Category Archives: Strategy

Strategic Foresight Secrets to Success

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Strategic Foresight Secrets to Success

GUEST POST from Robyn Bolton

Convinced that Strategic Foresight shows you a path through uncertainty?  Great!  Just don’t rush off, hire futurists, run some workshops, and start churning out glossy reports.

Activity is not achievement.

Learning from those who have achieved, however, is an excellent first activity.  Following are the stories of two very different companies from different industries and eras that pursued Strategic Foresight differently yet succeeded because they tied foresight to the P&L.

Shell: From Laggard to Leader, One Decision at a Time

It’s hard to imagine Shell wasn’t always dominant, but back in the 1960s, it struggled to compete.  Tired of being blindsided by competitors and external events, they sought an edge.

It took multiple attempts and more than 10 years to find it.

In 1959, Shell set up their Group Planning department, but its reliance on simple extrapolations of past trends to predict the future only perpetuated the status quo.

In 1965, Shell introduced the Unified Planning Machinery, a computerized forecasting tool to predict cash flow based on current results and forecasted changes in oil consumption.  But this approach was abandoned because executives feared “that it would suppress discussion rather than encourage debate on differing perspectives.”

Then, in 1967, in a small 18th-floor office in London, a new approach to ongoing planning began.  Unlike past attempts, the goal was not to predict the future.  It was to “modify the mental model of decision-makers faced with an uncertain future.”

Within a few years, their success was obvious.  Shell executives stopped treating scenarios as interesting intellectual exercises and started using them to stress-test actual capital allocation decisions.

This doesn’t mean they wholeheartedly embraced or even believed the scenarios. In fact, when scenarios suggested that oil prices could spike dramatically, most executives thought it was far-fetched. Yet Shell leadership used those scenarios to restructure their entire portfolio around different types of oil and to develop new capabilities.

The result? When the 1973 oil crisis hit and oil prices quadrupled from $2.90 to $11.65 per barrel, Shell was the only major oil company ready. While competitors scrambled and lost billions, Shell turned the crisis into “big profits.”

Disney: From Missed Growth Goals to Unprecedented Growth

In 2012, Walt Disney International’s (WDI) aggressive growth targets collided with a challenging global labor market, and traditional HR approaches weren’t cutting it.

Andy Bird, Chairman of Walt Disney International, emphasized the criticality of the situation when he said, “The actions we make today are going to make an impact 10 to 20 years down the road.”

So, faced with an unprecedented challenge, the team pursued an unprecedented solution: they built a Strategic Foresight capability.

WDI trained over 500 leaders across 45 countries, representing five percent of its workforce, in Strategic Foresight.  More importantly, Disney integrated strategic foresight directly into their strategic planning and performance management processes, ensuring insights drove business decisions rather than gathering dust in reports.

For example, foresight teams identified that traditional media consumption was fracturing (remember, this was 2012) and that consumers wanted more control over when and how they consumed content.  This insight directly shaped Disney+’s development.

The results speak volumes. While traditional media companies struggled with streaming disruption, Disney+ reached 100 million subscribers in just 16 months.

Two Paths.  One Result.

Shell and Disney integrated Strategic Foresight differently – the former as a tool to make high-stakes individual decisions, the latter as an organizational capability to affect daily decisions and culture.

What they have in common is that they made tomorrow’s possibilities accountable to today’s decisions. They did this not by treating strategic foresight as prediction, but as preparation for competitive advantage.

Ready to turn these insights into action? Next week, we’ll dive into the tools in the Strategic Foresight toolbox and how you and your team can use them to develop strategic foresight that drives informed decisions.

Image credit: Gemini

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Company Power Strategy is a Team Sport

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Company Power Strategy is a Team Sport

GUEST POST from Geoffrey A. Moore

Company power is primarily a function of the amount of ecosystem support for your offerings, which in turn is due largely to the market-making opportunities you create for partners to resell or flesh out your whole product. Market share leaders enjoy the most extensive ecosystem support because their installed base creates the majority of partner opportunities.

Let me note, however, that in the context of our Hierarchy of Powers framework, market share is a misnomer. The correct phrase would be category share. That’s because in our taxonomy markets are defined by groups of customers whereas categories are defined by groups of competitors. When financial analysts talk about market share, they are referring to category share, and it is your share of the category that sets the upper bounds of the opportunities you can create for ecosystem partners, the percentage of the total category you can make available to the ecosystem.

After category share, the next most important determinants of company power are barriers to entry and barriers to exit, or what we often just call “stickiness.” Because sticky offerings create ongoing opportunities for up-sell and cross-sell, as well as resist being displaced by lower-cost competitors, they enable vendors to sustain above-commodity pricing margins for the life of the category.

Gorilla Royalty Game

The strongest form of stickiness comes from proprietary technology that is category-enabling, the kind that Oracle has had in databases, Qualcomm in smartphones, Microsoft in operating systems, and Intel in microprocessors. When a category consolidates around such companies, it creates a hierarchy of company power we call a Gorilla Game, entailing three roles — gorilla, chimp, and monkey. In the absence of proprietary technology, categories form an analogous hierarchy with much lower switching costs, something we call a royalty game, organized around a parallel set of roles — king, prince, and serf. Cellular telephony, Wintel PCs, WiFi networking, and DRAM memory chips all exemplify categories with this latter type of structure.

The difference in stickiness between these two hierarchies creates dramatic differences in market capitalization. In the gorilla game, the gorilla dominates the category for the entirety of its life cycle, and thus its market cap gets a very high premium indeed. Chimps also have proprietary technology, hence stickiness, but are not the market standard, hence more limited scope. Their best play is to develop an independent ecosystem organized around high-value use cases specific to particular vertical markets, the way the Unix workstation vendors competed successfully against PCs with CAD-like applications for cinema, semiconductor, oil exploration, fluid dynamics, and high-frequency trading. And finally, there is a very large market open to being served by monkeys who are able to clone the gorilla technology and deliver a plug-compatible alternative at a much lower price.

When it comes to royalty games, the absence of proprietary technology with high switching costs leads to a much more fluid hierarchy of power. The category leader is still the king, but it can be deposed by some up-and-coming prince, the way that Compaq displaced the IBM PC, the way that Micron can challenge Samsung in DRAMs, the way that Aruba can challenge Cisco in Wi-Fi. Here the low-cost providers, whom we termed the serfs, have an easier time gaining entry into a large and growing market, but a harder time sustaining even the most modest of margins, as there is always some hungrier low-cost competitor looking over their shoulder.

Overall, the key takeaway is that, while the gorillas and gorilla games get the bulk of the attention, especially from the investment community, all six of these strategies are perfectly viable provided you play within the parameters of your role. The key is not to hallucinate about what role that is.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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Your Legends Define Your Culture

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Your Legend Defines Your Company Culture

GUEST POST from Shep Hyken

It was about 50 years ago, in or around the mid to late 1970s, when a brand’s legendary story was born. This true story perfectly articulates this brand’s culture. It perfectly demonstrates how empowered employees should act and defines how customers should be treated. The story is Nordstrom’s legendary tire story.

The short version of the story is that a customer brought a pair of tires into a Nordstrom store in Fairbanks, Alaska, and asked to return them. He insisted he purchased them at that location. Craig Trounce, the store associate who was working that day, gave the customer a refund.

Obviously, Nordstrom doesn’t sell tires—and never did. However, in 1975, Nordstrom purchased three retail stores owned by Northern Commercial Company, which did sell tires. Once Nordstrom took over the stores, it restocked them with its own inventory, which didn’t include tires.

According to the story on the Nordstrom website, “Instead of turning the tires away, Craig wanted to do right by the customer, who had driven more than 50 miles with the intention of returning these tires. Knowing little about how tires are priced, Craig called a tire company to get their thoughts on how much the tires were worth. He then gave the customer the estimated amount, took the tires and sent him on his way.”

That story became the legend that defines Nordstrom’s culture. So, as a leader of your organization, what story does your company or brand have that defines your culture? If you don’t have one, maybe it’s time to find it. And it’s never too late.

John W. Nordstrom and his partner, Carl F. Wallin, opened their first store, a shoe store, in 1901. It wasn’t until 22 years later that they had their second store. In 1963 the store expanded beyond shoes and started selling clothing, and in 1971, the company went public and officially changed its name to Nordstrom.

The point is that it took almost 75 years for a company that already had a reputation for delivering an excellent service experience to create its legend. This single act of customer service has been told countless times in training sessions, books, articles and keynote speeches. It’s not just about tires or refunds. It’s about empowering employees to make good decisions. It’s about emphasizing a company’s culture. And if you could monetize it, how much money would a company have to pay to generate the positive PR this created for Nordstrom?

Many other companies have similar stories. Some of the more recognizable brands with “legend status” stories can be found through a Google search and include the Zappos 10-hour phone call that some say is an all-time customer service call record, the story of how empowered employees at the Ritz-Carlton are allowed to spend up to $2,000 to solve guest problems and many more.

So, what’s your legend? And if you don’t know, how do you find it?

I’m going to bet there is some account of how someone in your organization responded to a customer or did something of note that is worth sharing and turning into your version of the Nordstrom tire story. That’s the place to start. And the best way to go about it is to simply ask every employee to share their favorite story about how they created an amazing experience for one of your customers.

In this first round, don’t make this a huge writing assignment. Just ask for a few sentences. From there, someone (or a team) will sift through the responses and look for five or 10 that stand out. You’re looking for:

  1. moments in which employees went above and beyond
  2. situations that perfectly demonstrate your values
  3. stories that are simple to tell but powerful in impact

Then go back to the sources of these stories and ask for more detail. In a short time, you’ll have several great stories to consider. And in the process, you’ll also discover ideas based on these stories to turn into “best practices” examples that other employees can learn from and emulate.

Your service legend doesn’t need to involve tires or thousand-dollar gestures. It simply needs to authentically represent who you are as a company and what you stand for. The best legends aren’t manufactured. They’re discovered in the everyday actions of employees who truly understand and embrace your culture. When you find your story, celebrate it, share it and let it inspire the next generation of customer service excellence in your organization. After all, somewhere in your company today, an employee might be creating the next legendary story that will define your culture for years to come.

Image Credit: Pexels

This article originally appeared on Forbes.com

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Portfolio Management and Category Power

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Portfolio Management and Category Power

GUEST POST from Geoffrey A. Moore

Portfolio management is the most consequential and the most challenging element in strategic planning. There is typically a ton of data, but none of it can really speak to the host of underlying risks that underpin long-range investments in net new lines of business, ones that pay off primarily in the out years. The best one can do is leverage experience, frameworks, and pattern recognition to navigate what are inevitably uncharted waters. With that in mind, here are some things to keep in view.

  1. Category Maturity Life Cycle: Tornadoes versus Main Street. Who doesn’t want a growth portfolio? To get one, however, means your enterprise must have meaningful plays in categories that are undergoing secular growth. Secular growth happens when net new budget is being created for a new purchase category across a broad spectrum of customers, a phase in technology adoption we have termed the tornado. Once the tornado has passed, the category will have an established place in these customers’ budgets going forward, a stage in the life cycle we call Main Street, one that is characterized by cyclical growth. Cyclical growth rewards inertial momentum, the goal being to leverage incumbency to grow wallet share more than market share. Secular growth rewards disruption, the goal being to displace an established profit pool by leveraging an emerging one. These dynamics transcend the efforts of most companies to influence (gorilla leaders being the exception), so assessing category power is first and foremost getting clarity on the hand you have been dealt. That will shape your ambitions for next year’s performance and set a baseline for future investment.

  2. Valuation: Growth investors versus value investors. Both forms of growth, secular and cyclical, are valued by investors for their respective risk-adjusted returns, but in different ways for different reasons. Growth investors are looking for a big pop and are willing for you to take considerable risk to get it. Value investors by contrast seek predictably consistent performance—an earnings-oriented approach that outperforms bonds with a minimum of additional risk. Both groups discount the value of the other group’s approach which exposes the market cap of established enterprises to a “conglomerate discount,” a painful penalty given that their stock is the major currency that will fund any M&A. Managing for shareholder value, in other words, gets hung up on the question, which shareholders? The reality is that most publicly held companies have a mix across the board, so the salient issue to address is how much of our operating budget should we commit to the current year versus the out years? Having a principled discussion on this topic leading to a definitive commitment is essential to creating a coherent strategy.

  3. Capital market status: PE-backed versus publicly held. Strategic planning in privately held enterprises is typically more straightforward because the board of directors representing the investing firms share a common approach to risk-adjusted returns. This is why when publicly held companies like Dell reach a crossroads that requires a patch of difficult sledding, they choose to take themselves private in order to accelerate their course corrections. The price to pay for this option is committing to operating principles, performance milestones, and a management discipline that meets the PE investors’ approval.

  4. Leveraging M&A: Incubate before you commit. Pundits like to claim that most M&A transactions fail to deliver on their promise (although recent research puts the odds at closer to fifty-fifty). Some of the failures, however, are self-inflicted wounds that can be avoided by taking a multi-step approach. If your enterprise has a venture investment capability, taking positions in disruptive start-ups with observer rights is a good way to test the waters. In parallel, the goal is to incubate comparable initiatives internally and get them into the market as trial balloons. The difference between this and the early-stage venture model is that you cannot wait for these organic efforts to scale—it will simply take too long. So, you are not trying to win the game with your new offers, just learn it. Sooner or later, you will turn to M&A to acquire something of meaningful mass, the difference being, because you have spent the intervening time in the market competing, you will be a much more knowledgeable acquirer than you otherwise would be.

  5. Synergy management: Year One is the one that matters most. Value-oriented M&A is intended to consolidate mature categories with cyclical growth. It is based on an inside-out approach to cost reduction focusing on eliminating duplicated functions, typically in the back office and the supply chain. Growth-oriented M&A, by contrast, takes an outside-in approach focusing on accelerating bookings and revenues through a series of go-to-market and customer success initiatives. When a smaller high-growth enterprise gets acquired by a larger, slower-growing one, the opportunity is to galvanize the latter’s existing customer base and ecosystem relationships, as well as its global sales and service footprint, to capture market share under highly favorable selling conditions. The trick is to do this quickly, while the iron is still hot, and that requires special incentives and strong management support to build trust between the old and new guards and to overcome the initial inertial resistance that accompanies any acquisition. In sum, what looks good on paper could very well be good in actual fact, but only after you execute Captain Picard’s famous dictum: Make it so!

  6. M&A integration: Year Two is the one that matters most. If the first year is all about getting the go-to-market right as fast as possible, the second is about creating lasting relationships that will enable the two enterprises to operate as one. There are four areas of interest here—the product team, the sales team, the management team, and the culture overall—and each one calls for a slightly different approach. The single most important outcome is to keep the product talent in place—they have the keys to the new kingdom. The sales team can and normally should continue to function as an overlay during the second year, but in parallel a transition to an integrated organization must begin so that in Year Three the overlay is eliminated. The management team is a wild card. Despite all the best intentions on both sides of the table, including vesting incentives of various kinds, entrepreneurial CEOs rarely stay, nor should they. The skillset for disrupting does not translate well into the skillset for scaling and optimizing. This suggests that from the outset a leadership transition should be on the table, typically enlisting an up-and-coming executive from the acquiring enterprise to personally throw themselves into the gap and pull the two organizations together leveraging every talent and tool they have. Finally, large enterprises necessarily entail an enormous amount of process management, something that goes against the grain of entrepreneurial culture, so one needs to tread carefully here, with the understanding that long term there can only be one enterprise, and by virtue of its scale, it will be process-driven for much of its day-to-day work. To promise the acquired company anything else will only create disillusion and disintegration down the line.

  7. Decision Time: To play or not to play. There is no formula for making transformational decisions, but there are some guidelines to keep in mind. The first is few, and far between. Transformations are disruptive to the core business that is funding your overall operation, and it takes time for everything to stabilize around a new portfolio. A second principle is existential threat. If the emerging category obsoletes a pillar of your core business, the way digital photography obsoleted film, the way that streaming is obsoleting conventional TV, then you must take action. Absent such a forcing function, a third principle to consider is value to the existing customer base, with the corollary of opportunity for our existing ecosystem. In other words, does the world want you to do this? Transformation takes a village, and it matters a great deal how much your constituencies will lean in to help you through it. Finally, when your competitors hear about this, will they smile and laugh, or will they say Oh sh*t! If the latter, it just puts icing on the cake.

  8. Plan B: Leverage the updraft. The stars have to align to make any transformational portfolio play work, and sometimes they simply won’t. Plan B is to incorporate a portion of the tornado category into your existing portfolio as a supplement. Take Gen AI, for example. You don’t have to be in the category like Open AI or Anthropic to participate in the new spending. Virtually any enterprise application can benefit from a Gen AI bolt-on to improve the user experience or simplify the administrative one. Prior experiences with adding mobile applications and digital commerce to legacy systems have delivered similarly positive returns. You don’t have to be in the lead, but customers do want to see you are still in the game, and assuming you show up with a working product, they are more than happy to consume it.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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Re-Framing Your Strategy for the Chaos of 2025

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Re-Framing Your Strategy for the Chaos of 2025

GUEST POST from Geoffrey A. Moore

Spring is in the air, which brings to mind the season’s favorite sport — no, not baseball, strategic planning! Let’s face it, 2025 has been a tough year for most of us (and it’s still early days), with few annual plans surviving first contact with an economy that was not so much sluggish as simply hesitant. With the exception of generative AI’s growing impact, most technology sectors have been more or less trudging along, and that begs the question, what do we think we can do with the rest of 2025? Time to bring out the strategy frameworks, polish up those crystal balls that have been a bit murky of late, and chart our course forward.

This post will kick off a series of blogs about framing strategy, all organized around a meta-model we call the Hierarchy of Powers:

The inspiration for this model came from looking at how investors prioritize their portfolios. The first thing they do is allocate by sector, based primarily on category power, referring both to the growth rate of the category as well as its potential size. Rising tides float all boats, and one of the toughest challenges in business is how to manage a premier franchise when category growth is negative. In conjunction with assessing our current portfolio’s category power, this is also a time to look at adjacent categories, whether as threats or as opportunities, to see if there are any transformative acquisitions that deserve our immediate attention.

Returning to our current set of assets, within each category the next question to answer is, what is our company power within that category? This is largely a factor of market share. The more share a company has of a given category, the more likely the ecosystem of partners that supports the category will focus first on that company’s installed base, adding more value to its offers, as well as to recommend that company’s products first, again because of the added leverage from partner engagement. Marketplaces, in other words, self-organize around category leaders, accelerating the sales and offloading the support costs of the market share leaders.

But what do you do when you don’t have company power? That’s when you turn your attention to market power. Marketplaces destabilize around problematic use cases that the incumbent vendors do not handle well. This creates openings for new entrants, provided they can authentically address the customer’s problems. The key is to focus product management on the whole product (not just what your enterprise supplies, but rather, everything the customer needs to be successful) and to focus your go-to-market engine on the target market segment. This is the playbook that has kept Crossing the Chasm on entrepreneur’s book lists some thirty years in, but it is a different matter to execute it in a large enterprise where sales and marketing are organized for global coverage, not rifle-shot initiatives. Nonetheless, when properly executed, it is the most reliable play in all of high-tech market development.

If market power is key to taking market share, offer power is key to maintaining it, both in high-growth categories as well as mature ones. Offer power is a function of three disciplines—differentiation to create customer preference, neutralization to catch up to and reduce a competitor’s differentiation, and optimization to eliminate non-value-adding costs. Anything that does not contribute materially to one of these three outcomes is waste.

Finally, execution power is the ability to take advantage of one’s inertial momentum rather than having it take advantage of you. Here the discipline of zone management has proved particularly valuable to enterprises who are seeking to balance investment in their existing lines of business, typically in mature categories, with forays into new categories that promise higher growth.

In upcoming blog posts I am going to dive deeper into each of the five powers outlined above to share specific frameworks that clarify what decisions need to be made during the strategic planning process and what principles can best guide them. In the meantime, there are still three more quarters in 2025 to make, and we all must do our best to make the most of it.

That’s what I think. What do you think?

Image Credit: Pexels, Geoffrey Moore

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ChatGPT Blew My Mind with its Strategy Development

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ChatGPT Blew My Mind with its Strategy Development

GUEST POST from Robyn Bolton

It’s easy to get complacent about your strategy skills.  After all, our yearly “strategic planning” processes result in quarterly “strategic priorities” that require daily “strategic decisions.” So, it’s reasonable to assume that we know what we’re doing when it comes to strategy development.

I’ll admit I did. After all, I’ve written strategic plans for major brands, developed strategies for billion-dollar businesses, and teach strategy in a Masters program.

I thought I knew what I was doing.

Then ChatGPT proved me wrong.

How it Began

My student’s Midterm assignment for this semester is to develop, recommend, and support a strategy for the companies they’ve studied for the past seven weeks. Each week, we apply a different framework – Strategy Kernel, SWOT, Business Model Canvas, Porter’s 5 Forces, PESTLE, Value Chain – to a case study. Then, for homework, they apply the framework to the company they are analyzing.

Now, it’s time to roll up all that analysis and turn it into strategic insights and a recommended strategy.

Naturally, they asked me for examples.

I don’t have a whole lot of examples, and I have precisely none that I can share with them.

I quickly fed The LEGO Group’s Annual Report, Sustainability Report, and Modern Slavery and Transparency Statements into ChatGPT and went to work.

Two hours later, I had everything needed to make a solid case that LEGO needs to change its strategy due to risks with consumers, partners, and retailers. Not only that, the strategy was concise and memorable, with only 34 carefully chosen words waiting to be brought to life through the execution of seven initiatives.

Two hours after that, all of my genius strategic analysis had been poured into a beautifully designed and perfectly LEGO-branded presentation that, in a mere six slides, laid out the entire case for change (which was, of course, supported by a 10-page appendix).

The Moment

As I gazed lovingly at my work, I felt pretty proud of myself. I even toyed with the idea of dropping a copy off at LEGO’s Back Bay headquarters in case they needed some help.

I chuckled at my little daydream, knowing no one would look at it because no one asked for it, and no implementers were involved in creating it.

That’s when it hit me.

All the reasons my daydream would never become a reality also applied to every strategy effort I’ve ever been part of.

  • No one looks at your strategy because it’s just a box to check to get next year’s budget.
  • No one asks for it because they’re already working hard to maintain the status quo. They don’t have the time or energy to imagine a better future when they’re just trying to get through today.
  • No one responsible for implementing it was involved in creating it because strategy is created at high levels of the organization or outsourced to consultants.

What the strategy is doesn’t matter.*

What matters is how the strategy was created.

Conversation is the only way to create a successful, actionable, and impactful strategy.

Conversation with the people responsible for implementing it, they people on the ground and the front lines, the people dealing with the ripple effects of all those “strategic” decisions.

How It’s Going

Today, I’m challenging myself—and you—to make strategy a dialogue, not a monologue. To value participation over presentation. Because strategy without conversation isn’t strategy at all—it’s just a beautiful document waiting to be forgotten.

Who are you inviting into your next strategy conversation that isn’t usually there but should be? Share in the comments below.

Image credit: Pexels

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Good Management is Not Good Strategy

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Good Management is Not Good Strategy

GUEST POST from Greg Satell

One of the most annoying things I hear from leaders is that “we had a great strategy, but just couldn’t execute it.” That’s simply not possible. If you can’t execute it, it’s not a great strategy. Most likely, it was a fantasy cooked up by some combination of consultants and investment bankers which was enshrined in PowerPoint.

As Richard Rumelt points out in his book, The Crux, planning is not strategy. Yet that’s what managers are good at, so when they set out to create a strategy they build a plan, starting with objectives and working back to resources and operational directives, rejiggering assumptions along the way to make everything fit.

Good strategy doesn’t rely on assumptions. It changes them. When you look at visionary leaders, like Ray Kroc and McDonalds, Charles Lazarus at Toys “R” Us or Thomas Watson Jr. and the IBM 360, they all focused on solving an emerging problem. The truth is that the next big thing always starts out looking like nothing at all. Good strategy creates something new.

Defining A Problem And It’s Crux

Managers lead through objectives, or what they call in the military commander’s intent, to achieve a desired end-state. To achieve these objectives, good managers make plans, allocate resources and delegate authority to direct action. They monitor progress, give advice and guidance, and maintain an atmosphere of accountability and good morale.

But how are objectives determined? Is the prescribed end-state really desirable? Is it achievable and meaningful? As Rumelt points out, without a true strategic process in place, objectives tend to be tied to financial goals that are easily measured, such as “We want to achieve 15% revenue growth, while improving profit margins and increasing market share.”

Good strategy starts with defining a problem that addresses a particular market reality. Kroc designed McDonalds to fit with an emerging suburban lifestyle. Lazarus came up with the “everyday low price” at Toys “R” Us to solve for the huge inventory swings that sale events caused. Watson bet the company on the IBM 360 because the lack of compatibility among IBM’s machines was slowly killing the company.

Rumelt calls these “gnarly challenges” because none of them had obvious solutions, or even clear alternatives to choose from. Fast food franchises didn’t exist when Kroc got into the business. Most toys stores continued with sales even after Toys R Us came to dominate the industry. None of IBM’s competitors made a similar investment in compatibility.

What most people miss about strategy is that it’s not simply about making choices among defined alternatives. Innovation is never a single event, but a process of exploration, engineering and transformation.

What Do We Know?

Because good managers are so operationally oriented, their minds tend to focus on what they see every day. So in a typical leadership team, the CFO worries about financial and economic data, the CMO follows consumer trends, the CIO is concerned about shifts in technology, the CHRO takes note of changes in the workforce and so on.

When we first start working with a team we do something called a PDO analysis (Problems, Disruptions & Opportunities) to begin to uncover relevant challenges. What I always find interesting is how often some team members are completely unaware of issues that others consider dire threats or important opportunities.

With some further discussion and analysis, we can begin to pare down the list and prioritize a limited number of challenges. We discuss what makes them important and difficult to solve. We ask questions like, “What’s the potential impact these could have on the business?” and “How much do we actually know about them?” “Where we can find out more?”

During this exploration phase, it is important to stay disciplined and curb action-oriented managers’ tendency to want to jump immediately to a solution. At this stage, we mainly want to better understand what the desired end state might look like. Only then can we start to build a strategy to tackle the problem.

What Can Be Done?

The most salient aspect of any journey is that you don’t end up where you started. As you explore the challenges your organization faces, you will encounter insights that lead definable alternatives. You will need to make choices about, as A.G. Lafley and Roger Martin have put it, where to play and how to win.

Yet as I’ve pointed out, strategy is not a game of chess, in which we patiently move inert pieces around a well defined board of play. We need to learn to leverage ecosystems of talent, technology and information from a variety of sources, including partners, suppliers, customers and open resources as well, as from within our organization itself.

That’s why strategy isn’t made in a conference room and doesn’t live on a PowerPoint deck. It reveals itself over time. What we can do is choose a path forward, which means that we leave some attractive alternatives behind. Great businesses like McDonalds, Toys R Us and the IBM 360 didn’t arise from a flash of insight, but emerged as successful initiatives were built upon and failures discarded.

Yet it takes discipline to be able to continue on a chosen path while at the same time retaining the flexibility to adapt as the marketplace evolves. My friend Ed Morrison, whose Strategic Doing framework helps build strategies for collaborative problem solving, recommends holding monthly 30/30 meetings, which review the last 30 days and plan for the next 30.

Good Strategy Isn’t “Right,” But Becomes Less Wrong Over Time

As Mike Tyson has pointed out, “everybody has a plan until they get hit,” which is why we need to take a more Bayesian approach to strategy, in which we don’t pretend that we have the “right” strategy, but endeavor to make it less wrong over time. Good strategy isn’t a plan, but a set of choices made about how to address meaningful challenges.

Ray Kroc didn’t invent the Egg McMuffin at McDonald’s, but his strategy of allowing franchisees to experiment gave birth to it and many other things as well. Charles Lazarus started with a baby furniture store, but his quest to find repeat customers led him to create Toys “R” Us and pioneer the category killer. Thomas Watson Jr. bet the company on the IBM 360, but it was the decision to move to an 8-bit byte that would revolutionize the computer industry. None of these were planned for.

Today, we need to shift our mindset to compete in an ecosystem-driven world in which our ability to compete is no longer determined by what we can command and control, but what we can access. That’s why we need to abandon the fantasy that making a strategy successful is just a matter of executing a series of predetermined moves.

Good strategy is not a function of good management, but a process of discovery. Managing by metrics will always be limited to what came before and cannot see what lies ahead. We need to learn how to identify grand challenges that shift the competitive environment and change perceptions of what is possible.

The essence of a good strategy, as Richard Rumelt noted in Good Strategy/Bad Strategy, is that it brings relative strength to bear against relative weakness in the service of solving a meaningful problem.

— Article courtesy of the Digital Tonto blog
— Image credits: Unsplash

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Shifting Mindsets to Compete in an Ecosystem-Driven World

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Shifting Mindsets to Compete in an Ecosystem-Driven World

GUEST POST from Greg Satell

In 1980 Harvard professor Michael Porter published Competitive Strategy, which recommended that firms create advantage by driving efficiencies throughout the value chain and mastering competitive forces by maximizing bargaining power. These concepts drove corporate thinking for decades.

Yet as AnnaLee Saxenian explained in Regional Advantage, around the same time that Porter’s ideas were ascending among CEOs in the establishment industries on the east coast, a very different way of doing business was gaining steam in Silicon Valley. The firms there saw themselves not as isolated fiefdoms, but as part of a larger ecosystem.

Competitive advantage can no longer be reduced to the sum of efficiencies in a value chain, but is embedded in webs of connections. To compete in an ecosystem-driven world, Leaders need to do more than adapt how we deploy assets, we need to look at things differently. It is no longer enough to merely plan and direct action, we need to inspire and empower belief.

Shifting From “Compel And Control” To “Access And Empower”

In the 1920s Henry Ford built the almost completely vertically integrated River Rouge plant. Because the company had the ability to produce just about every facet of its product itself (the plant even had its own steel mill), it had tremendous control over the value chain, making it virtually immune to the bargaining power of suppliers.

However, as the industry matured, other companies began to specialize in particular components. Ford, unable to compete in so many directions, became integrated into the larger ecosystem. In fact, during the financial crisis in 2008, the company’s CEO, Alan Mulally, said this in testimony to Congress:

“In particular, the collapse of one or both of our domestic competitors would threaten Ford because we have 80 percent overlap in supplier networks and nearly 25 percent of Ford’s top dealers also own GM and Chrysler franchises”

In a value-chain-driven world, Ford would have welcomed its competitors’ demise. In an ecosystem-driven-world, however, their collapse would damage nodes that the company itself depended on. Clearly, the principles of competitive advantage have changed. Today your fate depends less on the assets and capabilities you control, than what you can access.

That, in essence, is why we need an ecosystem strategy. Control has become a dangerous illusion. It’s what led to the demise of the East Coast technology companies such as DEC and Data General that AnnaLee Saxenian wrote in her book. By seeking full control of their value chain, they cut off connection to important parts of the ecosystem. When the market and technology shifted, they were left on their own island.

Building Silos Of Excellence

It’s become so common for pundits to complain about organizational silos that few even think about what it means anymore. Why do silos form in the first place? Why do they persist? If silos are so egregious, why are they so common? And once we get rid of them, what takes their place? To “break down silos” and not ask these questions is just lazy thinking.

Silos aren’t necessarily a bad thing. Essentially, they are centers of excellence. It’s true that people who work closely together naturally form a working culture and tacit domain knowledge that can be hard for others to penetrate, but breaking those units apart can undermine the important work they do.

Another problem is that when you reorganize to break down one kind of silo, you inevitably create others. If, for example, your company is organized around functional groups, then you will get poor collaboration around products. But when you reorganize to focus on product groups, you get the same problem within functions.

The truth is that you don’t want to break down silos, you want to connect them. What we need to learn is how to network our organizations to help silos become interoperable with other silos that have complementary resources and areas of areas of expertise. That, essentially, is what an ecosystem is, a network of interoperable networks.

Paradoxically, we need silos of excellence to provide value to the ecosystem in order to get value out. The best way to form a connection is to have something attractive that others want to connect to.

Connecting Silos To Leverage Platforms

It’s become clear that no organization can survive focusing exclusively on capabilities it owns and controls. Today, we need to leverage platforms to access ecosystems of technology, talent and information from a variety of stakeholders, including customers, partners, vendors and open platforms. Yet, that is often easier said than done.

The truth is that while platforms offer enormous possibilities to scale, they also have deep vulnerabilities. Yes, platforms can help connect to capabilities and assets, but they are no substitute for a sound business model that creates, delivers and captures value. That was one problem with Uber, it created connection, but little else.

Organizations that successfully leverage platforms do so with silos of capability at the core. Amazon has leveraged decades of investment in building an unparalleled logistic capability to create a dominant commerce platform. In a similar way, IBM has leveraged its expertise in quantum computing to create a network of like-minded organizations. Corporate Venture Capital (VC) funds leverage industry expertise to access entrepreneurial innovation.

There are a number of ways even small firms can leverage platforms to access ecosystems. The Manufacturing USA Institutes cater to small and medium sized firms. Local universities are often overlooked resources to access deep expertise. Harley Owners Groups are a great example of how firms can leverage their own customer networks.

Strategy Is No Longer A Game Of Chess

Traditionally, strategy has been seen as a game of chess. Wise leaders survey the board of play, plan their moves carefully and execute flawlessly. That’s always been a fantasy, but it was close enough to reality to be helpful. Organizations could build up sustainable competitive advantage by painstakingly building up bargaining power within the value chain.

Yet as Rita McGrath has pointed out, it’s no longer as important to “learn to plan” as it is to “plan to learn.” Today, a better metaphor for strategy is an online role-playing game, where you bring you certain capabilities and assets and connect with others to go on quests and discover new things along the way.

Unlike chess, where everyone knows that their objective is to capture the opponent’s king, in today’s ecosystem-driven world the basis of competition is in continuous flux, so we cannot be absolutely sure of the objective when we start out, or even if our opponent is really an opponent and not a potential ally.

That’s why strategy today requires a more Bayesian approach in which we don’t expect to get things right as much as we hope to become less wrong over time. As I wrote in Harvard Business Review some years ago, “competitive advantage” is no longer the sum of all efficiencies, but the sum of all connections. Strategy, therefore, must be focused on deepening and widening networks of information, talent, partners, and consumers.”

— Article courtesy of the Digital Tonto blog
— Image credits: Pixabay

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5 Business Myths You Cannot Afford to Believe

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5 Business Myths You Cannot Afford To Believe

GUEST POST from Shep Hyken

Sometimes a business idea or strategy seems to make total sense. Yet once it is implemented, it turns out to be a mistake. We rely upon research, stories and data to help us formulate what might work best. It’s okay to fail. But if you already know something is wrong, don’t make it worse by relying on a flawed business strategy.

I’ve taken some of my favorite topics I’ve researched and written about over the years and uncovered five myths that, while seeming to make sense, could cost you money, customers and maybe even your business. So, with that in mind, here are my five favorite business myths and the explanations behind why believing them cost your organization dearly.

  1. A Repeat Customer Is a Loyal Customer – The customer keeps coming back, so they must be loyal … wrong! Just because a customer comes back doesn’t always mean they love you. You must find out why they keep coming back. Maybe you have a physical location that is two miles closer than your competitor’s location. What if a competitor builds a store between you and your customer? You may find out they were loyal to your location and not to you. Or maybe your price is the lowest. If that’s what the customer loves, guess what happens when your competition offers a lower price? It turns out they were loyal to their wallet, not your store. There are a number of reasons customers come back that have nothing to do with how much they love the experience of doing business with you. But when you find someone who is truly loyal, keep doing what they love about you, and you may have them forever.
  2. We Want Satisfied Customers – This is a perfect follow-up to A Repeat Customer Is a Loyal Customer. No, you don’t want satisfied customers. You want loyal customers. In my customer service and CX research (sponsored by RingCentral), we asked more than 1,000 U.S. consumers if they were to rate an experience as “average” or “satisfactory,” how likely would they be to come back. Almost one in four (23%) said if they had a satisfactory experience, they would not be likely to or would never come back. Satisfactory is average, and the first opportunity the customer has to do business with a place that’s even slightly better than average, it’s a good possibility that they will move on.
  3. Only the Front Line Needs Customer Service Training – Customer service is not a department. It’s a philosophy that everyone in an organization must embrace. Everyone either deals directly with a customer, supports someone who does or is part of the process that drives or supports the customer experience. Someone in the warehouse may never see a customer, but if they fail to pack merchandise properly, they will negatively impact the experience, causing the customer to call and complain and make the company double its effort to send a product that isn’t damaged. Once the employees in the warehouse realize their impact on the experience, they will view their job in a new way and be focused on creating a better customer experience.
  4. Customer Loyalty Programs Create Loyal Customers – Customer loyalty programs are often about points, perks and discounts. An important question to consider is, “If you take those perks away, would the customer still be loyal to you?” That doesn’t mean you should do away with the program. While these types of programs may not drive true loyalty, what they will do is drive repeat business. So, recognize a loyalty program for what it is: a repeat business and marketing program. And if the customer keeps coming back, each and every time is an opportunity (beyond the points and perks) to validate their decision to do so with an experience that will keep them from even considering switching to your competition.
  5. The Customer Is Always Right – No, the customer is NOT always right, but they are always the customer. This is one of my favorite myths. Ten years ago, I wrote an entire article (Your Customers Are Not Always Right) devoted to this concept. For today, I’ll summarize it in one sentence: If the customer is wrong, let them be wrong with dignity and respect.

Don’t make the mistake of believing any of these myths. Rather than clinging to conventional wisdom that sounds good but potentially fails in practice, focus on understanding what’s behind these myths and what will work. Brainstorm with your team how you can “bust” these myths and create the experience that customers love and come back for.

Image Credit: Unsplash

This article was originally published on Forbes.com.

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Audacious

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How Humans Win in an AI Marketing World

Exclusive Interview with Mark Schaefer

Mark W SchaeferThe rise of artificial intelligence (AI) has led to a tsunami of AI-generated content, and according to Gemini these are some of the concerns for marketers:

  • Erosion of Brand Authenticity: AI can generate marketing copy, social media posts, and even personalized emails. The fear is that over-reliance on AI-generated content could lead to a loss of genuine brand voice and connection with customers, making marketing feel impersonal and manufactured.
  • Decreased Content Quality and Creativity: While AI can produce grammatically correct and seemingly relevant content, it may struggle with nuanced storytelling, truly innovative ideas, and emotionally resonant messaging that connects deeply with human audiences. This could lead to a decline in the overall quality and impact of marketing content.
  • Over-Saturation of Generic Content: If many marketers use similar AI tools and prompts, there’s a risk of the internet becoming flooded with repetitive and unoriginal content. This could make it harder for brands to stand out and capture attention in a crowded digital landscape.
  • Misuse for Deceptive Marketing Tactics: AI could be used to create highly targeted but deceptive marketing campaigns, such as generating fake reviews, creating convincing but misleading product descriptions, or even impersonating real people or brands. This could erode consumer trust and damage the reputation of ethical marketing practices.
  • Loss of Control Over Brand Messaging: While AI can assist with content creation, marketers may find it challenging to maintain complete control over the messaging and tone of AI-generated content. This could lead to inconsistencies in branding and potentially even PR crises if the AI produces something inappropriate or off-brand.


Now that we’ve got the ironic bit out of the way of asking AI to tell us what marketers have to fear from AI (in italics), let’s dive into the heart of this article and hear from the humans.

The Audaciousness of Humans

I had the opportunity recently to interview Mark Schaefer, a globally-acclaimed author, keynote speaker, and marketing consultant. He is a faculty member of Rutgers University and one of the top business bloggers and podcasters in the world. Audacious: How Humans Win in an AI Marketing World is his eleventh book, exploring how companies can create more effective marketing by being audacious.

Below is the text of my interview with Mark and a preview of the kinds of insights you’ll find in Audacious presented in a Q&A format:

1. We are seeing a marketing evolution from messages to stories, agree or disagree? Or is the evolution to something else?

This is an interesting question. Marketing is about creating customers. Our ability to do that has been dramatically changed by technology.

Let’s say 50 years ago, messages and taglines were about our only options. Advertising is expensive. Space was limited.

But in the Internet age, we have virtually unlimited space to tell a story at no cost. And stories can be created by anyone. I think the evolution of marketing right now is when we can do something so worthy, so memorable, so useful, that our customers can’t wait to tell the stories for us.

2. What impact are we seeing from AI on marketing?

There are two types of marketing – performance and brand marketing.

Performance marketing is about repetitive acts like ads that create traffic for the top of the funnel. These activities will almost certainly be dominated by AI.

Brand marketing creates meaning – an emotional expectation for your company or product. In this respect, AI can still have a major impact on creativity and planning, but I forecast that there will still be a human role to play for years to come.

The most effective connections still come from relationships with people!

3. Product, service, solution, experience… In today’s world, which is the most important?

The beauty of our world is that it is filled with people who have diverse perspectives and needs! Some people might buy on value, some might buy on performance, or even the status they feel when they own a product.

However, at the very highest level, I think experience is an interesting opportunity for brands. Let’s look at Patagonia, for example, it does not product the cheapest clothes, or the most functional or beautiful. But the brand MEANS something to a devoted fans because of a shared experience or responsible outdoor recreation.

4. With people drowning in content, how are marketers supposed to reach their target customers?

This question really cuts the heart of my research and writing over the last 15 years and it is the theme of my new book Audacious: How Humans Win in an AI Marketing World.

The book reveals research that shows that the vast majority of marketing and advertising is boring and ineffective and AI is making it more so. I would say we are in a pandemic of dull.

Competent doesn’t cut it. Competent is ignorable. So we need to ignite human creativity in a new way by disrupting traditions and norms. Changing HOW we tell a story. Changing WHERE we tell a story. Changing WHO tells the story.

It is time for audacity in our marketing. That is the only way we’ll cut through the clutter to be seen and heard. Audacity is now a survival skill.

5. Shock and Awe, which one should marketers focus on and why?

Audacious: How Humans Win in an AI Marketing WorldI actually address both of these in the new book!

Awe is an under-appreciated source of success in marketing. It’s not just about something that is vast and overwhelming. It can be something as simple as bringing people together in a meaningful new way that creates a shared experience. Wouldn’t it be amazing if people added more awe to their marketing?

Shock is also an overlooked idea. I don’t mean being offensive or reckless, but just waking up the sense to something completely different. A good example of this is Liquid Death, the fastest-growing beverage brand in America.

Nobody calls their product “Death.” So right from the start they have your attention. Their advertising features water boarding and kids chugging glasses of sugar. It is difficult to watch. But you don’t forget it, either.

6. You’re in charge of marketing the iPhone 17 and it’s basically the same as the iPhone 16, except now it’s available in Magenta. How would you change the marketing for a product that basically hasn’t changed?

This product introduction might actually work, but not for everyone.

You might recall that Apple introduced a black “U2” iPod many years ago. It sold out. It only worked because Apple already had a massive base of loyal fans – and so did U2! So even though the product wasn’t very different, the meaning for the fanbase was.

Normally, introducing a product with no discernible new value would be foolish but it is possible if the brand has meaning.

An example from my book is the game Cards Against Humanity. People invested in a hole in the ground and dried cow turds because they just wanted to be part of the fun. The value was in the meaning, not the product.

7. What does disruptive marketing look like now and in the future? What will become normalized?

The irony is, disruptive marketing is rapidly normalized. Here’s what I mean. The cover of my book is a world first – a QR code that creates an evolving, morphing cover based on the stories in the book. That is disruptive.

But you can only be disruptive once. From here on out, anybody who has QR code book cover will simply be copying me. The disruption has been normalized. You can only be audacious once.

8. Why are there so many damn QR codes in the book? 😉 (wink)

My book is full of “oh wow” moments. But a lot of them are better viewed than described. For example, a star of the book is Michael Krivicka, the king of viral video. I have never met a person with a keener sense of storytelling. There is no way you can appreciate his skill without seeing a video, so I provided QR code links so everyone has the chance to do that!

9. Where should marketers be careful as they challenge the standard ways of marketing, to be audacious?

There are lots of reasons why marketers should be conservative and traditional, especially when following laws and regulations.

However – if you’re staying in a boring box because there is fear in your organization, because dull is normal in your industry, or simply afraid, then you are vulnerable. The AI bots are here. They are competent, and in most cases more than competent. But you still own crazy. The companies that unleash the unique human fireworks of creativity will thrive in the AI era!

Conclusion

Thank you for the great conversation Mark!

I hope everyone has enjoyed this peek into the mind of the man behind the inspiring new title Audacious: How Humans Win in an AI Marketing World!

Image credits: BusinessesGrow.com (Mark W Schaefer)

Content Authenticity Statement: If it wasn’t clear above, the short section in italics was written by Google’s Gemini and the rest of this article is from the minds of Mark Schaefer and Braden Kelley.

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