Invent Business Opportunities No One Else Can Imagine 40 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 consider- 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. Job #1: Inventing the Future 41 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 pri- orities and actions with tomorrow’s envisioned strategic position. 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 42 Figure 2.1. Summary of Elements of a Strategic Position Elements 5 Years Ago Today 5 Years From Now Nature of the Business (What business are you in?) Future Customers (Who will be your customers in the future?) Future Competitors (Who will be your future competition?) Products and Services (What will be your future products and services?) Sales and Distribution Methods (How will you go to market?) Core Competencies (What skill sets and technologies will set you apart?) Source of Competitive Advantage (What will be your primary competitive advantage?) Job #1: Inventing the Future 43 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 back- ward from our imagined future to unfold a unique strategy. 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 free- dom of these uncertain times. Chapter 3 The 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 T he notion of “differentiate or die” isn’t extreme enough to describe 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 pro- fession isn’t good enough. Sustainable advantage is reserved for those who offer one-of-a-kind value to their preferred market niche. 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 48 When you are the only one to do exactly what you do in your industry, customers that want your value offering have no other choice but to come to you. Starbucks’ drinkers won’t accept Maxwell House. Nike customers won’t trade in their Air Jordans for a shoe from Reebok. Barry Manilow fans aren’t interested in tickets for a Madonna concert. Competing with a trendsetter is like following Elvis or the Beatles on The Ed Sullivan Show. While there are many trendsetter wannabes, the quest for unquestion- able originality is mastered by few. Witness the familiar industry scenario where everyone else plays catch-up to one recognizable trendsetter. Notice business ventures that have their fl ash of brilliance, only to fi nd that the competition copies or even exceeds their innovation. So what is the illusive magic in trendsetter strategies that enables them to sustain their astounding distinctiveness for years, even decades? 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 examin- 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. The Jerry Garcia Principle 49 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 guar- 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 [...]... innovation catalysts who have endured in their first-to-market position: Blockbuster Video, Coca-Cola, Dixie Cup, Dr Scholl’s (foot aids), Gillette (safety razor), Proctor and Gamble (Ivory Soap), Lea & Perrins (Worcestershire Sauce), Murine (eye care products), and 3M (Scotch Tape) And I would add to that list Canon, Charles Schwab, CNN, Edward Jones, 53 Invent Business Opportunities No One Else Can. .. technology, most people don’t realize that 51 Invent Business Opportunities No One Else Can Imagine 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 company’s steady dominance They are frustrated because Microsoft rarely conceives technological.. .Invent Business Opportunities No One Else Can Imagine minimally contested markets Even among their best customers, 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 Copycats No CEO would dream... the head of the pack, but slipped back to being replicators One or two strategic misfires were all it took to ignite the fall of a high technology empire, as demonstrated in the case of Apple in the early 55 Invent Business Opportunities No One Else Can Imagine 1990’s Business pundits have had a field day poking holes in Apple’s postMacintosh strategic blunders: • Slow to see the laptop market “Apple was... soon 57 Invent Business Opportunities No One Else Can Imagine follow In addition, they adapted the real-time model of the financial markets to the purchase of natural gas and electricity As a result, commercial customers could develop energy portfolios based on their choice of pricing by figuring in long- or short-term considerations, or going with the market index Enron is pioneering a new business. .. and Compaq.” (BusinessWeek, March 18, 1991.) • Failure to succeed in the business market “Sporadic and ineffective efforts over a decade have left the Macintosh with just 5.8 percent of the business market, not enough to excite software writers Now the Mac is behind in client/server programs, a must in corporate computing.” (BusinessWeek, October 3, 1994.) • Insistence on proprietary technology “Despite... following are examples of companies that created new 59 Invent Business Opportunities No One Else Can Imagine markets or regenerated existing markets by introducing new value, rather than going head-to-head with their competitors • Southwest Airlines created a new market by catering to travelers who would gladly fly, rather than drive, if someone scheduled flights to their short-hop destinations at reasonable... compelling innovations to the marketplace • Risk tolerance Innovation catalysts’ motto is: If it works, it’s obsolete They are willing to bite the bullet and lose money launching an innovation • Customer perception Innovation catalysts are viewed as pace setters for the industry When it comes to leading-edge products and services, customers have no other choice for doing business period Innovation catalysts... for innovation Innovation catalysts conceive of a trend long before it becomes frontpage news, and generate momentum that accelerates the trend and magnifies its expression in the marketplace For at least a brief window of time, innovation catalysts are certain of being the only one to do what they do They use expansive language like “creating something from nothing,” “pushing the envelope,” and “inventing... 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 profitability soars when nontraditional competitors that are off the copycat’s radar screen introduce innovations By contrast, here are two trendsetter strategies that invent new . 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. Murine (eye care products), and 3M (Scotch Tape). And I would add to that list Canon, Charles Schwab, CNN, Edward Jones, Invent Business Opportunities No One Else Can Imagine 54 Enron, Enterprise. are mas- ters of this strategy. In high technology, most people don’t realize that Invent Business Opportunities No One Else Can Imagine 52 Xerox invented the earliest prototype personal computer,