If you want your business to survive your tenure, make room for innovation as you strive to drive short-term growth. One of the approaches I talked about in June should be on your business menu.
How can you decide which of these approaches, if any, might work in your business? If you find that one or more of these approaches are worth trying, what is the most effective implementation approach?
Here are five key steps to answering these questions in the way that works best for your business.
1. Identify the greatest competitive strength in your business.
You need to choose one (or possibly more) of the six ways to make room for innovation based on your business’s greatest strength.
There are many possible strengths to choose from, such as developing new products, motivating talent, marketing and sales, scaling operations, and / or realizing your vision for the future.
To identify your company’s greatest strength, engage third parties to ask questions of your customers, including:
- What are the most important factors they use to compare your products to those of your competition?
- For which of your products, if any, does your business outweigh its competition on these factors?
- Why do customers prefer your products over your competitors?
- What are the most important strengths that motivate customers to choose your business?
Based on the answers to these questions, you should be able to identify the greatest competitive strength in your business.
2. Choose growth opportunities where this strength will help you gain market share.
The next step is to select growth opportunities – markets in which your business is not currently competing – where your competitive strengths will allow your business to gain market share. Such growth opportunities for your business must pass three tests:
- The markets are large – at least $ 1 billion in revenue
- The market welcomes pioneering customers eager to collaborate with you to develop new products
- Customer Interviews Reveal Your Company’s Competitive Strengths Will Help You Solve Top Unmet Customer Needs
3. Identify other capabilities needed to capture the new market.
The competitive strength of your business is one piece of a puzzle that you must complete in order to seize a new growth opportunity. For example, when it switched from DVD-by-Mail, Netflix developed its online streaming business starting with its biggest competitive advantage: its ability to analyze DVD rental data to identify the characteristics of the most popular videos. more rented.
When Netflix decided to offer online streaming, it quickly realized that the capabilities required to be successful were mostly different from those it had designed to deliver DVD by mail.
While Netflix has reduced its warehouses filled with DVDs, its wholesale DVD purchases, its warehouses to store them, and its partnerships with the USPS for the delivery and pick-up of its customers’ DVDs, it has retained behavioral data. purchase from its customers.
To compete in online streaming, Netflix needed to develop its own content. Since its customer data revealed that its DVD-by-Mail customers loved movies starring Kevin Spacey and directed by David Fincher, Netflix has confidently invested $ 100 million to license it. Card castle from a British producer.
In order to seize the growth opportunities that you identify in step two, you need to identify all of the pieces of the puzzle necessary for the successful operation of the business, building on your business’s greatest competitive strength.
4. Choose whether you want to build, rent, or buy the other features.
You have to decide whether to build the other pieces of the puzzle in-house, rent them out as part of a partnership, or acquire a company that does them well. There are many different approaches to doing this.
For example, Cisco was good at marketing and sales and seized new growth opportunities by acquiring startups that made the new products that Cisco customers eagerly bought.
To make this strategy work, Cisco developed a new skill: identify acquisition targets that match its business goals and manage the integration so seamlessly that the acquisition would appear transparent to the customer when the deal is closed. transaction.
When deciding whether to make, rent, or purchase these complementary puzzle pieces, consider factors such as:
- The cost and time required to bring the required capacity into service;
- The complexity of coordinating the relationship – what is most important in considering the rental option; and
- The quality of people and technology available for each option.
Do what gets your business up to speed with the best people and the best technology, in the shortest possible time.
5. Carefully deploy your chosen path of innovation.
Finally, when you think the puzzle is assembled correctly, try it out in a small part of your business to troubleshoot. If not, find out what went wrong and fix it. If so, use this method to make room for innovation across the business.