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MARKETBUSTING STRATEGIES

THE FOCUS OF THIS BOOK—strategic growth—is one of the most vital, fascinating, and poorly understood of business processes. We spend most of our research energy trying to make it less mysterious and to help executives manage it more effectively. In our first book, The Entrepreneurial Mindset, we emphasized helping managers in large, established companies learn from the practices of habitual entrepreneurs—people who are in the habit of creating new businesses over and over again. We argued in that book that half the battle is using appropriate leadership disciplines—recognizing, for example, that new initiatives need to be managed more like options and less like established businesses.¹ In the time since The Entrepreneurial Mindset was published, much has changed. The Internet bubble burst, leading new ventures to fall off the agenda at many companies, in favor of a “back to basics” approach.

Nonetheless, the fundamental issue of where you are going to find new sources of growth hasn’t gone away. You know that if you don’t innovate and change in the long run you’ll be too weak to compete. So, where will your company find new opportunities? How will you as an executive enhance your own potential for career success? How will you sustain the interest of top-quality people? How will you take advantage of changing markets and competitive conditions?

MarketBusters is our effort to provide you with some practical answers. Our hope is that this book will land on your bookshelf (or, even better, in your lap) together with several other excellent books that to us represent the state of the art in understanding growth through new business development. Like Clayton Christensen’s The Innovator’s Dilemma and his and Michael Raynor’s The Innovator’s Solution, this book gives you a point of departure for thinking about growth.² Unlike those books, this one focuses on some specific types of opportunities and how you can move to capture them. Think of the books as complementary.

What is a marketbusting move? It’s an action taken by your firm that changes the game to deliver markedly superior performance. We’ve discovered that with the right guidelines, people often surprise themselves by finding that identifying opportunities isn’t all that hard. This book is about helping you learn the techniques. We’ve distilled our observations from a three-year research program into a set of forty moves, clustered around five core strategies that you can use to create marketbusters. One thing that makes this book different is that we have also examined companies that tried, but failed.

Expect to find specific tools, checklists, and techniques, as well as the examples that make them come alive. Expect to find the practical concepts derived not only from our research but also from our attempts over the past three years to apply the tools to real companies facing real dilemmas of growth and differentiation. Where we can, we’ll share with you some of our experiences. Where we can’t (for reasons of confidentiality), we’ll illustrate the techniques with examples from our case study database.

Where MarketBusters Come From

The core of this book involves five strategies to create marketbusters. We developed these strategies after an extensive analysis of forty moves used by firms to successfully transform their market spaces.

We begin with the least difficult idea: to examine the entire set of linked activities customers engage in when they do business with you with the goal of changing the customers’ experience. If you figure out how to improve their experience, you can be richly rewarded. Next, we suggest you take a hard-nosed look at how your products and services stack up against the competition. Although this is a tad more challenging —because changes usually involve changing internal processes—at least you have a basis of experience to go on. Slightly more challenging is a strategy of radically changing some factor that drives performance in your industry, either to significantly boost your numbers or to help your customers become more competitive in their markets.

Up to this point, you are basically working from a platform of experience. With the final two strategies, you’ll move into new spaces, and thus the final two strategies are the most ambitious. The first involves capitalizing on or sparking a major upheaval in your industry. The second is to identify and exploit what (for you) are radically new opportunity spaces. As you’ll see, the strategies increase in difficulty and risk as you work your way through the book.

Two of the strategies—transforming the customers’ experience and transforming your offerings—may be familiar because we’ve explored them in other contexts.³ In our new research, we found that they are powerful for finding a number of our moves and that we had not really done them justice in earlier works. Three of the strategies—redefining profit drivers, exploiting industry shifts, and creating radically new offerings for your company—are published here for the first time. Table 1-1 summarizes the five approaches.

TABLE 1-1

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A Framework for MarketBusters

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Each approach leads you to look for opportunities in a slightly different way. The first approach: Examine your customers’ total experience with a view to transforming it. This strategy helps you to identify ways (often surprisingly simple ones) to radically improve the customers’ experience of getting their needs met, ideally ways that favor you. We introduced the consumption chain tool in our first book but stopped short of showing you how to make reconfiguration of the consumption chain a centerpiece of your strategy. Here, we use consumption chain analysis as a lens to help you identify how you might be able to capitalize on opportunities by changing your customers’ experiences.

The second approach: Transform your products and services by identifying opportunities to add features, eliminate features, or break apart offerings to reach different customer segments. Here we pick up another tool from our first book—attribute mapping—but we use it in a dramatically different way. We found that attribute mapping can be used to do more than introduce improvements to existing designs. It can also be used to substantively redesign what you offer.

The third approach: Redefine the metrics that drive profits by radically changing one or more key variables that reflect the standards of competition in your industry. This strategy leads you to discover ways to dramatically change the way you do business or, even better, to dramatically improve the way your customers do business by doing business with you. Here, we introduce a tool we call the key metrics analysis to help you discover marketbusting opportunities.

The fourth approach: Exploit more or less predictable shifts in your industry. This strategy calls for you to take advantage of big changes in your industry, either by being the first to spot the change, by taking advantage of second-order effects, or by actively provoking a change yourself. The industry shifts framework is a powerful tool for developing strategies using this approach.

The fifth approach: Capture emerging opportunities. This strategy calls for you to identify specific emerging opportunities by looking at the patterns of slow but significant changes in the context in which your business competes. We suggest ways you can anticipate and prepare for the changes and ways to capitalize on the opportunities big changes always create. Unlike the industry lens, this lens often reveals opportunities that are not relevant to the industry as it stands but rather can provide the basis for large step-outs. We introduce here a tectonic triggers framework to help you identify emerging opportunities.

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About Our Research

We began by defining a marketbuster:

1. A 2 percent change (gain or loss) in market position (typically volume share) of an incumbent as a result of its move or the moves of another player.
2. Annual growth in sales of shipments of 10 percent or more over at least two years from a new entry by an innovator.
3. Annual sales or shipment growth 5 percent greater than the growth in the underlying market by an incumbent.

Then we collected examples—as many as we could find, from as many varied contexts as we could find—of firms that tried to make transformational moves to reconfigure the profit streams in their industry. We included examples of failed moves to add to the robustness and replicability of our conclusions and to avoid the antifailure bias that is pervasive in much management writing.⁴

Eventually, we identified certain patterns in the data. Over time, we isolated forty potential moves that companies can make to dramatically reconfigure the profit streams in their industries.

The dilemma was that the patterns alone seemed fairly idiosyncratic to the companies and industries in which they emerged. The next step in our analysis was to take the patterns and draw from them a lens, a strategy, and eventually a tool that could frame a process to help you discover one of these patterns. So, for instance, by examining the customers’ total experience via a consumption chain analysis, it might become blindingly obvious that some important parallel offering could have enormous influence over actual purchasing patterns. What we did was link each of the patterns we found to a specific lens, so that by using that lens you too can discover patterns of potential marketbusters on your own.

We then began to test our ideas in real situations. Working with companies all over the world, we ran workshops. We found that using the lenses—in combination with the provocative questions listed in each chapter of this book and a modest amount of facilitation—helped companies take a fresh look at their opportunities. Companies in industries that were being written off as hopelessly mature, hopelessly competitive, or doomed were able to quickly identify new ways to look at their markets, new ways to serve customers, and new ways to create solutions for which they could be well paid. The process worked in industrial materials, industrial gases, heavy equipment production, financial services, hazardous materials disposition, maintenance, and a host of other situations.

We then summarized the best of the discoveries from field testing and experimenting with real companies facing real strategic quandaries and used them to inform the material in this book.

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How to Use This Book

Unlike many business books, this book is not intended to be read cover-to-cover on an airplane (although we’d be thrilled to see you dipping into it in that setting!). Rather, we intend it to support a serious and ongoing effort to drive growth and change in your companies. You will find plenty of stories and, more importantly, time-tested questions and frameworks. Everything we propose you try in this book has been tried out by actual companies in real life.

MarketBusters is structured so that you can quickly get to what interests you, use it, and come back to it as your thought process evolves. Each of our five strategies has its own chapter. We offer one company’s example to illustrate the lens, to give you the flavor of how it works. Next we spell out the moves, forty in all, underlying each strategy. Then we give you what we call marketbuster prospecting questions that you can use to identify ideas that your company can use. The questions are clearly set off from the text so that you can quickly find them when you come back to the book. At the end of each chapter, we provide a summary of action steps you can take to use the strategy effectively. At the end of the book, you’ll find a catalog of all the moves and the provocative questions associated with them, to make it easy for you to find them.

Where should you start? It depends on the business challenges you face. Have the feeling that things are too stable and static in your markets and that they may be ripe for change? Start with chapter 2. Struggling to differentiate yourself from competitive offerings? Chapter 3 offers ideas for renewal, based on a tough-minded perspective on how you compete. Believe that new technologies or approaches might radically change your value chain? Chapter 4 offers some guidance for making potential opportunities pay off. In an industry in the middle of a transformation or under significant cyclical pressures? Try chapter 5. And if you believe that the time has come for your company to make a major move into a new opportunity space, you’ll find ideas in chapter 6.

We don’t mean to imply that making a marketbusting move is easy. If it were, smart competitors would already be out there doing it. The big challenge is not only coming up with the ideas but also making them happen. So in chapter 7, we deal with implementation issues. We describe how you’ll need to align the key organizational elements to execute a marketbusting strategy effectively, and we alert you to possible barriers and minefields you need to be wary of as you move to implementation. In this chapter, too, we suggest a simple analytical tool, the delay and resistance analysis table (which we affectionately call DRAT). This table is a simple way of making sure that you have thought comprehensively about execution challenges and are prepared to take them on. Finally, chapter 8 takes you step by step through a case study, so you can see how it all fits together.

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Preparing Yourself: Audit Your Strategy and Clarify Your Process

Let’s be realistic. Your organization probably has some kind of strategy and is trying every day to outpace the competition and satisfy its customers. We recognize that marketbusters must fit into some process that your company already uses to create strategy. Nonetheless, judging from our experience in executive courses and workshops, we continue to be surprised at how many organizations seem to lack a coherent process for developing and executing strategy.

So at the risk of asking you to repeat Strategy 101 but in the interest of being pragmatic and realistic, we suggest that you audit your company’s strategy before you start trying to implement a marketbusting move. This approach will give you a baseline. If you already have good processes in place, you should be able to zip through the audit in no time. If not, you may want to revisit your base strategy. After you’ve taken a good hard look at what you’re doing now, you’ll be ready to start building marketbusting moves into the way you “do strategy.”

Your Strategy Audit

The following checklist is a simple way to assess the clarity, robustness, and health of your strategy as it stands. It’s a good idea to get in touch with your existing strategy before contemplating the kinds of major shifts that marketbusting implies.

Objectives

• What outcome represents success for this strategy? How clear and well articulated is it?
• Is it clear which market arenas are desirable and undesirable? Is the strategic logic for this choice clear and unambiguous? Do you use a screening mechanism to include desirable arenas or activities and exclude undesirable ones?
• Has the strategy been translated to memorable, simple phrases and idioms that have emotional resonance for employees?
• Do you have a systematic approach to communication that ensures widespread understanding of the strategy?
• Does your company have a way of describing the strategy to key financial stakeholders (such as stock analysts)?

Customers or Clients

• Which customers does your business seek to serve, and in what priority order? Why have you chosen these customers? Which customers do you not seek to serve? Why?
• What does your business do that offers a winning proposition for customers, consisting of greater value than is offered by competitors, in such a way that customers will pay for this greater value? How does your offering add value, from the point of view of the customer? Describe this value in a few sentences.⁵
• How is the business capturing value for your company from the target customers?

Competitors

• Who are they? Are you obtaining competitive intelligence about all three categories of competition? By this we mean not only the traditional competitors that you know well, but also potential competitors who might be preparing to attack you as well as oblique competitors—those who are in competition with you for something that you need, such as investment capital or disposable time. Is there a clear competitive strategy in place for each category?
• What is the form of competitive insulation—that is, how do you protect your chosen markets from the competition?
• What moves are competitors most likely to make? How will you respond?⁶
• How do you currently conduct competitive intelligence? How will your leaders get decent information about what the competitors are doing?

Complementors (business partners, or those whose cooperation you need to make your business work)

• Which activities do you perform on your own (without a partner)? Does partnering create future liabilities (such as losing touch with customers or weakening the technological or capability base of your business)?
• Whom do you need in your network of stakeholders to stay effective? Has a solid stakeholder analysis been done? When was it last updated?
• Do you have a continuously updated list of potential targets for acquisitions or potential partners for alliances? Do you have a clear strategy for post-alliance or acquisition management?

Company and Capabilities

• What are the unique capabilities and competencies of your business? How are they being leveraged?
• What business model is your company pursuing (what do you get paid for, and how does it fit into the industry’s value chain)?
• How does your strategy process ensure that you develop new capabilities and terminate those that are obsolete?
• How will you build and maintain the key human capital your business requires?

Context

• What are the environmental and contextual issues that will affect the success of this strategy?
• How will outside forces (regulation, globalization, war) affect the strategy?

As you think through the answers to these questions, note where you think your company’s strategy is healthy and which processes you want to keep in place, as well as places where you think changes are needed. Bear these in mind as you continue to develop a concept for marketbusters in your firm.

If you find that you are really struggling with your strategy process, it might be a wise idea to get away from the day-to-day business. Some good options are to take your team to an executive education course, similar to the ones we run at Columbia and Wharton, hold a facilitated management meeting off-site, or just get a “time out” for yourself to focus on these important questions. In our experience, it’s extremely hard to reorient your strategy while you are in the rush of ongoing business. We find most busy executives are surprised at how rewarding such time off can be.

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Moving On

Now you know what the book is about, where it came from, and how to use it. The next step is to decide where to start. It makes sense to skim through the book more or less as we’ve written it, with the easier-to-grasp and lower-risk ideas in the beginning, the more ambitious and somewhat more abstract ideas toward the end.

A few points to remember as you begin this journey. Creating marketbusters requires what we refer to as an “entrepreneurial mindset” on your part. What does this mean? It means that you recognize that competition is increasingly about developing new offerings, new ways of doing business, and new solutions—and not fighting your competitors on price.⁷ It also means that you need to be prepared to use the appropriate disciplines for moving into uncertain new areas, and you may not be familiar or comfortable with them.⁸ These new disciplines will demand that you, as an executive, develop new skills, such as getting better at making decisions that are roughly right, making sense of ambiguous information, and realizing that failure goes hand in hand with taking intelligent risks.⁹

It is also important to remember that no strategy lasts forever. In fact, by the time this book is published, one or more of the companies we cite as having successfully created a marketbuster may well have gotten into trouble. (This is commonly referred to as the In Search of Excellence problem.¹⁰) We are always surprised that people who agree that strategies need to continually change then expect that the companies we cite as examples will succeed with a particular strategy forever. No strategy will go on being successful indefinitely. Competitors will catch up, markets will change, and even companies that had a great idea can stumble when they take their success for granted. This doesn’t mean that the experience of these companies offers no important lessons.

After all, competitors aren’t stupid. Strategy 101 suggests that any market you demonstrate to be attractive by your success at marketbusting will attract competition. Strong competitors will provoke a strong competitive response, which often will succeed. Further, the very success of a marketbuster can lead to the rigidity, complacency, and embeddedness in the existing state of affairs that defeats once-successful firms.¹¹ The point of our examples is that the moves meet our criteria for marketbusters and that they help teach valuable lessons about how to identify such opportunities—and not that the companies behind them are somehow infallible. So just because one or another company has gotten into trouble, has been acquired, has been defeated by a competitor, or has run into some other problem doesn’t mean that it didn’t come up with a powerful move.

Finally, think of your efforts to drive growth and profitability as a journey and not an event. If finding marketbusters is at the top of your agenda, is in your daily conversation, and is supported by your behavior, your peers and subordinates will get the message that you are genuinely interested and enthusiastic about exploring the chance for these opportunities. If, instead, it’s the focus of a splashy off-site with a T-shirt as the main take-away, your efforts will only breed cynicism. Make the time for it. Think about making marketbusters one of your top priorities. And be proactive about getting stuff off your to-do list to clear the space you need to be successful.

Action Steps

Step 1: Define the objectives for the growth and profitability of your business in the near term and in the longer term. Will your current strategy get you to these objectives?

Step 2: Audit your current strategy using the questions in the strategy audit section presented earlier. Where is your strategy working well? Where is it not working well? What kinds of changes might you need to make?

Step 3: If your current strategy is either lacking or inadequate to achieve your objectives, identify the kind of change that would make a difference—modest or significant. Do you need to take some time off to get this most important process right? When? Where? Who will you use to help you think it through?

Step 4: Define where you are facing your biggest challenge. Is it in understanding customers? Better crafting of product or service design? Improving key operating metrics? Coping with an industry in transition? Figuring out how to make a really big new move? This might suggest which chapter to start with (2, 3, 4, 5, or 6, depending on the challenge).

Step 5: Get started learning about marketbusters!