Make Wise Choices in Strategy and Innovation
Who was that child who stood up in the primary school auditorium at the opportune time, right before the school rally started to avoid discipline for disruptive, and shouted something funny? Possibly a budding future strategist! Why? The kid deliberately committed to a strategy that differentiated him or herself from the rest of the group.
The act created recognition and likely a future set of friends that day. By standing out he or she was unique, different. The strategy was hard to copy because certainly a further call-out as the rally began would have caused swift disciplinary action for the copycat. That was good strategy even if it was 3rd grade strategy.
Decide which strategy levers will provide you a sustainable
Michael Porter defined strategy in his article “What is Strategy?” published in the Harvard Business Review in the mid 90's. He explained to leaders the difference between keeping up with the Jones' and making a stand on how your organization will uniquely compete. In essence, what Michael Porter said is that it isn't strategy if everyone can do it. Activities are harder to copy or may not be able to be copied at all if there are choices or trade-offs made in which activities to invest. Making different (but consistent and deliberate) resource allocation decisions creates a unique path that no one can duplicate because they in turn have already made or will inevitably need to make other choices and trade-offs to fit their strategy and direction. If those choices create a business or organization that creates value and that is somewhat sustainable, it is likely good strategy.
Michael Porter used a classic example in that article, Southwest Airlines, to explain strategy. The major airlines couldn't compete like Southwest (they couldn't copy their model) because of choices Southwest made that were different. The major airlines were the main competition with a major city “hub and spoke” system, many different sized aircraft, ticketed seating, etc. All of this adds luxury but all of this adds cost and even delays. Southwest competed differently. It flew into secondary cities (less congestion, easier to be on time, lower cost), flew the same model planes (easy to replace, repair, keep parts; improves up-time) and claimed a consistent low price that paid off. This classic example of strategy is about choices. The choices and trade-offs that Southwest made aren't easily copied. What major airline could just one day give up “hub and spoke” or all of the sudden revoke seat assignment ticketing, etc.? If they straddled and tried to copy pieces of the strategy such as no seat assignments, they would likely not appeal to any group because they still wouldn't have costs as low as Southwest and they might not appeal to the convenience/less price sensitive target they are serving in the first place.
The analogy we use is a set of levers; deciding which levers to pull and what direction to go matters. These pathways are paved from those choices and trade-offs made (e.g. levers pulled). Having a deliberate path and sticking to it helps leaders avoid something strategists hate, strategy convergence, where everyone beats each other up serving the same customers in the same way versus segmenting the market and finding a sustainable way to win. Good strategy is critical to good innovation. Good strategy guides the decisions of senior management who allocate resources to innovation and other levers of the organization. Good strategy also guides innovation at a project level where managers have to determine in which features to invest and how to position a particular set of services or products within a given category to win.
Chiquita Brands Case
A client of ours, Chiquita Brands, competes with Dole in the commodity banana market. We worked with them to change the mindset and define a transformational project to sell bananas at the point of convenience positioned as a premium, healthy snack. This wasn't something easily copied; it took a significant amount of resources and an exclusive partnership in new packaging technology where the two organizations collaborated to figure out how to execute a program. In the execution, called Chiquita-to-Go, the outcome was that Chiquita moved from competing as a commodity supplier to competing as a value-added solutions company. Bananas sold in mass for 39 cents a pound in grocery now sold for 75 cents a piece, as a healthy snack, in convenience stores and coffee shops such as Starbucks at the point of convenience. The final payout of the transformation was the acquisition of Fresh Express, a commitment consistent with the strategy of moving from wholesaler/commodity supplier to value-added manufacturer, their new lever in strategy to invest and grow capability.
Hillshire Farm Case
Let's take an innovation project example from a client in the grocery industry sausage category. The company is Sara Lee with brands such as Jimmy Dean and Hillshire farm. Our client had roughly seven levers to pull in his organization. We could compete in this category by investing in levers such as the brand, retailer relationship, low cost production, taste, flavor/culinary, variety or product quality with say the best cuts of meat. It is true, leadership has to invest in all (or pull each of them) but investing in all equally would be a mistake. We have to choose which lever or levers we will pull to be different and win. In this innovation, brand investment was extended in the premium space by licensing the Emeril Lagasse brand. The collaboration of the major celebrity chef with culinary sausage credentials changed the game. Hillshire Farm and Emeril brands provide significant opportunity to compete in premium sausage and provided focus for innovation and growth under those trademarks.
A Note on Using Strategy Well
Observe your own organization. #1. Is there a clear strategy? If not, it's time for senior management to put one in place. #2. Once a strategy is decided, fall in line and make consistent, deliberate investments in that path. The results of any decent strategy will come if there is a continued commitment to it. In the case of Hillshire Farm, renovating the shelf with new flavors and investment in products that continue to lead in the premium position is critical. In the case of Chiquita, finding its difference in value-add fresh food is key. Will it be innovation? Will it require unique production capabilities? These are the critical elements to managing a strategy well. Not just the first but the future choices made in strategy – whether investment in them continues or management strays from them – can affect the value extracted from a great strategy.
Decide which levers to pull when there comes a time where you have to make strategic choices. We'd rather see a leader make an uncomfortable decision that may not be perfect and adjust to a winning strategy than make no choice at all and continue in mediocrity. Be bold; be courageous; make the choices as the strategy architect and create the shared alignment to ensure you don't stray from the path chosen.
For more information on how we utilize these strategy principles in growth and innovation strategy methods, please contact us at email@example.com or +1 513 842 6305.
On how we utilize these strategy principles in growth and innovation