Every year, I visit my friend the optometrist. One thing that I can count on is answering a lot of black and white questions as I stare through various lenses. You know the routine. Is this one better? Or, is this one better? Over and over again the black and white decision is required. This is how my doctor narrows down the choices about which lens will provide the best correction for each of my eyes. That way, he will know precisely what eye glass prescription that I should have.

Are black and white questions the best type of questions for business strategists?

The virtue of a black and white question is that the answer is succinct and distinct. There isn’t debate about whether we should develop a new product since the answer is “yes” or “no.” We don’t endlessly wonder about entering a new market because we can get a concrete answer quickly. New trends are less worrisome because we decide simply whether they will happen or they won’t. Nice. Tidy. Quick. And dangerously simple.

Strategy is best dealt with in grayscales

A grayscale implies that there are gradients. Gradients, in turn, imply that the future is blend of influences. Intuitively we recognize that this is true at work. Seldom do major decisions get made with a simple yes or no. There are debates, arguments, counter proposals and reflection. After much gnashing of teeth, an answer finally emerges. The effective strategist eschews the simplicity of black and white thinking and chooses to live in the gray zone. How is this done?

Banking on “it depends”

My graduate school professor once told me that the right answer to any complicated question is “it depends.” Amazingly, as I have practiced this in my work life, these two words often served to silence those that were trying to trap me into black and white thinking. My opponents retreated to attack another day when I might ignore the fact that life and strategy is complicated. (May their wait truly be long.)

Of course, the right retort would have been “it depends on what?” This is where a strategist makes money. For example, will mobile banking become a significant, consumer demanded service in the future? Snapshot answers (e.g., is it important today, will it be important in 2012) may be “yes” or “no”. More helpful are the answers which explain what has to be in place (e.g., technology, business models, competitive forces, etc.) for this type of service to be broadly available and seen as a differentiator in the market. This is less like a snapshot and more like a constantly changing movie. When all of the components of the “movie” are identified, then the strategist can make arguments, assemble evidence and track competitors with respect to those components.

Shift the question from “what” to “when”

Think for a moment about baseball. One of the hardest things to do in sports is to hit a baseball. It requires many skills including good hand-to-eye coordination, proper balance and superb eyesight. Still, the most important determinant of getting a good hit is timing. The batter has to time the arrival of the pitch (and its trajectory) with precision or else failure is almost certain. This is why pitchers (i.e., their competitors) are fundamentally trying to upset the batter’s timing. And, not surprisingly, the very best hitters fail almost seventy percent of the time.

Strategy is similar. It very often is about timing when a market will mature or when a specific product investment should be made. It’s about tracking the moves of competitors and understanding when their offerings will endanger your competitive position. It’s about using dynamic market feedback of all sorts to adjust the speed of responses and initiatives. (Sometimes we should go faster and sometimes we should go slower.) It’s about having a fine tuned sense of those critical dependencies and meshing them together (using models and other tools) in such a way that they can be viewed for discussion and debate.

Here are some reminders to get you to the strategist’s gray zone (and keep you there)

1.       Practice responding “it depends” to questions about the future

2.       Be ready to explain the dependencies

3.       Put things in place to monitor the dependencies over time as they change

4.       Create a model to show how the dependencies fit together and affect your business

5.       Regularly hypothesize possible competitive responses

My eye doctor can prescribe vision correction lenses. His methods work assuming that I actually wear the glasses that he prescribes. Though it may be counter intuitive at first, the strategist’s gray zone is actually much clearer and more valuable than the black and white world. Though it does not guarantee success, it does produce strategy that is richer and more effective than other mindsets.

Do you agree?

business strategy, Competitive Intelligence, future focus, management, Strategy Effectiveness, strategy evaluation, strategy implementation

The difference between where we are and someone else is at the moment is a “gap”. The gap could be positive (that is, we are in a better position) or negative (our position is worse). In competitive intelligence, we study gaps (especially the negative ones) because we want to know and explain what our competitors are doing to create a significant advantage for themselves.

(See a video presentation on this topic by clicking here.)

So, we study and communicate the gaps and then we are done?

Nope. Identifying the known gaps (though not necessarily easy) is only the first step in a robust gap analysis process. Here are the 5 steps to comprehensively think through gaps, to create simple tracking methods and to ultimately get to the actions that will close the gaps.

1. Start with the “known” gaps.

“Known” gaps are the ones for which there is general agreement about their identity and significance. For instance, we may know that competitor X is about to introduce their new product which is 20% faster than any product that we have. Since there has been a press announcement, live demonstrations which seem to confirm the claims and an established track record for the competitor, we can firmly believe that the product and the claims for it are real. Furthermore, we know that our customers highly value performance. Hence, this is a gap that is well characterized and is significant to our competitive position.

To assemble a starting list of known gaps, solicit input from the management, business development, marketing and sales teams. For each gap that they identify, make sure that it is specific and well described, that the impact is estimated and each competitor which is better is noted.

There will be some of these gaps which cannot be fully described. These are the “potential” gaps.

2. Create a backlog of “potential” gaps.

“Potential” gaps do not meet the full criteria to be considered as known gaps. There may be information missing about the exact nature of the gap or its impact. Using the preceding example, if we hear that our competitor is introducing a “faster” product sometime in the future, we might conclude that this could be significant to us. However, it could make a large difference if it is 10% faster in three years or 50% faster in six months. Without more information, it is also very difficult to assess the potential significance of the gap. Still, knowing the competitor well may lead us to believe that “where there is smoke, there is fire.” The proper action is to keep track of the potential gap and to assign someone (e.g., the competitive intelligence function) to collect information about it. Then, when the uncertainty threshold is crossed and the evidence is more substantial, the potential gap can be escalated to a known gap status.

How do we look even further back in time to find things that lead to the potential gaps?

3. Make a list of triggers which may lead to gaps.

Triggers are not gaps. Instead, they are events, activities, announcements and such that may signal gaps in the future. Why are they important? They are important because companies rarely operate in a vacuum. Public companies, especially, signal much of what they plan to do through all types of disclosures. If we are attuned to these disclosures, we get hints of future strategic directions. Continuing the faster product example, it is entirely possible that the competitor had made patent filings years before the product was announced. They may have purchased the assets of another company with specific technology competencies. They may be actively making venture investments in small companies with complementary products. In an ongoing business, all of these types of triggers are predictable. A trigger list can serve to organize the monitoring of such triggers. Then, when several of them have “tripped”, it may be reasonable to investigate whether or not a competitive gap is imminent.

Triggers are often driven by broader forces in the market.

4. List the key trends which affect the market.

It starts to get a little fuzzier in this category. Nevertheless, tracking demographic, technology, product, legal and other areas is important. In technology, the broad trends of things getting smaller, faster, cheaper and more communicative is not a revelation to most people. More recently, the trends toward more social media, lowering energy consumption, increasing recycling features and more emerging market support are becoming important. The key to trend monitoring to find the ones that most affect customers (and, therefore, their buying decisions). After an important trend is identified, then it is critical to understand the rate at which the trend is being responded to in the market. The goal is to eventually identify the triggers (see step 3) which more concretely describe when and how competitors might gain some advantage.

How do we maintain all of this information? Simple. Create four spreadsheets and track the known gaps, potential gaps, triggers and trends. Last, establish action plans.

5. Assign actions for all areas.

Known Gaps

Assign each one to a person that must define and execute an action plan to close the gap. This usually must be a manager with sufficient authority and ability to work across organizations because all know gaps must be “significant.” Put another way, these are hard problems to solve but their resolution is critical to a company’s competitive position.

Potential Gaps

Assign these to the competitive intelligence function and require a periodic report to a responsible manager. The goal is to actively determine whether to demote the gap if it is insignificant or to escalate it when it can be fully characterized. The escalation process must be a part of a regular review cycle or it could become ineffective due to its irregular or inconsistent use.

Triggers

Assign these to the outward facing functions of your organization. These may be the business development or product marketing teams. Their responsibility is to look for the specific trigger information and feed it back to a coordinating competitive intelligence function. The CI team then coordinates the evaluation of the triggers and decides when a potential gap has been identified.

Trends

Assign these to the market research team and the technology team. Their mission is to help the organization understand when a trend accelerates to the point where there are specific, compelling market responses occurring. Once the responses are being seen, then triggers are identified for each competitor to understand how they intend to act.

Gap analysis can be a straightforward, organization energizing and fruitful process. The keys are to discriminate the different types of information, assign the responsibilities correctly for each and establish a process of regular review with management.

A more complete treatment of Gap Analysis can be found at http://tinyurl.com/yk8fcq6 or on my website at http://www.jthawes.com.

business strategy, CI techniques, Competitive Intelligence, Early Warning, future focus, gap analysis, management, strategy, Strategy Effectiveness

Consultants and managers like to talk about grand strategies to win in business. They spend time and money to meet together to craft the best possible expressions of the purpose of the business, the vision for the future and the major steps along the way toward that future. They gather in retreats to make advancements.

Meanwhile, in the rest of organization, people come and go to work each day. They often know little of what has been decided. Or, if they have received the pronouncements from on high, they selectively integrate what they consider important into their work plans.

So, how can you tell that the business strategy is working?

There are usual external measures of revenue, profit, market share and so on that are typically used to measure the effectiveness of strategy. These are critical measures, of course, but they are lagging indicators when a new strategy is introduced. Often the first measures of strategy effectiveness come from the internal organization.

What should a manager look for to understand if the strategy is working within the organization? Here are my five success indicators to monitor.

1. Managers are modeling the changes. At all levels, a new strategy implies change (otherwise it isn’t new). If management expects change to occur only because of announcements, then the strategy is unlikely to be effective. People are sensitive to strategy fads which come and go. However, they are similarly alert to real change in people.

2. Success measures are being understood. It is not enough to have a bright idea. At some point in time, the performance of the strategy must be measured and the measurement must be understood (and accepted) in the organization. People that understand the external measures begin to adapt the internal reward system accordingly.

3. Competing strategies are retired. The temptation for management and organizations is to retain the familiar. If a significant new strategy is introduced, a significant old strategy must be retired. Not only does this make sense to the larger organization (sensible behavior is important), it establishes the credibility of leaders to focus the organization.

4. Increasing focus on the future. A temperature reading of the organization will reveal that people are talking more about the future than the past. It should be no surprise that a backward focus is a drain on the organization’s energy. Befuddled leadership, ineffective strategies and risk aversion prevent an organization from solving tomorrow’s problems. A strategy starts to work when an organization is energized about what is possible to achieve.

5. It is becoming personal. The best leaders create bridges between their organization and the vision. People then make conscious decisions to move toward or away from the vision. A strategy’s effectiveness can be measured by the extent to which employees own it. Increasing ownership means increasing alignment with the vision, greater problem solving and broader participation. Simply put, people commit themselves by crossing the bridges.

behavioral modeling, business strategy, future focus, ownership, Strategy Effectiveness, strategy evaluation, strategy implementation, success measures