I have been working with a certain company for nearly two years, trying to help them commercialize a technology acquisition. The product was released six months ago. The firm has yet to make its first sale.
It’s true the product is not simple to sell. The market consists of old-line telecommunications carriers whose problems – and opportunities – are quite complex, rooted in the history of their networks, and dependant on many things being brought into alignment. But that’s just the kind of market it is. Big, and mature.
This is a firm that got where it is today by marketing innovation. And it hasn’t done badly. But growth has stopped, and there have been painful reverses.
The employees are not any less innovative than they were in years gone by. In fact, they regularly dream up more innovations than the market seems willing to buy. Their response to this has been to work even harder at inventing new ones.
Management cultivates an environment very conducive to innovation. Technical prowess is highly prized. Engineers freely share ideas. Managers remain largely in the background, particularly senior ones, except when providing encouragement. Employee retention is a source of pride, and promotion is from within.
Yet in many ways the firm seems lost. The technical people are naturally drawn to exciting new concepts, but their salaries are mostly paid for by the less glamorous traditional business segments. Being less interesting, these segments receive much less attention, and the people trying to maintain them little direction – other than standard corporate policy.
If this firm in fact fails, or continues its slow decline, it will be due to a very simple reason: the utter lack of a real business strategy.
There is a time in the early stages of a market or industry when innovation is rewarded, often and richly, when everyone is experimenting and there are no established rules. It’s a time when the most exciting stories are made, maybe a time of gold strikes, oil strikes, IPOs, or acquisitions. Think of Bell and Edison and Lindbergh, Jobs and Gates, even the insufferable Zuckerberg.
But markets commodify. Players become established. Innovation slows. Change is resisted. Because the industry has been successful and everyone knows what they’re doing. The barriers to entry are high, and opportunities for successful disruption fewer and farther between. It’s what a mature business feels like. Not thrills and triumph, but routine. Think of Detroit before the Japanese invasion. Think of Intel.
Challengers appear. Maneuvering and jockeying for position continue, and the battle for a breakthrough goes on. But in a very different way.
A mature market or industry is like a complex puzzle. From a distance, there appears to be little room for maneuver. All the pieces fit nicely, the relationships are established, the puzzle is complete.
Closer up, though, there are gaps between the pieces. Something can be shifted, and that might allow something else to move, and then something else, and so on, until there is room for a new piece, maybe at the expense of some of the old ones.
This takes strategy.
The job of the strategist is to figure out how to rearrange the puzzle, and the first step is to spot the opportunity that can be attacked with the particular strengths and assets of the firm, or those it can reasonably acquire.
An objective is plausibly identified and its value assessed, and now a plan has to be worked out for how to get there. What needs to be done. What are all the steps in between. Who is going to do what, when, where, how, and with what resources. How will the whole effort be coordinated and monitored. What are the risks, what could be their impact, and how should the firm respond.
A market strategist develops a deep understanding of potential buyers, identifies the potential for change (or continued survival), analyzes what the firm might deliver and when, and synthesizes a prospective set of products or changes and a business plan. An operating strategist understands the demands on the firm, the business objectives, the resources needed and available, and works out a plan for financing and managing those resources and the risks. And so on.
This is strategy. Don’t confuse it with ‘vision’ or ‘policy’. Strategy is less abstract and far more mundane. And harder.
It’s why the jobs of senior managers are difficult ones – or should be.
Strategy is obviously not peculiar to business. There is probably no market so mature and competitive, and yet so changeable, as retail politics, and not surprisingly accomplished political strategists are highly prized by the parties, perhaps more so than candidates. Successful investment banks are brilliant at planting their flags in pots of money no one else could reach. Generals strategize to win wars, or else lose them.
Yet business seems to have its own special capacity for wishful thinking. Perhaps this is because approaching defeat is so seldom heralded by loud screams or violent noise, or possibly because the rules of limited liability keep managers from suffering the fate often visited upon losing generals. The prospect of the gibbet must certainly focus the mind. When your chief executive is granted a handsome golden parachute, you should probably feel much the same as you would if the airline supplied parachutes to the crew on your next flight.
The most important qualification for a successful business strategist is a keen instinct for the jugular. It becomes the job of the managing directors to ensure this instinct is employed in the right service, outward rather than inward, and then let the battle begin.