Creating Winning Strategies by Changing the Dialogue

In far too many companies, "strategy" has become a euphemism for planning or budgeting. The underlying - and unstated - assumption is that marketplace conditions are largely static: the future will be largely an extension of the past and, thus, all we need to do is optimize our current operations.

This assumption, unfortunately, has proved fatal in industry after industry. Just a few years ago, Motorola and Nokia were major cell phone players, Sun was a significant server manufacturer, Blockbuster was the source for many of us for at-home movie viewing, and Borders and Barnes and Noble were where we shopped for books...

To drive serious strategic discussions, you first need to accurately assess your source of competitive advantage. Here's a framework we've found useful:

Source of Competitive Advantage (worst to first):

1. Commodity with cost disadvantage

2. Commodity with cost parity

3. Commodity with 10% to 20% cost advantage

4. One-year offering development lead

5. Two-year offering development lead

6. Brand, patent, copyright

7. Owning the customer relationship

8. A string of dominant positions (for example, cost advantage + development lead + patent protection

9. Managing the value net or ecosystem

10. Owning the industry standard

Importance of Marketplace Insight

The first two, of course, confer no competitive advantage; unfortunately, a realistic assessment of their true competitive position would surprise many companies... Hence the importance of helping decision makers develop relevant marketplace insight. Answers to these critical questions will help:

• What are customers really buying? How are their preferences changing?
• What new initiatives are current competitors undertaking: operations, innovation, marketing, sales, customer service?
• What economic or regulatory trends will impact the industry?
• Which emerging competitors have the potential to change the nature of competitive dynamics?

Assessing the Consequences

Once the decision makers have grappled with these issues, they'll need to assess the impact on the organization, including:

• Systems and processes: Do we need to change our offerings development or production processes? Which need to be re-engineered? Which can we outsource? What support do we need from IT?
• People and skills: Do we need to retrain our existing workforce? Change our hiring requirements? Restructure the organization?
• Culture: Do we need to change the behaviors? If so, where? Only in specific functions? Or everywhere in the organization?
• Incentives: Do we have the right incentives in place? And how will we align these across the organization?
• Profits: How will we make money in the future? How can we protect our profit streams?

Creating Winning Strategies

With all of the above in hand, decision makers can proceed to the important work of re-allocating resources to create:

• Differentiated value propositions
• Innovation, operational and go-to market initiatives
• Organizational alignment

Challenging work, all this, since it means the nature of the strategic discussion must change, from planning / budgeting to strategy, from past to future and from business-as-usual to new business models. Importantly, it means changing mental models - how decision makers interpret information about the marketplace. And this, in turn, means creating opportunities for dialogue and debate, v. reading reports.

But it could mean the difference between organizational life and death.