Strategy should always be on our minds, but with a busy agenda and an email inbox that’s bursting to overflowing it’s very easy to jump into the business planning process without too much thought – using the same tools and techniques as you did last year. But that could let a very simple mistake slip in right at the beginning of the process …
That mistake is the way that we think about that place we compete in. There are many established tools around that help us to think about this ‘competition zone’ and probably the most famous is Michael Porter’s almost universally applied Five Forces Model. The Five Forces Model was designed to help us the think about the dynamics and profitability of industries. It’s a great tool that considers the key forces of new entrant threat, buyer power, supplier power, substitute threats and competitive rivalry. There is, however, the danger that we might think about the future in terms just of industries.
And that’s where the mistake could be located in a world where technology, especially, is eroding traditional industry boundaries. To gain a different perspective, I would encourage you to think not in terms of industries, but in terms of customer need groups – this could well add a totally new and different perspective to your work. This is important. It’s a cold fact that the majority of new products fail. That’s right – the majority fail – and research tells us that the failure rate is a lot more than 50% – even as high as 95%! The reason for this, many say, is a focus just on products (‘marketing myopia‘), but I would say that there are two likely culprits – firstly, over-focusing on traditional industry definitions and secondly, the provision of products within that potentially dated industry definition. That’s why I suggest a focus on customer need groups and here are some guidelines to help you based on recent thinking:
- Don’t take too narrower a view when forming your customer need groups
- Remember that customer needs change and are, arguably, becoming more dynamic – so you need to make sure you’re close to customers’ thinking
- Don’t forget the need of other stakeholders.
There are others too who see problems in taking solely an industry perspective. This work proposes that we think not of industries, but business models, the authors recommending that we take the perspective of thinking about (i) Asset builders; (ii) Service providers; (iii) Technology creators and (iv) Network orchestrators.
Whichever approach you use, be careful not to get stuck just in an industry and product-focused mind-set.
And if you’re interested in other potential strategy mistakes you’ll find this article interesting too!