In turbulent and uncertain times, it is tempting for companies to wonder whether if they do actually require a strategy. They do. By way of proof, imagine that you find yourself in the middle of a dark and hostile jungle. If you want to get out of the jungle, do you need a strategy? Think about it. In the dense foliage you cannot see farther than a few meters. You want to get out of this jungle, but you don’t know how and you don’t know which way to turn. There is total uncertainty. How then can you get out alive? Well, the last thing you want to do is to stay still, paralyzed by uncertainty. You need to analyze your position based on the available information and then decide on a direction. That’s the first principle of strategy – the need to make difficult choices based on what information you have at the time. You take stock, gather information based on that, and then start walking. The worst thing is to stay still. That’s the second principle of strategy – the need to stop analyzing and start doing, even if you are not entirely sure that what you are doing is going to turn out to be the right thing.
After you start walking, new information comes your way. The new information may allow you to revise your original direction. That’s the third principle of strategy – the need to learn as you go along and modify your strategy through trial and error. If you meet a wild animal or run into a canyon, your strategy (or direction) has to change. Therefore, strategy is all about making difficult choices in the face of uncertainty and then learning as you go along and adjusting your original choices. When you think of it like this, it’s obvious that you need a strategy – even (or especially) in times of uncertainty.
The Search for Difference
If strategy is necessary the next question is how to come up with a differential strategy. In many industries competing companies have the same suppliers, are structured in much the same way, receive their information from the same sources, and so on. They receive much of the same information. And yet some pursue genuinely different strategies. The difference lies in mental processing. How companies process the information around them will determine what they do.
Indeed, this is what differentiates the innovators from other companies. Most companies try to become better than their competitors. But for almost all companies other than the established leader, being better is not the right way. They need to play a different game.
Look at Dangote Industries Limited and BUA Industries Limited, the two largest cement producers in Nigeria. These are companies’ intent, not on being better, but on playing a different game. They thought of new ways of playing the game. The managers of these companies face the same information as everyone else in their industries, yet they process these information differently and come out with differentiated strategies. Companies get the same inputs, but it’s what they do with the inputs to change the rules of the game that matters.
Established but Different
Many established companies develop a winning strategy and then spend all their time trying to improve it to make it better. They rarely consider “cannibalizing” their current strategy in favor of a different one. They judge the risks of doing so too high. Yet all around us established companies are being toppled by newcomers that adopt different strategies.
The solution? Companies must continue to improve their existing strategies, but they must also continuously strive to discover new or different strategies. They should try to be better and different at the same time.
Playing Two Games
The question is, how can a company play two games simultaneously? Former Harvard Business School’s Michael Porter suggests that doing this is so difficult that most companies that attempt it will fail. His advice is for companies to focus on only one game. His former Harvard colleague Clay Christensen suggests that a company can play two games at the same time, but the new game needs to be separate from the main business.
My research suggests that although it’s difficult, companies can still play two games without necessarily separating them. Most importantly, it implies that when established companies are attacked by a new way of playing the game, they do not necessarily have to respond by adopting the new game.
What established companies need to appreciate is that the new disruptive ways of playing the game are not God-sent. The new ways are not preordained to win out. Established companies could respond by killing off the new ways. For example, why is internet banking not appreciated by majority of Nigerians despite the many advantages it provides? Is it more convenient or efficient than traditional banking? Why didn’t banks respond to internet banking not by adopting it but by making their traditional operations so good that consumers wouldn’t find banking over the internet an attractive one?
Confusing Creativity and Innovation
One of the problems is that the difference between innovation and creativity (or invention) is often misunderstood. Coming up with new ideas is not innovation – its creativity. Innovation is deciding which ideas to select and implement to create value. A lot of research tend to emphasize creativity rather than innovation.
Innovation is about coming up with ideas and then finding ways to scale them up to create mass markets out of them.
The trouble is that while coming up with ideas is celebrated as innovative, the act of scaling them up into big markets is not. Even worse – scaling up rather than coming up with new ideas – is what big companies are good at, but they often forget and try instead to become brilliantly creative like small startups. Instead of taking the ideas of others and converting them into big markets, they focus on coming up with ideas themselves. Unfortunately, this is what small firms excel at.
Converting Big Firms into Small Firms
There is a lot of talk about injecting big corporations with the entrepreneurial culture of the small firm, or breaking up the big ones to make them agile and flexible as the small ones. This won’t happen. The big firm will never become as creative as the small firm. What the big corporation is good at is scaling up, not creativity. Our attention should shift toward making the big corporation better at what it is good at – not making it like the small ones.
We have a cultural bias in favor of coming up with ideas, and a real lack of appreciation for the challenging task of taking the idea and converting it into a mass market. Similarly, there is a bias in defining innovation as something new. But the real trick is how to convert something new from being a plaything of the few into the mass market.
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