What is this article about?
NYU Stern Professor Adam Brandenburger’s article, Strategy Needs Creativity, in the most recent issue the Harvard Business Review proffers a new toolkit for those consultants and entrepreneurs trying to develop a new business strategy.
Why does this matter?
These four new strategy development tools are far more actionable than previous generations of strategic marketing frameworks like Prof. Michael Porter’s Five Forces Analysis and SWOT analyses. They are also are particularly timely in the management consulting world where “aspects of ‘strategy’ and ‘innovation’ have started to converge.” As Prof. Brandenburger notes by way of example, “IDEO, the design and innovation powerhouse, has moved into strategy consulting, … while McKinsey has added design-thinking methods to its strategy consulting.”
How are the new analytical tools different?
The new, innovation-oriented tools begin from the conventional premise that “[a]t its core, strategy is still about finding ways to create and claim value through differentiation.” However, whereas previous strategic analysis frameworks are “better suited to understanding an existing business context than to dreaming up ways to reshape it,” the new tools emphasize innovative, truly divergent thinking that ensures more profound differentiation.
What are the analytical tools?
1. Contrast existing strategies:
Precisely, and literally, identify the assumptions implicit in existing strategies and industry structures and find advantageous ways to disprove them
“Consider the video rental industry in 2000. Blockbuster ruled the industry, and the assumptions beneath its model seemed self-evident: People pick up videos at a retail location close to home. Inventory must be limited because new videos are expensive. Since the demand for them is high, customers must be charged for late returns. (It was basically a public-library model.) But Netflix put those assumptions under a microscope. Why is a physical location necessary? Mailing out videos would be cheaper and more convenient. Is there a way around the high fees for new releases? If the studios were open to a revenue-sharing agreement, both parties could benefit. Those two changes allowed Netflix to carry lots more movies, offer long rental periods, do away with late fees—and remake an industry.”
2. Combine products or services or technologies that have traditionally been separate:
Form groups with diverse expertise and experience; brainstorm new combinations of products and services.
Look for ways to coordinate with providers of complementary products (who may even be competitors).
“Often these [combinatorial] opportunities arise with complementary products and services. Products and payment systems, for example, have traditionally been separate nodes in value chains. But the Chinese social media platform WeChat (owned by Tencent) now includes an integrated mobile payment platform called WeChat Pay that enables users to buy and sell products within their social networks.”
3. Consider Constraints and then consider how you can turn limitations into opportunities:
List the “incompetencies” (rather than the competencies) of your organization—and test whether they can in fact be turned into strengths.
Consider deliberately imposing some constraints to encourage people to find new ways of thinking and acting.
“Tesla hasn’t lacked financial resources in entering the car industry, but it doesn’t have a traditional dealership network (considered a key part of automakers’ business models) through which to sell. Rather than get into the business of building one, Tesla has chosen to sell cars online and to build Apple-like stores staffed with salespeople on salary. This actually positions the company well relative to competitors, whose dealers may be conflicted about promoting electric vehicles over internal-combustion ones. In addition, Tesla controls its pricing directly, whereas consumers who buy electric vehicles from traditional dealers may encounter significant variations in price.
4. Expand your Contextual exploration: "Consider how far-flung industries, ideas, or disciplines shed light on your most pressing problems:
Explain your business to an outsider in another industry. Fresh eyes from a different context can help uncover new answers and opportunities.
Engage with lead users, extreme users, and innovation hotspots.
Quick Case-in-point: Velcro
"An entire field, biomimetics, is devoted to finding solutions in nature to problems that arise in engineering, materials science, medicine, and elsewhere. For example, the burrs from the burdock plant, which propagate by attaching to the fur of animals via tiny hooks, inspired George de Mestral in the 1940s to create a clothing fastener that does not jam (as zippers are prone to do). Thus the invention of Velcro. This is a classic problem-solving technique. Start with a problem in one context, find another context in which an analogous problem has already been solved, and import the solution."
Quick Case-in-point: Intel and Branding
"Intel did that when it came up with its famous Intel Inside logo, in the early 1990s. The goal was to turn Intel microprocessors into a branded product to speed up consumers’ adoption of next-generation chips and, more broadly, to improve the company’s ability to drive the PC industry forward. Branded ingredients were well established in certain consumer product sectors—examples include Teflon and NutraSweet—but hadn’t been tried in the world of technology. Intel imported the approach to high tech with a novel advertising campaign, successfully branding what had previously been an invisible computer component.
Quick Case-in-point: Computer Innovations
"Context switching can be done across industries, as in Intel’s case, or even across time. The development of the graphical user interface (GUI) for computers was in a sense the result of a step backward: The developers moved from immersion in the text-based context in which programming had grown up to thinking about the highly visual hand-eye environment in which young children operate. Similarly, some AI researchers are currently looking at how children learn in order to inform processes for machine learning."
Quick Case-in-point: Extreme Users of your Products
"Companies are always eager to see into the future, of course, and techniques for trying to do so are well established. That is the purpose of lead-user and extreme-user innovation strategies, which ask companies to shift their attention from mainstream customers to people who are designing their own versions or using products in unexpected ways in especially demanding environments. Information about where the edges of the market are today can signal where the mainstream will be tomorrow. Extreme sports, such as mountain biking, skateboarding, snowboarding, and windsurfing, are good examples. In an MIT Sloan School working paper, Sonali Shah relates that aficionados led many of the innovations in those areas, starting in the 1950s, and big manufacturers added cost efficiencies and marketing to take them mainstream."