I wrote a week or so ago that Apple didn’t see itself in the computer market, but that the mobile communications market was part of its core business. Sure enough, during the launch of the iPad, Steve Jobs commented that Apple were now the world’s largest player in the mobile devices market.

One of the best ways to drive growth for your business is to have a clear view about the markets you play in. Like with Apple, these may change over time, as technology, customer behaviours and competition changes.

Kodak is struggling because, for too long, it continued to believe it was in the film processing market, not the mobile devices market. Olivetti made the mistake of believing it was in the typewriter market, not the word processing market.

If Kodak’s and Olivetti’s executives had been able to make this perceptual leap much earlier, like Steve Jobs and his team did, they would have been much better able to deal with the rapid changes that brought their companies down.

Understanding what your real markets are, requires you to answer these three questions:

1. For what purposes do your customers and users use and derive benefit from your products and services, and how is this likely to change in the future? For Olivetti, the purpose was to prepare and share written documentation, and the introduction of digital technology was likely to affect both these activities.
2. What alternative or substitute products and services could and do they use, and how is this likely to change in the future? Olivetti was up against the pen and pad and manual typewriters, but even by the 1970s word processing applications were being developed.
3. What complimentary products and services are available to your customers when they purchase from you, and how is this likely to change in the future? By the 1980s the complimentary products and services were rapidly changing from paper and ink, to personal computers, floppy disks and memory cards.

As you can see, once you have answered these questions you are likely to have a very different view of your market.

To begin with, it’s likely to be much larger than you think, with more existing and potential competitors to consider. It will also be more uncertain as it requires you to anticipate future changes and dynamics.

All this will make your market more difficult to predict, messier and more difficult. At the same time, however, it will also have far bigger and more interesting possibilities and opportunities.

To my mind, this is part of Steve Jobs’s genius. He recognises markets aren’t defined by products but by customer experiences. As technologies develop and converge, customers will demand and respond to new and better experiences.

This has meant that Apple has shifted its perception of its market from the personal computer to a much bigger and dynamic market, which is now called the mobile devices market.

What market are you really in?

© Stuart Cross 2010. All rights reserved.

I was in a meeting with a strategy director yesterday, when he shared his concern that his strategy team may be missing a trick. He wanted to make sure that the processes and approaches he is currently using to develop his company’s strategy were going to take the business forward, not backwards.

So, here are my top 10 strategy pitfalls. How many of these are evident in your business?

1. A failure to make trade-offs. A strategy is defined as much by what you’re not about as it is about what you are about. A key differentiator of many market-leading companies is that they are willing to make choices about how they wish to compete. Many struggling companies are unwilling to make these trade-offs and end up stuck-in-the-middle, being outflanked by companies with more innovative products, lower prices or stronger customer relationships.
2. Confusing strategy with planning. The annual financial and operating planning process drives many corporate strategy exercises. However, they are different activities and should be separated: strategy is about developing a framework that guides future actions and decisions; planning is about resource allocation. Big strategy decisions don’t fit with the annual planning timetable, and neither should the strategy process.
3. Incremental thinking. When you immediately focus on next year’s budget the strategy process becomes incremental, and discussions are about whether the sales growth target should be 3.7% rather than 4.1%, and not about the fundamental direction of the business.
4. All process, no output. When I worked for Boots the Chemists, the executive and management teams were weighed down with a Managing For Value approach. It involved a 7-step process for all strategy development. The result was an excessive focus on process, needless reports and analysis and insufficient emphasis on the key issues faced by the company.
5. Too much data, too little insight. Linked to the over-emphasis on process is the development of a whole industry on data analysis. I need to ‘fess up’ here. In my past I have been guilty of excessive data-diving (or ‘bog snorkelling’ as one ex-colleague succinctly put it). It’s the key insights, not needless detail that’s required. Understanding the 80:20 of any project is essential to effective strategy work.
6. Lack of informed decision-making. In contrast to point #5, other organisations end up with uninformed choices, based on hunches and gut feel. Or, at best, any analysis that is performed is driven by the CEO to fit with the conclusion that he or she has already reached. The strategy process should bring rigour and challenge to management’s thinking, and not be a passive activity designed merely to maintain the status quo.
7. Being excessively tied to one alternative. It is important to have a point of view, but it is also essential to appreciate when a better alternative has appeared. Developing three or four credible alternative strategies is a highly effective way of ensuring that there is real discussion on the best way forward, and that the executive with the loudest voice, or the most stripes doesn’t automatically win the argument.
8. Insufficient alignment, commitment and communication. Having spent so much time creating strategy with the Executive team it is tempting to believe that the strategic intent is clear to everyone across the organisations. In most companies this is far from the case. The strategy process should include ensuring that executive alignment and commitment is strong (see a previous post on this here), and that sufficient time and effort is spent on communicating the strategy (see a previous post on this here).
9. Trying to solve everything at once. Creating an implementation agenda that resolves all issues immediately is a huge temptation for managers. They want their new vision to be delivered immediately. But you can’t do everything at once, and need to prioritise and sequence your implementation if you wish to build momentum, growth and profits.
10. Insufficient focus on action. Most strategies fail in delivery, not formulation, and the value of successful strategies are only realised when they are executed well. Ensuring resources are allocated, accountabilities are clarified and performance goals and milestones are established is critical, as is a bias for action and learning.

© Stuart Cross 2010. All rights reserved.