Too many businesses operate without clearly articulating their goals and the strategies that will help achieve them. Those that have established aspirational milestones as goals, such as “to be the largest regional player in my field”, often muddle their way along, either swept up in the rising tide of a growing category, or sadly, barely holding on financially. Breakthrough strategy setting can help in both these market situations.
Breakthrough strategy setting is a non-forgiving, no holds barred process. It does not accept mediocre performance. It measures progress along the way and it is dynamic, continually adapting and adjusting to changes in the marketplace. Leveraging this architecture can make breakthrough strategy a powerful growth and competitive tool.
Creating a breakthrough strategy can be the subject of an entire book. Here are the high points of the process.
Setting long-term innovation strategy – Long term strategies support three and five year goals. They are by definition, innovative. Without innovation, businesses cannot grow the bottom line effectively. There are two types of long term innovation strategy:
1. Sustaining innovation strategies are ones that build incremental features and benefits on an on-going basis. In the dry cleaning business, for example, one might add customer desired features such as after-hours drop off, phone messages confirming that an order is ready, automatic payment when picking up an order and other services that make it easy on the customer. These could be added one at a time, thereby building a sustainable series of benefits that delight customers.
Thinking about this type of strategy, we see it employed in the constant flow of incremental improvements being offered by smart phone providers. It seems each day a new feature is announced such as a slightly bigger or better screen or integration to car audio systems. This market is, in essence, a never ending battle between the major players to win a customer’s wallet using incremental, sustaining innovation as a primary tool.
Sustaining innovation strategies play a key role in keeping established businesses vital, relevant and growing, thereby avoid the “resting on our laurels” issue that can cause once-successful businesses to languish before dying.
2. Disruptive innovation strategies are ones where a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors. (Source: claytonchristensen.com). An example is the original PDA (Personal Digital Assistant) which disrupted the paper-based calendar and contact systems, some of which still support loyal customers (such as the FranklinPlanner system.)
Disruptive strategies start by gaining a niche among early adopters and progress to dominate the category. The emerging “wearables” market is one such example. While early in their development and experiencing a few cludgy interaction, size and functionality issues, some customers could not wait to buy these early products and begin using them. Thus, sales have begun at the “bottom” of this market.
Who wins? The chart at the right, developed by Disruptive Innovation expert Clayton Christensen compares and contrasts the potential for each type of strategy to win. Where initial performance is not a major factor, new entrants can win with disruptive technology. When it is key to day to day performance delivery, incumbents can sustain their business advantage with sustaining innovations.
Short term innovation strategy – Short term innovation strategy is about earning customer business and beating competition on a daily basis. What will motivate a customer to buy the product you are selling at the first moment of truth? (A.G. Lafley/Procter &Gamble view of customer interaction and winning their hearts and minds.) The first moment of truth is when the customer is front and center, considering what product or service will meet their immediate need.
Short term innovation strategy is about the best way to communicate a product’s benefits when a customer is in the market to buy. Innovation can be realized in the distribution system that supports that product, making it easy to obtain. One example of an innovative tactical support system is in Tesco’s home delivery distribution system.
Shown at the right is an ordering kiosk at Gatwick Airport in London, England. Vacationers typically empty their refrigerators in anticipation of heading out on holiday for a couple of weeks. This kiosk allows them to order groceries and dry goods while waiting for their flight out. It will be delivered to their home upon their return. The system tracks flights times to ensure the traveler has returned on time and will be available to accept their order when arriving at their residence.
Measuring strategic progress – Whether long or short term, strategies will succeed in their delivery when they are continually monitored against time and deliverable goals. As mentioned earlier, measurement is key to enabling course corrections along the strategic path. Setting up KPIs (Key Performance Indicators) is the basis for measuring progress.
Assume the long term strategy is a year into its activation. The growth projection begins to falter. What do you do? If you set up good KPIs they should point to key drivers of growth that are not developing as forecast. The next step is to develop insight into why the driver is falling short. Have customers “tried through” the solution and are now satisfied with an incumbent? The surge in gym memberships over the past few years has fueled significant expansion of gym facilities in almost every segment. That growth rate may be leveling off right now. If you were a franchisee in one of these gym networks, you would want to understand why so you could adjust – promote more flexible, lower cost memberships, add services such as spa treatments, or potentially even close locations.
Strategy management is not a “hail Mary” pass – Great strategy is realized by careful, thoughtful management of its direction. The leadership team should be discussing strategy regularly, at its periodic business review meetings, sometimes even daily, particularly when the strategy is first rolling out.
If you ever get to wondering why strategy management is so time consuming, perhaps this perspective from chess will help. Stick with it and you can win!
Longest Official Chess Match
The longest tournament chess game (in terms of moves) ever to be played was Nikolić vs. Arsović in 1989 and played in Belgrade, Serbia.
The marathon lasted for 269 moves and took 20 hours and 15 minutes to complete. And after ALL that, nobody won! Sometimes strategy management can be like a chess game, long, combative and with no clear winner. Keep at it and you can win, big.