By James Janega
What can incumbent firms do to stay relevant in an increasingly contentious, uncertain, and disruptive competitive environment?
Alter processes, plan ahead, and delegate decision-making authority — both for new opportunities and for responsibilities managing day-to-day “business-as-usual.”
I work with both startups and enterprise companies. Each has their advantages. I find it interesting that each also admires and fears the other. But it’s among corporate executives that I hear the most urgent questions about how to tailor strategic planning to account for startup competitors.
As I was doing research for leaders at a global company rethinking its strategic metabolism, I came across several bits of good advice for leaders at established companies anywhere who are worried about disruption.
Strategic planning processes will be different.
Here’s where you’ll notice it:
Planning cycles. You cannot make decisions on a yearly cycle. So companies should distribute decision-making authority. You can set the budget on a yearly cycle – while you do, set boundaries on discretionary budget, so that faster decisions can be made closer to the action about (well-qualified!) opportunities that align with your (well-defined!) growth strategy.
Historical analytics aren’t reliable for forecasting growth. Uncertainty increases with new entrants, and technology opens those doors. Use market-sizing to define opportunity for initiatives that come out of innovation budget. And understand which proportions of your strategy will be appropriately predicted by historical analytics, and which will be governed by opportunity-sizing and disciplined experimentation.
Strategy formulation. Tools perfected by big corporations are well suited to in-market competition. But Michael Porter’s Five Forces model is being upended by Clayton Christensen’s theory of disruption, in which new entrants nibble at low-margin sales, build scale and reframe value propositions, and then horizontally integrate into more profitable areas – or else create entire new markets that erode customers’ willingness to share their wallet with incumbents in the first place.
The fix: Take a holistic view of the customers’ jobs to be done, in the context of future scenarios five to 10 years out. How would you use technology and scale to capture those opportunities? How can you box out entrants that haven’t decided to enter that market yet?
Shift from “waterfall” strategy to “agile” strategy.
Strategy needs to be a framework, not a plan. Frameworks allow you to share and align on common goals, common language, and also letting you refine where you play in changing conditions — based on consistent priorities. Look to your priorities and build your strategy in sprints. Keep a flexible investment capacity to respond. Every time you act on the strategy framework, reassess your strategic position and your framework’s effectiveness.
Find opportunities to disrupt yourself. Play the opposite game: Where are your biggest costs? Your most important channel relationships? These are the places where disruptors will try to pin you down. Devote a leadership workshop to imagining how to compete without those costs or those channel advantages.
Key operational questions include: What capabilities would you need to build? Who in your company should investigate that? Experiment with it to develop a proof of concept? Should any resulting success exist as a part of the company, or as an off-brand flanker to devour market opportunity before startups can scale into the space?
Leaders should put tension on the company to start the digital transition. That involves researching and evangelizing the opportunity, setting priorities with their leadership groups, and incentivizing their teams to find alternative revenue streams. They also must set aside time for their teams to think about those issues. Many successful teams develop strong deputies – and then offload day-to-day operational duties to that person, freeing the team leader to devote more time to future revenue opportunities. They also must first bring their bosses and peers on board to the opportunities. That wide-scale point of view of investors’ and shareholders’ expectations will help leaders determine how much operational “sea room” they have to navigate in. But don’t take no for an answer. Discover what you’d have to prove to get them to say yes.
Apply process optimization differently. After your first few go-rounds at strategic innovation, do process analysis on how you and your team went about understanding and scoping new opportunities — be it partnership, M&A, or building a proof of concept. Get better at reducing ambiguity and uncertainty with unfamiliar opportunities, just as venture capital investors (or journalists) do.
Build a picture of a common enemy. Your opponent doesn’t exist yet. But opportunities for them are developing. You can’t spot an opponent that doesn’t exist, but you can spot the opportunities for them to emerge. Build time for basic scenario planning to be led by your leadership team or a devoted skunk works. During that time, flag opportunities where new entrants can develop a value proposition with future consumers. Develop a persona for your disruptors, paying special attention to how each “disruptor” would exploit an opportunity in a given scenario. So that they can more effectively flag risks and opportunities to the organization, share those personifications widely. That’s the corps of common enemies your team probably needs to galvanize them to take action.
What new processes or relationships are you using? I’m always curious to see how others solve common problems.
James Janega leads the Innovation & Insights group at Slalom Chicago. He is an Entrepreneur-in-Residence at the University of Illinois’ EnterpriseWorks accelerator, a member of the Chicago Ideas Co-Op, and helps enterprise companies and startups improve the way they think about innovation strategy, customer validation, building more robust innovation capabilities and processes. You can reach him at @JamesJanega on Twitter.