In my last article, we examined the business strategies described in The Art of Opportunity, by Marc Sniukas, Parker Lee and Matt Morasky.
Michael Porter’s classic book, The Competitive Advantage: Creating and Sustaining Superior Performance, described strategies for achieving competitive advantage by 1) becoming a cost leader, 2) differentiating your offering, or 3) focusing on a niche.
So how does The Art of Opportunity differ from these more traditional approaches championed by Porter? First of all, we see that there is a shift from focusing on achieving competitive advantage by simply being cheaper or different to finding and seizing opportunities by creating value.
To be clear, the authors don’t suggest that the sort of traditional strategic management approaches described by Porter do not work. For some organizations and in certain industries, they work extremely well, if applied in the right way. And yet, a lot of companies nevertheless struggle when attempting to achieve their growth and innovation targets within these traditional frameworks. The following sections summarize some of the authors’ key points.
Where to look for new growth opportunity? This statement from Professor David Bell says it best, “The first principle of finding new growth is that you’re always better off going after customers who are underserved or neglected.” Why is that? The authors state, “Only by gaining a deep understanding of customers, their true needs and expectations, as well as their satisfaction or dissatisfaction with current offerings, will you gain the insights needed to develop solutions that customers really want to buy. Most companies don’t know why customers do or don’t do business with them in the first place.”
Understand customer needs, expectations and choices: The basic idea is that customers do not buy products because they want to own the product, but because they have an objective they would like to fulfill with that product…. So, should you just ask existing customers what they want and need? Henry Ford is credited with saying, “If I had asked people what they wanted, they would have said faster horses.” Henry Ford’s customers might have wanted faster horses, but they probably also wanted something that was a bit more comfortable and convenient, needed less maintenance, and possibly was cheaper. Understanding why and when customers buy a certain product opens new ways of segmenting your market. Opportunities are a function of the chosen customer segment, its needs, and expectations toward the solution offering. Once you understand your customers’ needs and the experiences they have trying to fulfill those needs, you can investigate what stands in their way to having a satisfactory customer experience.
Understand your firm: Looking at your customers is an external search approach to uncovering growth opportunities. While looking at your company with an internal slant, the key is still to discover new opportunities for growth from existing and new customers. Once you understand why customers come to you, you will have a good sense of what you excel at doing. This is the underlying capabilities and competencies that make your company special. Think about the strengths, capabilities, and resources of your business that you could leverage to create new businesses. The book lists several questions for you to identify your valuable, rare and costly-to-imitate resources and how to organize to exploit those resources.
Frame your growth opportunity: For starters, we are not focused on traditional forms of growth like the following:
- Selling more of the same: Market penetration occurs when a firm enters the market where its current products already exist or its services are provided, allowing the business to go head-to-head with incumbents in the market.
- Growth through mergers and acquisitions: Mergers and acquisitions ae often taken to increase the size of the firm. Some are to add capabilities and some to add product lines outside of their current core business to diversify.
Instead the authors see three types of growth:
- Evolutionary growth: This type of growth is closest to your core. You evolve by removing hurdles to satisfaction and barriers to consumption for you existing offerings. This could include making your products more consumer friendly or upgrading your services.
- Adjacent growth: This is expanding your offering to cover additional steps in the consumer experience or offering other similar products. It is closely related and complements your core. Adjacent growth bears a little more risk than evolutionary risk, as you are venturing into slightly new territory. Yet, as you are staying close to your core, nevertheless the risk is manageable.
- Breakthrough growth: This is the type of growth that goes well beyond the limits of your current business. This entails not only the development and launch of a completely new strategy to market an offering outside of your company’s existing business definition, but also the design of a new business model and/or revenue model as part of the new strategy. Breakthrough growth is obviously not only the most difficult, but also the riskiest type to achieve. Yet it also bears the highest rewards, if successful.
What type of growth are you aiming at? Each growth model is appropriate for specific situations. There is not one prescribed model type and, in fact, you may benefit from combining them in order to adapt your firm’s individual situation. Clarifying your objectives and the type of growth you are aiming at will enable you to focus your subsequent strategy efforts, provide your team with guidance, and avoid pursuing opportunities your company might not be comfortable with at present.
Now that you’ve identified your opportunity, how are you going to seize it? While traditional strategy would have you focus on products and services, strategic innovation means you will focus on the following:
- Offering: The mix of products, services and the customer experience.
- Business model: The way you operate and the activities to do business.
- Revenue model: Where the money will come from, how you set prices and how payment is done.
Although the three parts are presented in a sequential order, innovation can come from each of them. In practice, you are likely to cycle back and forth as each component informs the other. At the end of the day, you need to make sure all three parts are integrated and support each other.
The author’s research has shown that successful strategic innovators go through three phrases.
(1) The inception phase, within which an opportunity for new growth is discovered.
(2) The evolution phase, during which the offering business and revenue model are adapted.
(3) The diffusion phase, during which the focus of activities shifts from designing and crafting the strategy to scaling up the new business.
Summary: It isn’t possible to give adequate emphasis to the depth and breadth of the authors’ material here. There are many examples throughout the book of companies utilizing this process and methodology. The authors have skillfully employed visualizations, diagrams, and templates in support of their concepts. My articles have simply been an overview of this book and hopefully have piqued your interest to explore this further.
About The Author
Roger Gudobba is passionate about the importance of quality data and its role in improving the mortgage process. He is an industry thought leader and chief executive officer at PROGRESS in Lending Association. Roger has over 30 years of mortgage experience and an active participant in the Mortgage Industry Standards Maintenance Organization (MISMO) for 17 years. He was a Mortgage Banking Technology All-Star in 2005. He was the recipient of Mortgage Technology Magazine’s Steve Fraser Visionary Award in 2004 and the Lasting Impact Award in 2008. Roger can be reached at email@example.com.