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Invent Business Opportunities No One Else Can Imagine40 Who will be your future competitors?. In a fi ve-year plan, for example, imaginative future planning looks at the desired strategic

Invent Business Opportunities No One Else Can Imagine

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Who will be your future competitors? Besides traditional competitors, this includes entire industries that might one day constitute competition For instance, Microsoft and First Data Corporation produce on-line bill-paying software, which allows consumers to pay bills with the stroke of a com-puter key—no need to write checks provided by a local bank Monster.com advertises jobs on-line nationwide, threatening one of the newspaper industry’s main revenue sources

What will be your future products and services? Go beyond product line extensions to invent products and services that introduce new value to targeted markets Which of your current customer segments are defi ning value differently? For example, has the Internet caused them to defi ne con-venience of service by a new standard?

How will you go to market? The we’ve-always-done-it-this-way approach

to sales and distribution should be treated as ripe for transformation Stockbrokers did virtually all their business by phone, until Charles Schwab and E-Trade introduced on-line trading Insurance policies, formerly sold exclusively by agents calling on prospects, are now available on-line Manu-facturers like Nike are jostling the supply channel by building their own retail stores and providing on-line ordering

What core competencies will set you apart? In his book Competing for the Future,

leading strategist Gary Hamel defi ned a core competency as, “a bundle of skills and technologies that enables a company to provide a particular ben-

efi t to customers.” For example, Cisco’s competence in managing strategic partnerships offers a steady supply of leading-edge technology solutions

to key accounts Starbucks’ brand management gives customers a reliable quality assurance behind its products Nike’s product design satisfi es the performance requirements of athletes and provides fashion for style-con-scious consumers Subway International’s competence in franchise opera-tions insures convenient access to products and consistent quality across the chain of stores

What will be your primary competitive advantage? The strategic ations of the fi rst six elements ultimately comprise the source of a trend-setter’s competitive advantage—how they deliver compelling and original value to their customers

consider-Job #1: Inventing the Future

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Rather than assuming current industry conditions will remain unchanged, imaginative future planning anticipates potential cat burglars and capitalizes on their destabilizing impact on the marketplace The envi-sioned strategic position—all seven elements—represents an enormous stretch from current reality and cannot be achieved in the short term.Plotting backward from the ultimate long-term strategic position, trendsetters determine a sequence of yearly foundational milestones, which describe the gradual changes in knowledge, technology, skills, culture, orga-nizational structure, and network of strategic alliances that comprise the journey to the intended strategic position

In a fi ve-year plan, for example, imaginative future planning looks at the desired strategic position in fi ve years and breaks it down to a sequence

of milestones that build on each other It asks the questions: To reach our intended strategic position fi ve years from now, where do we need to be in four years? Three years? Two? One?

Ultimately, this sequence of foundational milestones aligns today’s orities and actions with tomorrow’s envisioned strategic position

pri-Figure 2.1 on page 42 is an imaginative future planning tool used by my clients to insure that they systematically examine the various elements of a strategic position over a 10-year period Here’s how to use it:

By comparing your company’s position fi ve years ago to where it is today, you can diagram the historical progression of your strategy Fill

in the seven elements of a strategic position for both the “5 years ago” column and the “today” column What does the comparison reveal? Is the strategy basically incrementalism, with no substantial change in strategic position over fi ve years? Or do glaring changes in several of the seven ele-ments indicate a commitment to carving out a strategically advantageous position?

The goal of strategic innovation is to reach different answers for some,

if not all, of the elements for the column labeled “3-5 years from now.” Once the new elements are decided, write them on the chart, and compare them to the “today” column to notice the proposed degree of change This comparison prevents settling for play-it-safe incrementalism

Invent Business Opportunities No One Else Can Imagine

Future Customers (Who will be y

Future Competitors (Who will be y

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Scared, thrilled and free

Big Idea #1 reveals the trendsetter’s fundamental choice in bold relief—invent a future or accept whatever results future circumstances permit Getting in touch with your full capacity for entrepreneurial free-dom can be both scary and thrilling Depending on how you interpret the uncertain future, its emergence either threatens your past success or liber-ates you from the restraints of historic underpinnings

We are witnessing the best time in business history for working ward from our imagined future to unfold a unique strategy

back-Never before has there been such rich potential for targeting minimally contested market space and even inventing entirely new industries

Never before have market boundaries been so permeable, permitting entry to newcomers with imagination and ideas

Never before have the industry rule dictators been so consistently divested of market share by revolutionaries inventing the new rules

It is time to reexamine established strategies and capitalize on the dom of these uncertain times

3The Jerry Garcia Principle

The Jerry Garcia Principle

• 47 •

Chapter

3

“ You do not merely want to be considered the best of the best You want to be

considered the only one that does what you do.”

—Jerry Garcia of the Grateful Dead

the innovation required in today’s competitive environment A defi nition of the new standard came from an organization that achieved more than customer loyalty Jerry Garcia and the Grateful Dead created a cult that commanded the allegiance of fans for 30 years Credit goes to Jerry Garcia for coining the essence of Big Idea #2:

Big Idea #2: Be the only one that does what you do.

Keeping up with the traditional best standards of your industry or fession isn’t good enough Sustainable advantage is reserved for those who offer one-of-a-kind value to their preferred market niche

pro-To paraphrase Justice Potter’s famous

remarks about pornography, we know an

original company when see one There

is only one Nordstrom, one Crate and

Barrel, one Toys ‘R’ Us, one Disney, one

Victoria’s Secret, one McDonald’s, one

Microsoft and one Ritz-Carlton When

you look at celebrated individuals, there

is only one Martha Stewart, one Picasso, one Ralph Nader, and one Steven Spielberg

?????

How do you become known

as “the only one to do what you do”?

Invent Business Opportunities No One Else Can Imagine

Four prototypes for strategy development

Whether a business is primed for replication or innovation is refl ected

in the thinking of its strategists Eavesdrop on a meeting in the replicator camp and you might hear statements like: “We need to protect ourselves from making costly mistakes,” or “We’ll react fast once change in the indus-try solidifi es.” Eavesdrop on a trendsetter’s conversation and you might hear, “We’d better cannibalize our business before someone else does,”

or “Let’s watch where the industry is heading, then move in the opposite direction.”

The root assumptions held by senior management about competing, risk tolerance, and creativity determine how strategies unfold Without a change in the root assumptions, don’t expect a humdrum strategy to be transformed into trendsetting originality at the upcoming senior manage-ment retreat Nevertheless, few companies bother to lay bare the core assumptions that underpin their business approaches Now is the time

to clarify the root assumptions that reside in your company by ing the four basic prototypes for strategy development Here are two replicator strategies that build on the past—their own history and their competition’s

examin-The Jerry Garcia Principle

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Conformists

Change disturbs business routines, so conformists respond judiciously when customers make requests that don’t fi t their existing product and service offerings With moderate accounts or small market segments, they reply, “Sorry we don’t do that,” and treat the unusual appeal like an intru-sion rather than an opportunity For major accounts, they may reluctantly acquiesce

Here is an abbreviated scouting report on conformists:

• Trend sensitivity: Conformists focus most of their attention

on maintaining close connections with individual accounts or targeted customer segments They know what is happening at

a micro level, but fail to consider the big picture, or develop

a futuristic view of the market Macro opportunities elude them

• Risk tolerance: Conformists don’t read the handwriting on the

wall until their backs are against it They are unwilling to risk change unless they are left with no other options

• Customer perception: Conformists adequately serve well-known

needs in the marketplace They attract customers who are treading water, not progressive businesses that are swimming upstream to the future They are defi nitely not the supplier of choice for early adopters of innovation

• Strengths: Conformists do a good job of deriving maximum

earnings from their cash cows They expend minimal resources on R&D, market research, and educating custom-ers about new products and services Successful conformists have enough customers who are satisfi ed with having their basic requirements met—at least for now

• Weaknesses: Conformists’ strengths are also their weaknesses

On the surface, their well-defi ned niche appears to antee steady profi ts But underlying this seemingly enviable picture, the conformists’ concentration on their best cus-tomers prevents their seeking out and capitalizing on new

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minimally contested markets Even among their best ers, conformists pay attention only to well articulated needs, and remain oblivious to their customers’ unexpressed issues The result is lost opportunities for penetrating key business accounts or gaining an enlarged share of the consumer’s wallet

custom-Copycats

No CEO would dream of telling shareholders or employees, “Our compelling vision is to one day become a world class ‘me-too’ company!” Such an admission hardly inspires peak performance

Yet a large percentage of businesses actually communicate a disguised version of that message to their constituents They mask their true inten-tions with words like, “We realize that no company can predict the future accurately and we don’t want to waste money on risky ventures that go nowhere Let the competition try out innovations and take the risks If their innovation is a hit we’ll play catch-up.” Beneath the rhetoric lies the unvarnished truth: We choose to be followers We choose not to have an original strategy

The copycat strategy is a compromise It doesn’t address emerging tomer needs until the competitors’ moves clearly signal where the indus-try is headed Armed with the safety of numbers, the copycat follows the pack

cus-Copycats are always playing catch up to their industry’s trendsetters Think of Burger King chasing McDonald’s, Avis trying harder to catch Hertz, or McDonnell-Douglas following Boeing Think of Fujitsu behind IBM’s trail in mainframes, Reebok sprinting to keep pace with Nike, or Kmart in pursuit of Wal-Mart Colgate settles for seeing itself as “second

to Procter” and on a quest to be “another P&G.”

Here’s how to spot a copycat company:

• Trend sensitivity: Copycats are vigilant observers of their

com-petitors’ innovations They capitalize on trends only after the initial business opportunity has been developed

The Jerry Garcia Principle

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• Risk tolerance: Copycats act only when a new innovation has

proven profi table They let their competition do the fi testing

eld-• Customer perception: Copycats are among the fi rst targets of

price reduction negotiations

• Strengths: Copycats let their competitors absorb the costs of

R&D and initial marketing of new products or services Then they leverage the savings into a profi tability and pricing advantage

• Weaknesses: Copycats miss out on the advantages that come

with being fi rst to exploit a fresh opportunity: lucrative sales growth, improved market share, and higher margins They have to compete largely on price or special promotions once the innovation’s novelty wears off

Copycat strategies face serious jeopardy when a competitor comes

up with a hard-to-copy innovation or when the window of opportunity slams shut faster than anticipated This threat to profi tability soars when nontraditional competitors that are off the copycat’s radar screen intro-duce innovations

By contrast, here are two trendsetter strategies that invent new futures, but in different ways

Best of the bests

While they are never fi rst to market, best-of-the-best companies come

on like gangbusters once the innovation is launched Their goal is to unseat the originator in the minds of customers Unlike copycats, best of the bests aren’t satisfi ed with duplicating innovations Their objective is to master innovations more effectively than the originator When they are successful, the primary innovator’s name is forgotten The best-of-the-best company earns the brand equity

In the auto and electronics industries, Japanese manufacturers are ters of this strategy In high technology, most people don’t realize that

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Xerox invented the earliest prototype personal computer, the mouse, and point-and-click computing We only remember the companies that did it best, like Apple

In software, Microsoft’s competitors are dumbfounded by the pany’s steady dominance They are frustrated because Microsoft rarely conceives technological advances, yet winds up with the brand equity for the innovation Renowned for hiring the best and brightest, the company depends on this brainpower to quickly overtake a competitor’s budding innovation If Microsoft’s own talent can’t fi gure it out fast enough, look for Bill Gates and company to partner with the fi rst player to go to market

com-or acquire the necessary competencies And once the product is ready to ship, watch the massive Microsoft marketing machine stage a new product rollout that competitors can only envy

The book on best-of-the best companies contains these primary points:

• Trend sensitivity Best-of-the-bests know the key trends but

don’t synthesize the information to conceive business tunities They exploit trends by following the trail of the pri-mary innovators with the intent of catapulting past them in market penetration and name recognition

oppor-• Risk tolerance Best-of-the-bests are confi dent in their ultimate

ability to surpass the fi rst-to-market player They are willing

to risk missing a strong share of early sales, and require dence of a successful innovation before launching efforts to provide superior value

evi-• Customer perception Best-of-the-bests can’t be counted on to

lead the way to the future, but will eventually be major players

in bringing innovation to a defi ned market segment ers trust that best-of-the-best companies won’t entice them

Custom-to adopt some half-baked idea before it is user-ready

• Strengths Best-of-the-best companies have an outstanding

ability to acquire or develop mastery of a competitor’s vation, and execute it with even better profi ciency or prof-itability They rely heavily on their talented employees to