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    1. 1. Business, Market & Competitive Reconnaissance: Exploiting Growth Opportunities by Anticipating Industry Change Arik R. Johnson 3M Marketing Forum Founder, CEO & Managing Director St. Paul, Minnesota Arik.Johnson@AuroraWDC.com Friday 04 April 2008
    2. 2. Competitors, Customers, Markets & Technologies Are Complex Interdependencies
    3. 3. “ Strategic Intelligence” <ul><li>Principles of Defensive Warfare </li></ul><ul><ul><li>Only the market leader should consider playing defense. </li></ul></ul><ul><ul><li>The best defensive strategy is the courage to attack yourself. </li></ul></ul><ul><ul><li>Strong competitive moves should always be blocked. </li></ul></ul><ul><li>Principles of Offensive Warfare </li></ul><ul><ul><li>The main consideration is the strength of the leader's position. </li></ul></ul><ul><ul><li>Find a weakness in the leader's strength and attack at that point. </li></ul></ul><ul><ul><li>Launch the attack on as narrow a front as possible. </li></ul></ul><ul><li>Principles of Flanking Warfare </li></ul><ul><ul><li>A good flanking move must be made into an uncontested area. </li></ul></ul><ul><ul><li>Tactical surprise ought to be an important element of the plan. </li></ul></ul><ul><ul><li>The pursuit is just as critical as the attack itself. </li></ul></ul><ul><li>Principles of Guerrilla Warfare </li></ul><ul><ul><li>Find a segment of the market small enough to defend. </li></ul></ul><ul><ul><li>No matter how successful you become, never act like the leader. </li></ul></ul><ul><ul><li>Be prepared to bug out at a moment's notice. </li></ul></ul><ul><ul><li>-- Jack Trout </li></ul></ul><ul><li>Guerrilla </li></ul><ul><li>Small Players </li></ul><ul><li>Finding market small enough to defend </li></ul><ul><li>Prepared to bug out at moment’s notice </li></ul><ul><li>Flanking </li></ul><ul><li>New Players </li></ul><ul><li>Moving into uncontested area </li></ul><ul><li>Element of surprise </li></ul><ul><li>Offensive </li></ul><ul><li>No 2 or No 3 </li></ul><ul><li>Avoiding leader’s strengths </li></ul><ul><li>Attacking leader’s weaknesses </li></ul><ul><li>Defensive </li></ul><ul><li>Market Leaders </li></ul><ul><li>Attacking themselves with new ideas </li></ul><ul><li>Blocking competitive moves </li></ul>The Strategy Square
    4. 4. Growth Vector Analysis <ul><li>Growth Vector Analysis (GVA) reviews the different product alternatives available to the firm in relation to its market options, not already being pursued by competitors. Four complimentary characteristics are used for defining common threads of strategy: </li></ul><ul><ul><li>Product-Market Scope specifies particular industries to which a firm confines its position. </li></ul></ul><ul><ul><li>Growth Vector indicates the direction a firm is moving relative to current product-market posture (market penetration, market development, product development and diversification). </li></ul></ul><ul><ul><li>Competitive Advantage defined as particular properties of individual product markets conveying a strong market position. </li></ul></ul><ul><ul><li>Synergy is the combined effect on the firm’s resources that is greater than the sum of its parts. </li></ul></ul>  Present Products Improved Products New Products Existing Market Market Penetration Product Extension Product Development Expanded Market Market Extension Market Segmentation / Product Differentiation Product Development / Market Extension New Market Market Development Product/Service Extension & Market Development Diversification
    5. 5. The Apparatus Failed to Evolve <ul><li>Unfortunately, New Threats (al Qaeda) Emerged on the Geopolitical Stage in the Vacuum of America's Return to International Dominance After the End of the Cold War </li></ul>
    6. 6. Marshall McLuhan <ul><li>“ I don’t know who discovered water, but it wasn’t a fish.” </li></ul>Strategy is concerned with what the corporation wants to do in the world, while Competitive Intelligence is focused on what the world wants to do to the corporation.
    7. 7. Reforms to Create Equilibrium <ul><li>Similarly, in Business, Corporations which had placed too much Emphasis on Defensive Competitive Risk Management found themselves Ill-Equipped for a Market Driven by Offensive Opportunities for Innovation-based Growth. </li></ul><ul><li>The Resulting Shift in Emphasis from a Focus on Polar Extremes to Equilibrium & Mode-Switching between Incisive and Decisive Ends of a new “Reconnaissance Continuum”. </li></ul>
    8. 8. Connecting Emergent Phenomena
    9. 9. “ Competing head-to-head can be cutthroat especially when markets are flat or growing slowly. Managers caught in this kind of competition almost universally say they dislike it and wish they could find a better alternative. They often know instinctively that innovation is the only way they can break free from the pack. But they simply don’t know where to begin. Admonitions to develop more creative strategies or to think outside of the box are rarely accompanied by practical advice.” Chan Kim and Renee Mauborgne
    10. 10. Success Breeds Complacency <ul><li>“ It is a classic conundrum for business titans: How much money and attention should be focused on a new, but growing, operation that is far less profitable than the core business?” </li></ul><ul><li>- Prof. Clayton Christensen, The Innovator's Dilemma </li></ul>
    11. 11. Customers “Hire” Products to Do “Jobs” for Them Concentrate Less on What Customers “Want” and More on What Customers “Need”
    12. 12. Disruptive Technology
    13. 13. Value Chain Evolution Theory <ul><li>Disruptive Business Models: Vertically Integrating VC to Improve What’s “Not Good Enough” in the company’s products and services judged by customers. </li></ul><ul><li>Performance Defining Subsystems: Companies must control all those activities and combinations of activities in the value chain that drive the product performance characteristics that matter most to customers. </li></ul><ul><li>Specialists will seek to control performance drivers based on differences in motivation and skills around a modular interface in the VC. (Sword & Shield) </li></ul>
    14. 14. RPV Theory: Building Capabilities Processes Ways to Turn Resources into Products/Services Hiring/Training Product Dev. Manufacturing Budgeting Research Values Prioritization Criteria for Decision-Making Cost Structure Income Statement Customer Demand Opp. Size Ethics Resources Assets the Firm can Buy or Sell, Build or Destroy People Technology Products Equipment Cash/Brand/Distr.
    15. 15. Customer Demand & Signals of Change <ul><li>Non-Market Contexts: External Forces (Government, Economics, etc.) Increasing or Decreasing Barriers to Innovation </li></ul><ul><li>Undershot Consumers: Opportunities for Up-Market Sustaining Innovations </li></ul><ul><li>Overshot Consumers: Opportunities for Low-End Disruption, Shifting Profits by Specialist Displacements (Modularity) and the Emergence of Rules </li></ul><ul><li>Non-Consumers: Opportunities for New Market Disruptive Growth </li></ul>Established Companies almost always Lose to Disruptive Innovators
    16. 16. Process of Predicting Industry Change Signals of Change Strategic Choices Influencing Success Likely Outcome of Competitive Battles
    17. 17. Disruptive Innovation Theory Sustaining Innovations Better Products Brought to Established Markets Low-End Disruptions Target Overshot Customers with a Lower Cost Business Model New-Market Disruption Compete Against Nonconsumption Difference Performance Measure Time Nonconsumers or Nonconsuming Contexts Performance
    18. 18. The Duality Continuum of Reconnaissance includes Both Decisive & Incisive Sensing Incisive Scanning for Trends, there is no “Decision” to be made Recognize “Pattern Vector” History Framework for Interpretation Implications for the Reader Bottom-Up Exposition Driven by Trends Outcome is Observation Emergent & Theoretical Decisive Frame of Reference is the Decision, Less Trend-Dependent Framework for Current Analysis Compares Options & Outcomes Recommendations and Trust Top-Down Imposition Driven by Issues Decision & Action vs. ‘Nariyuki’ Factual & Hypothetical
    19. 19. Most Attempts at Innovation Fail Innovation can be thought of as an instrument with ten main notes from which to choose, ranging from such categories as a company’s business model to customer experience, he said. Knowing which to play and how to combine them is the key. “ If you use these notes and compose some new and fresh way to do business, go to market, and astonish customers, the world will notice,” Keeley said. Usually companies approach business innovation by first brainstorming a hopper of ideas and then subjecting them to the process known as stage-gating, where ideas are winnowed out, until, Keeley said, CEOs come in like Roman emperors to give a thumbs-up or -down. A better method, he said, is to start by diagnosing a business or industry’s conditions to find weak spots, which offer the first hint at what keys to play. Business leaders should declare an intent and set conditions before teams of workers begin to foster initiatives. It’s also best to work on a small number of big ideas rather than expending time and effort on a large number of small ideas, Keeley said.
    20. 20. Larry Keeley Innovation Strategist Doblin, Inc. Long thought to be at the core of innovation, new products are, if anything, a distraction—&quot;an overly emphasized, not-very-important basis for innovation.&quot; Keeley's research suggests that many other types of innovations, from changes to channels or brands or customer experience, to changes in processes or service systems or business models, are vastly more likely to give you sustained advantage. A good innovation exercise begins with diagnostics. Keeley's methodology includes assembling the right combination of customer needs (most of them unmet and subtle); with competitive patterns, those actions being taken by the players in an industry; plus a company's own capabilities, all integrated with clear step-by-step protocols. This sounds like it ought to be self-evident, but Keeley finds that &quot;the absence of good innovation protocols means that the average innovation team is forced to make up both what they will address and how they will address it—a prescription for failure.&quot; By integrating these three types of insights— customer needs, competitive patterns, and a company's own capabilities —and combining them with solid protocols, innovation becomes a routine competence and companies can double or triple their success rates. In fact, Doblin clients routinely find success with key programs more than fifty percent of the time. He tells companies that the really big hits are often the products that innovate in not one but two or three or more &quot;innovation spaces.&quot; Further, Keeley tells them to focus their brainstorming. &quot;The worst mistake is to have everyone running off generating a million ideas,&quot; says Keeley. &quot;The goal is to focus on a very few very bold ideas that tend to work, as opposed to many, many ideas all over the place that tend to fail.&quot; Keeley has a vision of the world a few years from now. Innovation will be just another management discipline—like budgeting or auditing—that is well understood, thoroughly analyzed, shared and taught. What appeals to him is the sense that innovation can be so implicitly understood that everyone who wants to can feel like they can not only participate but also succeed. &quot;We're entering a time when a great many organizations and individuals can be effective at creating something new and noteworthy and workable.“
    21. 21. The Ten Types of Innovation
    22. 22. 10 Examples
    23. 23. The Reconnaissance Think Tank Model TASKING > SENSING > INTERPRETATION
    24. 34. Questions or Comments? <ul><li>www.AuroraWDC.com </li></ul>Arik R. Johnson Consulting & Training Institute [email_address] +01-715-720-1616 Derek L. Johnson Research & Analysis Bureau [email_address] +01-608-268-3470