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The Old

The old, customary procedure of strategy development has a pure and sound logic. It has been designed to answer the question, What is it that we should do in order to achieve our goals?

The process essentially involves three stages:

  1. Where are we now? 
  2. Where do we want to be? 
  3. How are we to get there?

This process is based on Gap Analysis. Supposedly, the competitor who manages to execute it better and more wisely (and also carries out the strategy with consistence and persistence)—will be the one who achieves competitive advantage over the rest of the market.

I claim that this time-honored process is no longer adequate and is insufficient in the current competitive environment. It does not help managers steer their organizations in the direction of success and profitability. I call it “Wishful Strategizing.” Its outcome is—more often than not—failure, and the consequence is that executives lose faith in strategy-making altogether.

What is wrong with the classic process?

Before all else, its basic assumptions are erroneous:

Assumption No. 1: We know our goals

How do we set our goals according to the old process?

In the worst but not infrequent case, goals are based on the degree of managerial ambition or aggression—with no true reference to reality. In the better case, it is by evaluation of potential. Our evaluation of potential is based on the current situation and on consumers' answers to market research questions. However, the real potential—that which we cannot see while adhering to this approach—is based on “what could be.”

Our initiatives and actions continuously change customer desires. Products that no consumer ever wished to exist become vital necessities. Hence the famous historic mistakes in the market-potential assessments of commercial flights, cars, computers and so many other products and services.

Assumption No. 2: The world is stable

We assume that if we just define where we want to get to, we would surely be able to either find or make our route to get there. The leading image, in the background of it all, is that of driving through a more or less previously explored landscape that nevertheless remains unaltered while we progress across it. Well, that image could not be more misleading.

In the past, companies succeeded by discovering or unveiling unsatisfied customer needs. Today, generally speaking, there is no such thing as ungratified needs. Moreover, customers have become infested with options. Their expectations are constantly rising. Their wants are volatile.

If in the past “market share” was a stable index of achievements (as we used to say, “We have achieved a market share of x”), then today, in many fields the market share data changes by the month, by the week—and even by the day. We can speak only of our average market share. Most managers will admit that there are no more sustainable competitive advantages, and that the mission has become… the achievement of a repeatable competitive advantage.

While the old approach is a control-oriented approach (we aspire for market dominance), the new orientation of marketing behavior is that of a dance-along with the market trends and customers.

Assumption No. 3: Only we are doing this (or: we do it better)

The illusion that we are capable of defining specific goals and moving toward them virtually unimpeded assumes that our competitors are going to continue doing exactly what they have been doing so far.

Well, surprise! They will do no such thing.

First of all, the competitors of today may not be the competitors of tomorrow. Manufacturing in China, electronic trade and the unlimited openness of customers to novelties have lowered entrance barriers in many market categories. Furthermore, managers now spend less time in their posts. This means that new managers constantly pop up in competing companies and bring with them with new ideas—or at least fresh ambition.

In the past, when the game consisted of a rat race toward unfulfilled customer needs, one could know exactly what one's competition was attempting to achieve. Since then, more and more companies have realized the need for inventiveness and innovation to do something that might succeed and which their competitors have not yet tried.

The New

So, then, what is the alternative to the old brick road to strategy? I propose that we move from wish-oriented management to opportunity-oriented management.

I would like to offer a new process leading to successful strategizing that we have been using in our consulting work for the last few years. It includes four stages:

  1. What's now? 
  2. What's possible? 
  3. What's feasible? 
  4. What's next?

The new heart of the process is the question, “What is possible?” Admittedly, the old process does encompass a SWOT Analysis, in which there is an Opportunity component. It is, however, a minor—and usually pretty much neglected—step in the strategy-development process. It has no method, and it has no tools. You just list whatever opportunities come to mind.

As opposed to that, the process I am referring to is based totally on systematic examination and thorough scanning of available opportunities. We have developed a comprehensive methodology for doing that and have named it The Opportunity Scan, or, in short, the O-Scan: a set of procedures and tools designed to map the full scale of opportunities that are available to the company at a certain point of time.

Judging from my experience, defining goals is much more meaningful, far-reaching and effective—after a proper opportunity scan.

We have created the O-Scan after having analyzed, in depth, more than 150 companies that have managed to come up with a “next thing”—and succeeded. That “new thing” usually was…

  • A new winning business concept 
  • A new winning competitive strategy 
  • A new segment that offers growth potential 
  • An innovative “hit” product (or service) 
  • An irresistible brand strategy

Our analysis asked the question, “Where and how was the new opportunity found and identified?” Based on the conclusions of this extensive study and our own accumulating experience, we determined that a systematic opportunity search should encompass six modules, for which we assembled or designed the most appropriate instruments. Here are the modules, in brief:

  • Consumer Fore-search—This module is used for marking potential future consumer wants, and it consists of the following:
    1. An analysis aimed at detecting new market segments and emerging social groups

    2. The use of trend-spotting and cool-hunting methods

    3. A qualitative research method designed to conduct a Reverse Analysis of the current system active goals (benefits sought), beliefs (mostly unconscious) and emotions at work, in order to predict the possibility of inducing the formation of new such systems (the results guide the development of new products, services and brands).
  • Competition Analysis—using a methodology designed to uncover the underlying rules of the game in the market and to explore systematically the possibilities to alter them—in order to achieve competitive advantages.

  • Internal Audit—a methodical “treasure-hunt” within the company for identifying competencies, infrastructures, technologies, connections, etc., which could be exploited in new ways to serve as bases for future opportunities.

  • Brand Audit—A thorough examination of the brand architecture and each and every brand in it. More often than not, the potential of the brand system is not realized in full and there are opportunities to reshape the architecture, to focus/abstract/extend the brand or to re-brand, to develop the brand drama or to enrich brand realization in more dimensions, such as brand culture, brand community, brand experience, innovations that fulfill and reaffirm the brand's promise and many other options.

  • Worldwide Lookup—Spotting of new ideas and models that have succeeded elsewhere, either in the same industry or in other categories, which could be adapted and implemented to create new opportunities.

  • Inventive Thinking—Exploring, in a creative yet systematic manner, potential alterations and advancements of current technologies, products and practices so as to create new opportunities.

The What's Next? Process for strategy development could be summed by the three “Open Your I's” commandments: Identify, Invent, Implement.

The static nature of the old process manifests itself once more in the norm of performing the process of strategy development infrequently, because “one does not change one's strategy every day.”

In contrast, the approach that I'm professing reads: strategy in motion, strategy in constant development that stems from the tension between the need for continuity and accommodation to the changing environment and opportunities.

Therefore, the strategy-development process is a continuous one and constitutes an essential element of routine management work.

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ABOUT THE AUTHOR

Dan Herman, PhD, CEO of Competitive Advantages, is a strategy consultant, keynote lecturer, workshop/seminar leader, and author of Outsmart the MBA Clones: The Alternative Guide to Competitive Strategy, Marketing, and Branding (www.outsmart-mba-clones.com).