking the right questions, and finding out what is really wanted as a solution to a problem, you should be able to prove that your solution is the superior value for your customer.

That homework involves asking good, focused questions which are designed to bring out what your customer values, what they are willing to pay for and sets the stage for your ability to provide a clearly superior value proposition to your customer.  By providing this well focused solution, you should be able to fend off lower priced competitors, having the highest value solution to your customer’s problem.

If your strategic planning doesn’t help you focus on solving your customer’s problems, let us help you do a better job of developing strategies to provide wanted solutions to those problems.  Contact me at baldwin@cssp.com, or call me at 616-575-3193.

For more information on this subject, please read these two articles: Mining Your Unexploited Value – Part I, and Mining Your Unexploited Value – Part II, both by Tom Ambler, Senior Consultant, CSSP, Inc.

For more information on how to take your strategic planning to the next level please listen to our webinar: Why Isn’t My Strategic Planning Working?

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

 

These two words go together sickeningly often. Every buzz-word spouting bozo tends to refer to themselves as “inspiring strategic innovation” or “working on innovation strategy”. But these words have very specific meanings, and, when it comes to strategy, there is innovation that will be strategic, and innovation that will not be.

To begin with, innovation is partly derived from the Latin “novis”, or NEW. Doing things weirdly isn’t innovative, and putting fun colors on an old way of doing things is also not innovative.  Innovative ideas absolutely break new ground – which means they may be weird, they may have fun colors, but most importantly, they are NEW.

Strategy, on the other hand, is a word that people often mis-use when they mean “important” or, even worse, “well-paid” (as in, for example, the title “strategic information officer”, which is often a fancy name for the IT guy). Strategic things always revolve around one or more of the three key strategic questions:

1.  What do we do?
2. To whom do we sell?
3. How do we beat (or better yet, avoid) the competition?

Put another way, if something doesn’t change the direction your business is going or get you there faster/better/cheaper, it’s probably not strategic. Strategy is about direction – and so, strategic innovation should be about either shifting direction, or refining your direction to make it more strategic in nature. Because strategy usually revolves around beating the competition, strategic innovation must, by necessity, create a distinct competitive advantage – and ideally one that is not easily copied.

Let’s look at some examples. One key innovation in the early years of cell phones involved making them smaller, thinner and lighter. These were incremental improvements in the existing design, and everyone was pushing them. As a result, while you could be very successful with a smaller, thinner, lighter phone (for example, the Motorola Droid, which was very sexy in its day), innovation in that direction wasn’t exactly going to make or break your strategy. On the other hand, adding new functions (camera, GPS, touchscreen, apps) did push strategy forward, since it re-defined the market in a way that the established players lacked advantages in. The camera, for example, was a high-end phone feature at first – which meant the players that had it were a step ahead of those who didn’t.

Real innovations in the cell phone market came from different players at different times.  Research In Motion, for example, made their phones into personal information managers/email machines by adding software and a keyboard. Apple added GPS, touch screen, and app support.  Each of these innovations could be called strategic, because they did not involve just pushing in the same direction as everyone else.

This brings out one of the most difficult but critical aspects of successful innovation in business – truly strategic innovation either enhances your leadership in the area you already dominate (the thin, sexy Droid Razr might be called that) OR it creates great distinction for your product or service by delivering something no existing product or service offers (the Apple iPhone is a great example). This suggests a two-step test for any innovation you consider:

1. Does it make us better at something we are already the best at?
2. Does it differentiate us from all other players in our market?

These questions can also serve as a great starting point for your innovation activities – either as a part of your strategic planning discussions, or as a separate activity before you sit down to design new products or services. Simply ask “How can we be even better?” and “How can we make our offering even more unique?”, and run with the answers.  Or better yet, pretend you are a great customer – and then role-play about your use of the product or service. From that perspective, anything that looks like it would be awesome for the customer is a great starting point for your innovation efforts.

How do you innovate strategically? Where do your innovative ideas come from?  To extend your strategic thinking about innovation, plan to attend our next public seminar today! Click here for more information.

For other ways to enhance your strategic planning process please watch our video:  Why Isn’t My Strategic Planning Working? This video will give you tips for enhancing the strategic thinking during your next strategic plan update.

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

 

What differentiates your company in the market?  What sets you apart in your customers’ eyes?  What do your potential customers think? These competitive differences may be good – but they may not be good.  Would it be good if your customers think your company is difficult to do business with? Would you know? What if your customers think that your product has the best quality, but is also the most expensive – should you target potential customers who are only looking for the cheapest price?

Recently, I spoke with a number of marketing executives and they emphasized the importance of customer and market surveys to better understand what differentiates your company in the market place.  Often these surveys are eye openers and provide good input for strategic thinking; for example:

1. Understanding the positive attributes will help you target the segments and customers that truly appreciate what it is that differentiates your company.  It keeps you from wasting time with customers who do not particularly care about certain features or benefits that you provide.
2. Understanding the negative factors will help you target what changes need to be made so that your company can gain market share.
3. What if your customers do not see any differentiators?  Then you need to decide if this is because you do not emphasize your competitive advantage or if you really do not have a competitive advantage.  This dilemma often occurs when a market leader lives off of its reputation, rather than continuing to innovate and further differentiate its products and services.

Some examples:

If your company is perceived to be the high quality and high value producer, you should not be spending time with customers that are shopping for the lowest price.  While this may seem like it limits your market, it really focuses your sales efforts on the customers that value the characteristics that you bring to the market.

If you find that there are negative perceptions, it is time to do some soul searching.  Do the negatives come from a small unattractive segment of the market?  Or are these attributes that need to be fixed in order to achieve significant market penetration?  One company did a survey and found that they were perceived to be arrogant in the market place.  What was behind this remark?  When they asked, they found they were difficult to do business with – customers found it hard to work with the company on special promotions and on tailoring the marketing mix to reach the specific end users that were important to a particular customer.  The actual reason for the lack of responsiveness had nothing to do with arrogance, but rather resource allocation – with only one marketing person the company was unable to respond to the number of marketing requests that it received and was thus perceived to be unresponsive.  By hiring more marketing resources and focusing specific resources on specific customers, the company was able to change its negative differentiator into a positive characteristic.

What should you be doing?

1.  Do some market research to better understand what differentiates your company in the market – yes, from the customer’s or potential customer’s point of view?
2. Once you know the positive attributes, look for market segments and customers that value the attributes that differentiate your company in the market place.
3. If you have attributes that do not show up in your survey – is this because they are not valued?  Or is it because the customers do not understand the value that you truly provide?  Think of ways that you can communicate the true value of your offering.
4. If you have some negative differentiators (e.g. difficult to do business with), look at ways you can change the negative impressions.

Market research is a key input to better market understanding.  Assess whether or not it is time to do a third party survey to better understand what your market thinks differentiates you in the market.  Then use the information in your strategic planning process to help focus the team in the areas that require focus, either from a positive or negative aspect of the research.

 

For a better understanding of how you can use your market research to help your team focus on the high potential areas of your market, you might be interested in signing up for our Strategic Planning Tune-Up book.  To download, please click on Tune-up.

Denise Harrison is Executive Vice President and COO of the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.