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Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. A former Madison, WI resident, Kay now resides in San Diego, CA. The views on her blog are not those of her employer, IBM.

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August 27th, 2009

What’s Your Version of Out-of-the-Box?

What do J&J, Fed Ex, Morgan Stanley, Microsoft, GE, HP, Hyatt, Trader Joe’s, SW Airlines, MTV, and CNN have in common? A recent Newsweek article identifies these 11 great icon brands as US companies that started in a recession.

A recent Wall Street Journal article contains market share data for different markets showing how leadership is changing rapidly. Who thought CIT and GE would lose their strong lending positions to businesses?

The game changes in recessions, especially one like the present when the other side of the downturn is anything but an equivalent upturn. Consumers and businesses are in “reset mode” and their changes create new opportunities for:

  • Followers to unseat leaders;
  • Leaders to consolidate their industry; and,
  • New-to-market categories from existing and new companies.


Add in game changing new regulations for green house gasses – which essentially alters every comparative price – and the future is really wide open. Put it this way – if economic cycles were geography, this recession would be to exploring what the moon was in the 1950s – uncharted territory.

What moves make sense right now? Fred Schlegel in Frog Blog offers a compelling challenge to out-of-the-box thinking, which many leaders feel is a must-do given uncertainty all around. He suggests instead that we need to be in a cardboard box with some limitations. I’d repeat the list, but I’d prefer you read Fred’s lively writing.

The suggestion I’d like to give is the following:

Before you leap out of the box, figure out how strong your core business is.

If your position is weak, find the part of your business where you can lead and align that part of the business with trends and make improving and growing this part of your business your new True North. This is called the “shrink to win” approach.

If your position is strong, but your core business’ market is disappearing (e.g., land lines in the telecommunications industry), find a way to transfer your skills to a growing and more profitable part of your more broadly defined industry. This is called the “reinvent the core” approach.

If your position is strong and the core is growing, find adjacent target markets or categories where you can excel. Segment your current target market and serve each segment better to build competitive barriers. Keep pushing to enhance your value promise so that no one can catch up. This is called “great market leadership” and companies that are consistently profitable and growing have mastered this art.

Yes, there are huge opportunities today. But which you pursue will depend upon where you stand today.

Where do you stand today? How is that influencing the opportunities you are considering?
____________________

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For insight on business model innovation and the perils of commoditization, read my recently released book, Beyond Price.


5 comments to What’s Your Version of Out-of-the-Box?

  • I like this core analysis a lot. The structure of Strong vs weak starting points offers good reminders that in some way your innovative efforts are building off an existing business. Very good for focused innovation initiatives. Visually I can imagine this leading to a chart with vertical axis strong to weak and horizontal axis leading from shrinking to splintering to growing. Or maybe growing -> splintering. Could be an interesting part of an innovation analysis. Does that make sense to you?

  • Absolutely. I am working with a company that has weak positions across three businesses and using a similar chart to help them understand the challenge in front of them. One of the variables we started to measure is your share as a percent of the leader’s market share. This one measure is the best argument I can offer a client for finding a niche where THEY are the leader. Have a good day Fred. Kay

  • That’s interesting. I like it when there’s a strong visual reason for action that comes from the analysis.

  • Kay, It’s been interesting to watch some of these new business models emerge as adaptations to current conditions. A few real estate agents, real estate brokers, and real estate attorneys I know have developed new specialties in things such as foreclosures, auction sales, online marketing of properties, bankruptcy law, etc. Some of these concentrations may fade away as conditions improve, but then again, perhaps they will evolve further. For instance, there’s no reason why an auction approach to home sales couldn’t work in a strong market. And it’s not a long stretch from bankruptcy counseling to new business start up counseling: each has to do with capital resource realignment. I suppose independent contractors and small businesses can adapt more quickly, but many of them seem to be doing well and larger firms should take a cue from their example.

  • If quality was the must have in the past decade, flexibility is the must have in the emerging decade. In the instances you share, companies are taking their core competencies and asking how they can be extended to new products (aligned with trends) and new target markets. The art of strategic differentiation is knowing your advantages/competencies and then deploying in markets and categories that are the most relevant and fastest growing, or where share growth is most profitable for your company. Best, kay

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