Why are so many breakthrough strategic possibilities killed off before they see the light of day? Years of research have provided us insight into the mistakes teams make that tend to kill off the most exciting ideas.
General Electric just announced it is selling off GE Digital, the much-hyped software business based in California and a keystone in GE’s strategy to transform itself from an unfocused conglomerate (in financial services and media) into a digital player that would usher in the next industrial era, creating the “industrial internet of things.”
We are passionate about understanding how the strategic conversations you hold – in boardrooms or hallways – can lead to breakthrough ideas … and why so often they don’t. We have found five mistakes teams often make that tend to kill off the most exciting strategic possibilities, and we’ve come up with a way to counter each mistake, called the IDEAS framework (Imagine, Dissect, Expand, Analyze, Sell).
In this article, I share this framework with you, in addition to a special announcement about a new program we are launching this month (see below).
I started my career in the 90s, as an external management consultant who worked on the business process reengineering aspects of large systems integrations. Our clients would spend millions of dollars reengineering the organization, but they often did not implement the changes. My personal experience reflected what research indicated: 80% of change projects fail.
In a sun-filled boardroom overlooking lower Manhattan, I was sitting with a group of chief strategy officers for part of our Outthinker Roundtable discussion. Professor George Day, leading expert on innovation and marketing, and faculty member at Wharton Business School, shared a concept about disruption that has been infecting my thoughts ever since.
US corporations invest more than $350 billion a year on innovation through R&D efforts. So it’s easy to assume that such formal efforts propel innovation more than any other factor.
Debbie Brackeen was in the “innovation” business before it was even called “innovation.” After completing her undergrad at Stanford University, she found herself in the heart of Silicon Valley. She spent her first years at Apple followed by stints at a variety of high-tech companies from HP to venture-baked start-ups. Today she is the chief strategy and innovation officer at CSAA Insurance Group, one of the largest AAA insurers in the world.
You stepped into the future…but has it felt more like you stepped off a cliff? Some of the most spectacular strategic failures have been due to poor execution. Unfortunately, the momentum of vision is often short-lived as the reality of the complexity of execution begins to set in. Since 1955, only 57 companies have maintained a position in the Fortune 500 while nearly 2,000 companies have come and gone during that same time period.
If someone handed you a sledgehammer and told you to start smashing your company’s products, would you do it? That’s exactly what Haier CEO Zhang Ruimin did to prove a point to his employees. That was the first in a long line of radical decisions that have transformed the company from a fledgling refrigerator maker to the world’s number one appliance manufacturer – and kept it there.
Stratagem 36:The Stratagem of Linking Stratagems
“When the enemy possesses a superior force, do not attack recklessly. Instead, weaken him by devising plots to bring him into a difficult position of his own doing. Good leadership plays a key role in winning a war. A wise commander gains Heaven’s favor.”
—From The Thirty-Six Stratagems
Many credit the iPod’s success to Apple’s creative ethic. Unconventional design choices—a flywheel, no on/off switch—surely made for a radically aesthetic product. Inventive marketing practices such as highlighting the iPod’s white earphones, instead of the device itself, surely contributed to the generation of early buzz about the product.
But a careful dissection of the iPod’s rise reveals numerous stratagems at work. Steve Jobs’ creativity extended beyond the technology and into the business. Apple built and launched a set of interlocking strategies that deflated competitive resistance. If you had wanted to compete with iPod when it was launched, consider what you would have had to contend with:
- If you were Sony, you’d have been stuck with a conflicting agenda. Your consumer electronics group would have wanted to introduce a hard drive–based MP3 player like the iPod, but your entertainment business would have resisted. This is Stratagem Seventeen, Seize the opportunity to lead the sheep away.
- If you had been open to introducing a hard drive–based player, you would have been unable to match the iPod’s size, because Apple had secured exclusive rights to a new hard drive capable of storing more songs in less space than previously possible. There would also have been music content that you could not have made available in your online music store because Apple had secured exclusive rights to some music content. This is Stratagem Ten, Remove the firewood from under the pot.
- Even if you could have gotten your hands on a small hard drive, you would have been forced to battle Apple on two fronts. Apple initially marketed the iPod only to consumers who owned an Apple computer (the iPod was initially compatible only with the Mac). Unless you had had a similarly strong business to link to your device, you would have faced unfair odds. This is Stratagem Seven, Besiege Wei to rescue Zhao.
- You would have to struggle to secure a music library as large as that which Steve Jobs rapidly lined up by his effective use of Stratagem Six, Kill with a borrowed knife: He convinced music labels to give his iTunes music store a robust music catalog by using the threat of illegal digital music–sharing sites.
- If you had been able to launch a successful competing product, Apple would have made sure you remained on shaky ground by repeatedly implementing Stratagem Twenty, Let the plum tree whither in place of the peach, because the company is comfortable cannibalizing its products to prevent competitors from doing so first. In January 2004 Apple launched the iPod Mini, a lowercost alternative to the iPod. One year later, in January 2005, it launched the Shuffle, an even smaller and less-expensive alternative. In September 2005 Apple replaced the Mini with the Nano. This was followed one month later by the Video iPod. Keeping pace with Apple is tiring.
Apple sets up a long line of barriers for its competitors to surmount. It continues to erect them, ensuring that its competitors’ success comes only after considerable persistence and creativity.
Microsoft, long an Apple rival, has grown as a result of a competitive ethic not unlike Apple’s. Microsoft, of course, has succeeded far longer and on a greater scale than Apple. It executes multiple creative strategies across value chains, markets, and levels (from corporate strategy to operating tactics).
The company’s core strategy is Stratagem Seven, Besiege Wei to rescue Zhao, which takes the form of one business contributing to the success of another (e.g., Windows contributing to the success of Microsoft’s ISP, MSN). But Microsoft executes multiple strategies around this core strategy to confuse, frustrate, and outmaneuver its opponents.
- If you are profitable, Microsoft may sacrifice its own profits to win consumer loyalty, forcing you to give up your profits as well (Stratagem Two, Exchange a brick for a jade).
- If you beat Microsoft to market with an innovation, Microsoft may reveal its intention to soon make a similar innovation, thus drying up your supply of customers and investors (Stratagem Twenty-One, The stratagem of the open city gates).
- If you do launch your innovation successfully, Microsoft may let you proceed, and then launch a competing product only after you have proven your innovation to be successful (Stratagem One, To catch something, first let it go).
- If you command an advantage in your market, Microsoft may force you to play a different game, one it knows it can win (Stratagem Three, Invite your enemy onto the roof, then remove the ladder).
- If you are competing for distribution, Microsoft may use its cash to build influence over distributors, as it did to influence retailers (Stratagem Thirteen, The stratagem of the beautiful woman).
- Even if you win a battle, Microsoft may persist, launching small incursions that build its knowledge of your market and that incrementally erode your lead, until it overtakes you (Stratagem Fourteen, Beat the grass to startle the snake).
Competing with Microsoft or Apple demands agility. Both are opponents that will come at you from multiple directions and will keep rising from the mat until you are too overwhelmed to keep up.
Linking stratagems also means combining stratagems to create entirely new ones. This will gives you the power to generate nearly endless streams of moves. As Sun Tzu wrote, combining tactics can give rise to “an endless series of maneuvers. . . . It is like moving in a circle—you never come to an end. Who can exhaust the possibilities of their combination?”96
As an example, consider the “disruption” strategy heavily promoted by business strategists today: pursuing an approach that competitors will not copy because copying it would expose them to attack from other players in the market. This is the explanation often given for the successes of strategically innovative companies such as Southwest Airlines and Ikea, the furniture-store chain.
The Thirty-Six Stratagems would explain this strategy as being a combination of two stratagems: Stratagem Twenty-Nine, Clamor in the east; attack to the west, and Stratagem Six, Kill with a borrowed knife. First, attack your competitor in such a way that, in defending himself, he exposes himself to another attack (Clamor in the east; attack to the west). Then, rather than attacking your exposed competitor, let other players attack him (Kill with a borrowed knife).
If your competitor defends himself, he will be attacked by other players in his industry, weakening him and potentially forcing him to call off his defense against you. If your competitor decides that this makes it not worth defending against your incursion, you can move in unhindered. Either way, you win. If your competitor defends himself, he exposes himself to attack from other competitors.
The Generals’ Three Strategies
The prince of Chu was being held prisoner by the state of Qi when his father died. He naturally wanted to return home to claim his throne. But the king of Qi demanded a high price for his freedom: The prince of Chu, soon to be the king of Chu, would have to give up great stretches of Chu’s eastern lands to the kingdom of Qi. The prince reluctantly agreed.
After returning to his home and taking the throne, the new king of Chu faced a dilemma. A regiment of Qi soldiers had approached the Chu border, demanding that the king make good on his promise and surrender the eastern lands. The king was unsure how to deal with his promise whether or not to fulfill. So he summoned three of his generals to ask their advice.
The first general believed the king’s only option was to give up the land and later attempt to recapture it. He argued that a king’s ability to rule depends on his reputation. If the king proved his word to be of no value by refusing to give up the eastern lands, his authority would be jeopardized. This general offered to travel to the Qi regiment on the Chu border and surrender the land.
The second general argued that the king should defend the land at any cost because it was too large a parcel to give up. The state’s strength depends on its size, so giving up so much would be a disservice to the king’s people even if it cost him some face. The general offered to lead troops to defend Chu’s eastern borders.
The third general argued that Chu should seek an ally to help defend the land. He agreed with the second general that the land was too large to give up but feared Chu was too weak to prevent Qi from taking it. He offered to lead a diplomatic mission to a large neighboring state, Qin, to request help defending Chu’s eastern land.
The king thanked the generals for their advice and dismissed them. He thought about his three options and decided not to choose among them. Rather, he decided to pursue them all.
The next day, the king ordered the first general to do as he had suggested and travel to the Qi regiment waiting on the Chu border. He was to announce to them Chu’s intention to give up the land as promised. The general was pleased and left with a contingent of soldiers.
The following day, the king told the second general that he agreed with that general’s advice; the land was too high a price to pay for keeping a king’s word. He ordered this general to follow his own suggestion and lead troops toward Chu’s eastern border to prepare to defend against an attack from Qi.
On the third day after his initial consultation with the three generals, the king told the third general to do as that general had suggested, and to lead a diplomatic mission to neighboring Qin to request assistance. This general assembled a small mission and set off for Qin.
The Qi were confused by the mixed messages they were getting from Chu’s actions. One Chu general had approached them to surrender the land. But a day later, a second general was preparing to defend it. They decided it was time to bring certainty to their situation, so they sent for reinforcements and planned to take Chu’s eastern lands by force.
When Qi’s reinforcements arrived, the king of Qi was with them. He had planned to lead his army into battle himself.
As Qi’s and Chu’s forces lined up opposite each other and prepared to converge, the third general appeared. He was escorting Qin troops, led by a Qin general, who was ready to join forces with Chu.
Outnumbered, the king of Qi called off his attack. The Chu’s eastern lands were preserved.