THE CEO CHALLENGE
The giant within: growing through strategic innovation
While strategic success is often identified with finding the right set of opportunities for a firm, the fact is that companies are faltering more in the realm of making these opportunities actually work for them. A calibrated, step-by-step approach can help
Issue Date - 15/12/2011
Growth is a strategic imperative for most organizations, both because it allows the firm to seize new opportunities and also because it helps firms to adapt to changes in the environment. This lesson has been well learned. Consequently, the vast majority of firms are constantly on the lookout, trying to detect new opportunities in their markets.
Our research, however, indicates that most firms face a different set of problems: the inability to take advantage of the opportunities they have found, wasting the resources they have spent during the search process and weakening their competitive advantage. In short, we have observed that firms do not necessarily take advantage of the opportunities that they have found; focusing instead on newer and more remote opportunities.
Letís begin our conversation by stating that finding opportunities and taking advantage of them are two different activities that require (and mobilize) very different resources and skills. This is so because opportunities expose the firm to unfamiliar territories: innovation, for most firms, isnít defined as doing something no one has ever done before in the history of humankind: rather, innovation is defined as something the firm has never done before. That unfamiliarity with the conditions that make the opportunity palatable for the firm can create a great deal of suspici3on among those who are in charge of implementing it, and suspicion brings doubts and later contempt. This is both natural and avoidable, as I will mention below.
Finding opportunities requires an outwards orientation, a deep understanding of the market conditions and a good degree of customer intimacy that allows the organization to understand what creates value for the customer, why, and where. Seizing opportunities, however, requires making at least some transformation in the organization, and it is unreasonable to think that the ones who detected the opportunity are also the ones who have the power or the skills to change the organization. In short, this is a game where the ones who know what to do canít do it, and the ones who could do it do not know very well what to do.
To address this wasteful problem, my colleagues and I have developed a method that facilitates both the detection of opportunities, especially those opportunities that are most interesting to the firm. This is intuitive: not all opportunities are necessarily good, and not all good opportunities are good for the firm. By ensuring that the firm pursues only those opportunities whose degree of fit with the firm is adequate, we reduce the chances that they will not be implemented by the organization or perceived as alien, unnatural or downright impossible to use. The first part of the exercise, then, involves the search for the largest number of opportunities possible, very much like a session of brainstorming seeks to obtain the largest number of ideas, or names, or anything else with little regard to the quality of these ideas.
On the second phase of the method, we focus now on a calibration of the ideas found. We use three variables to construct a space where the opportunities are placed. The first variable is the magnitude of the opportunity: assuming everything goes according to plan, and not a single problem affects the development of the opportunity; will this be a small, medium or large opportunity? Will it revolutionise the industry, or is it just a tiny fraction of actual sales? The second dimension is distance to implementation. Assuming we want to implement this opportunity, how many steps will we need to take? Is the opportunity ready to be seized, or will we have to go through many steps, each one of them feeding the next one? Our third and final dimension has to do with the resources needed to take advantage of the opportunity: in some cases, we have all the resources needed, and in others, we have no resources at all.
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