Thursday, June 4, 2009

Strategies for uncertain times.

Strategizing today involves examining trends and developments like those mentioned yesterday, then turning them on their heads, and discovering the new opportunities that drop out. Since cars are in the news, remember that when Toyota first introduced Lexus in America, it didn’t just offer higher quality than its competitors at a 40% discount. Rather, Toyota built the car around a thorough review of the whole buying and service world experienced by prospective Lexus buyers. On the basis of that information, Toyota decided to sell Lexus cars through a unique new channel, one structured and managed to make customers feel special and valued. For Toyota, Lexus represented not just another new car, but a whole new way of doing business. As a result, exploding from a standing start in 1989, Lexus quickly outsold both Mercedes and BMW in the North American marketplace. I've owned a Lexus since 1992 and because of the excellent service and performance, I'd never want to own a different brand.

Great strategies are often based on developments outside the organization’s current field of knowledge or where discontinuities in technology, demographics or lifestyles are reshaping industry boundaries. These “white spaces” represent new areas of growth that fall between the cracks because they don’t naturally match the skills and capabilities of existing business units. Lew Platt believed his most important role in strategy formulation at Hewlett-Packard was to build bridges among the company’s various operations. He said, “My role is to encourage discussion of the overlaps and gaps among business strategies, the important areas that are not addressed by the strategies of individual businesses.”

The organizations that built the best sailing ships in the world didn’t learn to build steamships. The people who manufactured horse buggies didn’t build automobiles. Companies miss the future not because they’re stupid but because they’re blind. One of the problems of seeing the world in new ways is that the basic classification scheme built into our common speech and language directs us to observe the things we can readily classify with the names we’re already familiar with. We have a strong tendency to overlook or disregard everything else. So, as the surrounding environment changes, much of the information it generates gets ignored.

In a dynamic world, conventional wisdom is an oxymoron. Long years of experience in an industry can be a detriment rather than an asset. Since paradigms are only useful for a limited time, organizations need to constantly revise the models and ruling metaphors that guide their perceptions. Smart companies change before they have to. Lucky companies scramble and adjust when push comes to shove. The rest disappear.

When executing strategies in uncertain times, much of the route forward may be invisible from the starting point. The only way to see the road ahead is to start moving, because clarity emerges more readily from error than from confusion. Great strategies move organizations in the right direction and are quickly refined through rapid experimentation and adjustment. In a fast changing world, it’s especially important to get new products and services into the marketplace as early as possible rather than waiting to perfect them. Once they hit the market, no one can anticipate where that will lead or whether they’ll succeed or not. In a business environment where progress depends on serendipity and spontaneity, high risk and high rewards go hand-in-hand.

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