Understanding your competitive advantage

Similar to the previous post, understanding the form of competitive advantage your organization or products hold is another critical component of forming a growth strategy, in combination with market growth potential, as well as lagging performance indicators such as profit generated.

Along the same lines, here is a rating methodology you might consider using with stakeholders to generate a collective view of competitive advantage at the granularity that is most relevant. One final comment is that low ratings may simply identify the need for innovation or repositioning, as opposed to depositioning or “sun-setting” product lines. It’s a current state view that needs to be combined with potential ratings and analysis.

Unique intellectual property:
You have a better model or it is based on information no one else has
1. Our product offerings are based on commonly available information and well-known models
2. Our offerings are built on current models and information but requires some related expertise to apply in a consulting situation
3. Our product offerings are built on current industry models and we have a high degree of specialized knowledge
4. Our product offerings are built on proprietary knowledge, a customized approach that is specific to the needs of the CU system, and specialized skills that aren’t readily available
5. Our product offerings are totally unique in the market, leveraging our position as the central, and employing internally developed processes and knowledge that is only available through us

Integrated product line: The continuity of using your products is better, creates a better outcome, is easier
1. This product line is in a category of its’ own, and does not integrate at all with other offerings
2. This product line is can easily be discussed in the same conversation as others, but doesn’t integrate
3. This product integrates through price bundling because it is somewhat related in nature and can be sold to the same decision maker
4. The product is somewhat effective when used in combination with other products, with some synergistic effect
5. The product is most effective when used in combination with other products, with a synergistic effect

Proven relationships:
You have built relationships that garner you loyalty with clients
1. This product is practically unknown and internal contacts which would be the decision maker are not identified
2. This product line has some general awareness in the system, but customers primarily seek to solve this problem independently whenever possible
3. We are known with our clients for offering this product, but the relationships built on this offering are inconsistent
4. This product is consistently a conversation starter with clients when we spend time with them
5. We have strong relationships with clients, who call us, about this product – because of its’ reputation

Dominant market player: You are considered a heavy hitter in the industry, and it is assumed there’s a reason why
1. This product offering is unknown in your target market
2. This product is largely unknown in your target market
3. While it is hit and miss, there are customers who know you and are very satisfied with this offering
4. Your market awareness has often been boulstered by the strong reputation for an ability to deliver this service well
5. You are considered the expert on this subject matter, within this market

Differentiation: Your product offerings are simply different / better
1. Customers see this product as an absolute commodity, something they can get elsewhere
2. Customers see this product as somewhat common, they have other options
3. Customers see this product as somewhat unique, there are few other options
4. Customers recognize the fact that the product offers value they can’t get elsewhere
5. Customers understand you deliver value that isn’t matched by any other supplier in this category

Understanding the attractiveness of your markets

Michael Porter developed a tool called the “Porter’s 5 forces” to help structure the analysis of market attractiveness. This can be used to understand potential markets, or existing markets. It’s important to understand both the forces that are acting on your business, as well as the opportunities for influencing them. Sometimes influence comes simply by changing your offering to generate competitive advantage, and in other cases it may act as impetus for actions like horizontal or vertical integration, lobbying for advantage with regulators, etc. It’s important to go further than simply talking about the forces, it’s important to create some form of rating in order to generate consensus building discussion.

This can be implemented at a market level, product category, or down to individual offerings, depending on what makes sense. While you don’t want to isolate your perspective to an internal view, there can be a lot of insight held within the collective minds of your teams. One way to generate data is to structure a stakeholder survey, with ratings, applied at the granularity you deem most relevant.

Here is a starting point if you choose to go down that road (below). Once you start generating this kind of data, you’ll probably want to continue the discussion into the future, because it’s essential to a lot of decision-making.

Sample survey methodology:

New Entrant Risk: The ease with which new competitors can enter the market if they see that you are making good profits (and then drive your prices down).
1. The barriers to other suppliers entering our market would be extreme from their perspective
2. The barriers to entry are high, but not insurmountable
3. The barriers to entry are moderate
4. The barriers to entry are minor, and act only as a mild deterrent
5. The barriers to entry are practically non-existent, it would be very easy to start competing with us

Buyer Power: The power of your customers to drive down your prices.
1. Buyers have no collective power over our pricing
2. Buyers have a minor degree of power over our pricing
3. Buyers have a moderate degree of power over our pricing; they can squeeze us a bit
4. Buyers collectively have a lot of power over our pricing
5. Buyers have power over our pricing changes through collective influence whenever they want

Threat of substitution: The extent to which different products and services can be used in place of your own. (this also drops both supplier power and the market attractiveness)
1. Clients have basically no substitutes for this product offering; they can neither get anything similar elsewhere nor replicate it in-house
2. Clients have less-than-ideal options for substitution, but they exist
3. Clients have some reasonable substitute options, ranging from doing it themselves to accessing the expertise in the different form
4. Clients have some solid substitution options that match our own value proposition
5. Clients have substitution options that could easily be perceived as better than what we provide

Supplier Power: The power of suppliers to drive up the prices of your inputs.
1. Suppliers have practically no control over input pricing, we can easily force the margins when we want
2. Suppliers have a bit of control over input pricing because of their strong reputation amongst limited suppliers
3. Suppliers have a reasonable degree of control over input pricing, and are in a position to occasionally negotiate in a healthy way
4. Suppliers have more control than we would like, and are effective in keeping the input prices reasonably high
5. Suppliers are in a dominant position, and have been able to successfully control the input prices higher than we want

Competitive Rivalry: The strength of competition in the industry.
1. There are very few competitors in our market, and their products are less attractive than ours
2. There are a few competitors than offer products, but they are generally not as attractive as ours
3. There are several competitors in the market, and their products are arguably similarly attractive
4. There are some significant competitors in the market, many of which have very attractive products and services
5. The competitors in our market are at least as strong as us, and their product offerings are equally attractive or more competitive

Benefits of strategy mapping

Strategy maps take a fair bit of work to “dial in”. The question many leaders have is whether it is worth the effort. I think: yes!

If leaders understand all of the inter-dependencies within the strategy (already), building a strategy map will take about 5 minutes. The fact that it takes much longer is representative of the idea that we don’t always understand our strategies as well as we think we do. So what is this new level of clarity comprised of?

1. Understanding inter-dependencies: How do each of your strategic objectives impact each other? Do they? Over time, if changes in performance levels of metrics don’t contribute to downstream improvements (linked objectives) then you may need to question whether the measure is appropriate, and whether the relationships between objectives are as real as you have theorized. This is a more sophisticated understanding of direction than discussing individual objectives individually.

2. Confidence in measurement: How do you know that you are measuring not only all of the right things, but only the right things? Every strategic objective should be linked to a measure, if they are in fact critically important. Without this context, your focus may be pulled around by “good measures” that may or may not be deeply linked with strategy. Measurement drives behavior, it’s essential that you’re ONLY measuring things that are relevant.

3. Resource expenditure / Project relevance: If your organization is investing effort into “improvement” projects that can’t be tied to your strategy map, you should question whether they are relevant at all. This is a great way to identify what you should be challenging, and where your “sacred cows” may be grazing.

The ability to represent the entire strategy on a single page is a huge advantage in communicating direction. Your goal of consistently communicating this through multiple levels of leadership will be greatly supported by having this kind of visual. It’s a creative exercise that you may find challenging, but the rewards of doing this well are many.

Outside the pack

I’m just going to go ahead and say it: Anything that is part of your strategic vision, and the directional statements that ian’t UNIQUE (vision, mission, values, objectives, strategies) is just noise; both to your employees and to your customers. Well-crafted visions always offer up clearly unique directional information about how your organization will achieve competitive advantage.

Why?

Anything that is generic will not create a competitive advantage, because it’s the same as what everyone else is doing. You need to find a unique way to create value, and predict where your capabilities match with emerging customer needs. Michael Dell didn’t change the computer industry by selling product through the business model everyone else was using. And Henry Ford didn’t set out to sell 5% more cars year over year; he set out to democratize the automobile industry.

A second reason why you need to differentiate your strategic framework is that no one pays attention to statements that could apply to one of a hundred different organizations or industries. In other words, you’re going to have a hard time inspiring your team to follow and contribute to the long-term goals. Example: “We will become the trusted first-choice for customers in whatever market we choose to serve” Yawn. What’s missing? Direction that relates to HOW you’re going to get outside the pack. Draw me a picture of what you’re going to do in a way that I can get excited about it! Tell me about your aspirations. What’s the product-market-customer mix you’re going after? Why does it matter?

Clearly positioning yourself outside the pack is often perceived as creating risk to leaders. After all, what if it fails? Maybe it’s safer to just compete on the same building blocks of advantage as everyone else: be in the ballpark for the value you provide and the price you charge. But what if you found a way to create value that made certain customers pay more attention to you? What if your employees got inspired about how your organization was going to outpace your competitors, and they started outlaying their discretionary effort more freely?

“The essence of strategy lies in creating tomorrow’s competitive advantages faster than competitors mimic the ones you possess today.” – Hamel & Prahalad

What is a strategist’s perspective?

Most of us would feel pretty comfortable describing ourselves on a resume as a strategic thinker. But have you ever thought about what a strategist’s perspective might entail? How is this unique from being someone who thinks about strategies? What distinguishes you from others in the room?

Adapting some concepts from strategy professor Terry Power at Royal Roads University, here’s one version of what a strategic perspective is and how to apply it on a continuous basis.
A strategist:

Always questions the assumptions that everyone else leaves unquestioned. If you pay attention to this in planning sessions, you’ll find a lot of decisions are made based on assumptions that have been carried for a prolonged period of time. This carries risk, because the validity of those assumptions may wane with time, and it’s possible that they weren’t absolutely accurate to begin with. An addendum to this is to avoid the tendency to give a pass to more senior leaders’ assumptions. They’re subject to the same realities as the rest of us.
Always seeks logical and fact-based information. Strategic thinking demands sound information sources.
Demonstrates an unwillingness to expend resources without questioning whether there is an alternative that is lower cost, or has no cost at all.
Looks for unpredictable approaches, rather than the expected. Strategies are only capable of creating a competitive advantage when they describe an approach that is unique from those you are competing against.

Strategy as a commitment, risk and time-frame

A big idea is not a strategy

Contrary to popular application, a vision or big idea is not a strategy. A strategy is how you align today’s actions to support tomorrow’s desired outcome, or overall aim. Here are a few ingredients that you’ll want to include:

A strategy involves a specific commitment

While terms are often interchanged, the end-state goal that you have envisioned for the future is not a strategy. A strategy is how you’re going about making that come to life, or reposition your organization. Because it describes how you’re going to achieve something, it can be translated down to specifics and hard numbers describing impact. If you can’t translate your strategy into objectives and targets, you may not have one.

A strategy involves taking a risk

As a leader, your primary job is to envision and operationalize strategy. This is all about being able to make change happen. If you are to be an effective leader, it’s important that you get used to taking professional risk, because your organization will only accomplish as much as you are prepared to promise, risk, and deliver.

A strategy involves a public commitment of what, how and when

Now that you know how you’re going to accomplish it, and you’ve committed to it publicly (so others can align in support of it), it’s time to make it time-bound. This is not a vision, it’s time to get specific about when you’re going to bring it to life. Inspiring others to achieve a strategy involves saying when it’s going to happen. Adjust if you need to, but be brave with what you’re committing to.

The clearer you get about what you want to achieve, the easier it is to get other people to help you bring it to life.

Glassdoor Reviews: How is greater transparency affecting your organization?

Softwareadvice.com just posted up the results of a recent study they completed on how job seekers are using Glassdoor reviews. I love new technologies that create transparency, like this, and I find it interesting to see how usage matures over time. Perhaps now is a good time to think about whether these emerging technologies will have any impact on your organization today, or in the next future. It’s not really a matter of if, rather when.

What are people saying about you?
Does this predict a future in which you’ll have to invest more resources in human capital in order to be able to acquire and retain the specialists you need to succeed?
Is that day here?
Or is it yet in the future?

Check out the new trends on usage of Glassdoor here, and think about what it means to your business.

Stop the insanity…

We’ve all heard the definition of insanity… “doing the same thing repetitively and expecting different results”. And yet in how many areas of our business, and personal lives do we fail to heed this wisdom?

When people feel stressed, they often want to move to finding a solution that is going to alleviate that tension. You’ve got some new targets. So, how can you do more of what you do, in order to hit those targets??!!

Before you go down that road, let’s talk about opportunities and limitations. I’ll guarantee you right now, 2 things:

1) There are opportunities around you that you haven’t identified yet
2) There are limitations that you think are real, but they aren’t

It’s a common tendency in middle management (and sometimes upper too) to bypass strategic thinking and jump into tactics and action planning. It feels like the fastest way to create more positive results. The problem with starting/staying with tactical thinking, without considering the strategy, is that you’re going to end up mostly doing the same things you have done before. There’s no path to change the game.

Consider the two points above. We all have flawed beliefs about what is possible. We set limitations, and manage to them. We sometimes recycle old information that was once true, but may no longer be.

I’ll make the following recommendations:

1) Drink in the fact that some of your beliefs are flawed. This will keep you on your toes about paying attention to new information.
2) Cyclically challenge the underlying assumptions behind your plans, and your beliefs about what is possible. Involve other smart people, not all of who share your views.

“We promise according to our hopes and perform according to our fears.”
-François de La Rochefoucauld

10 questions your executive should take seriously

You have a shiny new strategy. Congrats. Here are some questions to determine whether you’ve really thought it through. Selecting a strategy is exciting, but it requires due diligence or it can spell trouble for your organization. Questions like these may help move you from strategically “running with scissors” to being ready “to boldly go”. Best of luck.

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1.How will our strategies position us to beat the market?
– In what ways does it increase our dominance?
– What does “beating the market” mean, specifically, within the context of our business?

2.Are we leveraging any unique source of advantage, or allowing ourselves to compete on an open field with everyone else?
– In what ways are we tapping this?
– How can we increase this advantage?

3.Is our strategy granular and specific enough that it’s clear about where we’re going to compete in terms of market space?
– Can you describe the highest level strategy a hundred different ways, or do people tend to rattle of pre-scripted phrases?

4.How are we positioning ourselves ahead of trends, and which ones specifically?

5.Does our strategy rely on unique insight or commonly available information?
– Do we know something that is enabling us to gain advantage or are we working with the same information everyone else has?

6.Does the strategy balance commitment and flexibility? Commitment and flexibility are inversely proportional.
– Have we boldly selected a strategy / desired market position that isn’t generic to every possible future scenario?
– Have we committed to an extent that it’s clear to internal stakeholders what we’re doing?

7.Do we allow historically negative events to categorically limit our future stratagems?
– Are there options that get shot down without real consideration because of past events?
– Have we tested the current validity of the fundamental assumptions behind our strategy?
– Do we know what assumptions our choices are predicated upon?

8.Do we have a team that has demonstrated the ability to mobilize on and enact change consistently?

9.Is our highest level strategy translated down to a concrete action plan?

10.Is someone senior appropriately accountable for everything we refer to as a strategy?

Decision tree: Strategic Issue Resolution

How does your organization manage the resolution of strategic issues? Chances are, they pop up in executive strategy review sessions, as they should. Alternatively, you may also have meetings set aside to specifically address these emerging issues.

One of the challenges many organizations face is how to turn those discussions into defined action, how to consistently leave the room with firm decisions. I would suggest that while your emerging risks may be extremely complex, the initial decision making process doesn’t have to be. There are 3 things you need to leave the room with:

1) Obviously… The list of the issues/risks on your radar
2) A decision about which ones are real/operational in nature, and which ones are perceptual (don’t assume your customers are wrong often)
3) Accountability for the resolution

Here’s a decision tree you can use in your meetings:

Depending on your culture, and who is in the room with you, you may find that a framework like this simplifies decision making.

A issues: We know we’re prepared to resolve, who is going to do it
B issues: We aren’t prepared to act, hence we need to manage the issue differently
C issues: We have a percpetual issue, this is managed by a different group of people

For easier viewing: Right-click and copy the image, then drop it a word file. It’s fairly high res.