Disruption and Strategic Competency
Market disruption happens in just about every industry, no matter how mature it is. How is it that some players seem to shrug off or even thrive through disruption, while others are ruined? One of the keys to a successful response to disruption is strategic competency.
In our Simplified Strategic Planning seminar and our book on the subject, we defined a strategic competency as a combination of skills, processes and knowledge. This creates great value for your customers. in a truly unique way. The resilience of a company can be measured by the level of value and uniqueness that its core competency brings to its market.
When faced with the most destructive types of disruption, resilient companies inevitably undergo a strategic shift.
The disruption usually makes that company’s means of meeting needs in the marketplace irrelevant. As a result, the company usually shifts away from the old way of meeting customer needs. In some cases, this means a shift away from a product or technology. In others it could also be a shift away from a distribution channel or method of sale. This shift is critically dangerous to any company. Our success is generally built upon doing one thing (or type of thing) better than our competitors. To shed the old way means we are shedding our recipe for success. This is where strategic competency becomes a life or death issue. As the old way of succeeding loses value, a surviving company must find new ways to apply its strategic competency.
One example of this can be seen right now in the automotive industry.
Currently, the future of internal combustion engines becomes threatened by electric vehicles. So, many players are examining how their competencies can be successfully applied to the new technology. In some cases – people who sell seats or headlights, for example – the transition is simple and easy. For companies that make fuel system components and engine components, the transition is likely to be difficult. By focusing on applying their strategic competency, such companies can shift much of their successful activity into new applications.
An historical example of this exists in the print industry.
In the 1980s, Sears Roebuck saw a decline in catalog sales and began shifting their marketing approach. By 1993, they had stopped printing catalogs altogether. If you look back 20 years before that, the Sears catalog, which was very large, was a major part of the print industry. Some estimate that the Sears catalog accounted for 30% of the four-color printing capacity in the Midwestern United States. Clearly, this shift was a huge disruption for printers who specialized in this kind of work.
As all of the players tried to find work to fill their expensive, high volume, four color presses, it became clear there wasn’t more catalog business. Likewise, other traditional customers, like magazines, did not offer enough growth to fill the idle capacity. A few well-placed companies found one application that would benefit from the low-cost four-color process they had – newspaper inserts. While in 1970 there were very few four-color newspaper inserts, by 1995 they were everywhere, and made up a large part of ad revenue for newspapers.
Both examples show companies taking a manufacturing process and seeking to apply it to some new product.
This isn’t the only way to succeed with this approach. Companies have also succeeded by applying a completely different process to the old product. Others have responded by outsourcing many of their processes to focus on the core expertise that drives their strategic competency. In some industries, this approach has led to leading players who only provide a part of the value chain. One example of this is Nike, who designs and markets shoes but does not manufacture any shoes themselves.
These examples should illustrate the importance of understanding and using your strategic competency when you consider your response to disruption in your industry. If you would like to learn how best to know and apply your strategic competency, contact me to find out some of the ways we can bring this powerful approach to your company.
If you’re like most people, you’d benefit from having an experienced professional lead you through the strategic planning process. Then you can focus on the content of your strategies. If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings. Furthermore, they understand how to best use your planning time. Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.
Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc. He can be reached at rbradford@cssp.com.
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Author Robert Bradford