The Truth about
Breakthrough Strategies
Ford,
Apple, Netflix, Starbucks, and Google struck gold with these
breakthrough strategies, and changed the game in their respective
industries:
- Offer a standard, mass-produced automobile
- Turn a personal computer into a “digital hub” for consumers
- Rent movies through a monthly, direct mail subscription service
- Create a “third place” between office and home to enjoy high-quality coffee drinks
- Organize the world’s information and make it universally accessible and useful
Although
each strategy is distinctive, they share a few common characteristics
that tell us how breakthrough strategies really come to be.
First,
they start with flashes of insight prompted by working on big
problems. For example, Henry Ford had the idea to move the cars, not
workers, down an assembly line, while struggling with how to make the
automobile more affordable. Netflix
founder Reed Hastings asked
himself, “Why can’t you sell movies like Amazon sells books?”
while fuming over the fees he had incurred from his late return
of Apollo
13 to Blockbuster.
But
where do such novel ideas actually come from? Is it from the muses,
as the ancient Greeks would have thought? Is it from genius? Is it
from the creative side of one’s brain, as Roger
Sperry,
winner of the 1981 Nobel Prize for his left brain/right brain
research, might have said? Or is it from a brainstorming session in a
tricked-out conference room with creativity-enhancing furniture,
colors, and lighting?
In
fact, research
tells us that
innovative strategies are sparked by “precedents” from unexpected
places that seem to offer at least a partial solution to the
challenge you have in mind. For example, before they founded Google,
Larry Page and Sergey Brin were working on how to make the Web more
useful for e-commerce. But Page was also working on the Stanford
Digital Libraries Project, and realized that you could rank Web pages
the way scholars are ranked by their annual number of citations.
Howard Schultz was noodling on how to raise people’s demand for
high-quality coffee when he was inspired by
observing Italians from all walks of life enjoying espresso at their
local watering holes. Ford’s idea for the moving assembly line
originated in meatpacking plants, where butchers disassembled
carcasses moving past them along an overhead trolley.
Then
things get really fascinating, because breakthrough strategies always
involve “creative combination.” For example, to help make the
Macintosh a digital hub for consumers, Jobs
created the iPod by combining visual
cues from Braun’s T3 pocket radio; a 1.8-inch 5GB hard drive from
Toshiba; the navigation features of the Bang & Olufsen BeoCom
6000 wireless telephone; capacitance technology invented in 1910 for
the scroll wheel; the programming code from SoundJam MP (a popular
MP3 player app), and his Pixar experience, where he learned about
negotiating with the music industry for the right to sell songs
individually. Ford added to his idea for a moving assembly line by
adopting profit sharing for frontline workers—which John Stuart
Mills had written about in his popular book published in
1848, Principles
of Political Economy.
Ford’s famous dictum, that you can have any color you want as long
as it’s black, was the result of discovering that black paint dried
faster than any other color—thus allowing the assembly line to move
faster. And his network of dealer franchises emulated Singer
Manufacturing’s move to cover the country with third-party
resellers because it could not afford a national sales force to hawk
its innovative sewing machines. Similarly, Page and Brin brought
together data mining, page ranking, and search-linked ad selling
technologies in creating Google, and Hastings combined Amazon’s
book-selling approach with the gym membership fee model to build
Netflix.
Finally,
people—not companies—create breakthrough strategies.
Breakthroughs go against the grain of accepted wisdom, and markets
and organizations are powerful immune systems that throw up multiple
barriers to turning new ideas into commercial reality. It takes a
person who believes enough in the strategy to be willing to fight an
organization or the broader market for however long it takes to make
it happen. Remember that Howard Schultz was not the original founder
of Starbucks. He was just an employee of the company, then a roasting
and packing business, when he was sent to Italy to scout out the
equipment used there for roasting and grinding coffee. Upon his
return, he shared his idea—to create an Italian-style espresso bar
that would drive demand for Starbucks’s high-quality coffee—with
the founders, who promptly turned him down. So he quit to start his
own business. Then, when the founders decided to sell, Schultz bought
the company, and the rest is history.
So
what does all this tell us about breakthrough strategies? They rarely
come from the typical strategic planning effort. Nor do they
typically result from the common practice of generating and
evaluating strategic options. And they certainly aren’t inspired in
a traditional board offsite, executive retreat, or brainstorming
session. Instead, they start with individuals working on big,
specific challenges who find novel ideas in unexpected places,
creatively combine them into innovative strategies, and personally
take those strategies to fruition—against all odds.
Of
course, breakthrough strategies like these—that shape or redefine
their industries—are rare. In your everyday life, you are more
likely to encounter the fashionable strategies that come in and out
of vogue: strategies that transcend any one company, industry, and
region with their broad reach and popularity.
Ken
Favaro is a senior partner with Strategy& based in New York. He
leads the firm’s work in enterprise strategy and finance.
http://www.strategy-business.com/blog/The-Truth-about-Breakthrough-Strategies?gko=bb14d&cid=20141216enews&utm_campaign=20141216enews#nomination
2 comments:
Post a Comment