Updated: Apr 22, 2021
Part 2 of a series
In its essence, the purpose and value of a strategy is to create a unique, valuable, and defensible position in the market; therefore the essence of your strategic plan is to prioritize the activities that will help you achieve, maintain, and build on the competitive advantage(s) that arise from your unique position and differentiate you from a host of competitors. Copying someone else's strategy only works if you have the same vision, objectives, strengths and ability to execute; if that isn't the case, you end up undifferentiated and uncompetitive.
This has a number of implications for leadership teams. First is the need to recognize that if no competitors would logically do the opposite, you don't really have a strategy. We have asked the deceptively simple question "What differentiates you from your competition?" to executives in countless boardrooms, conference halls, and classrooms over the years, and with remarkable consistency the majority of respondents answer with some version of "our relationship with our customer"
We are all for great personal service and strong personal relationships, but the fact is that very, very few organizations truly differentiate themselves in these aspects in a meaningful and sustainable way. It is also not a strategy because no rational competitor would do the opposite. We've never once heard anyone tell us that what makes them different is they work very hard to avoid having a relationship with their customer or they intentionally provide poor customer service.
That's not to say that you can't dial down some aspects of how we have traditionally delivered "good customer experience" via in-branch visits and personal relationships and dial up other aspects that customers find valuable to carve out some white space in the market. This is already part of the playbook for many asymmetric fintech competitors, and this leads us to another important implication for leaders; the unavoidable reality of trade-offs.
Plotting Your Growth Vectors
In our previous post in this series, we talked about allocating your long list of ideas and projects into the appropriate quadrants of an innovation portfolio that is aligned with your strategic plan. In this post we are going to focus on those parts of the portfolio that are oriented towards generating revenue, in both the short-term and longer-term.
We use a series of strategic maps we call the Innovation Atlas to help facilitate a series of strategic discussions and decisions within the leadership teams of organizations we work with to help them focus and execute on their most critical priorities. The Growth Vectors Map is the second of these strategic maps, and it is based on the mid-twentieth century corporate strategy work of Igor Ansoff, who is considered the father of strategic management.
The concept simply states four basic alternatives to generating growth:
You can focus on selling existing products and services to your existing customers in your existing markets (Market Share)
You can focus on selling your existing products and services to new customers/markets (Market Development)
You can focus on selling new products and services to your existing customers/markets (Product Development)
You can focus on selling new products and services to new customers/markets (Uncharted Territory)
Don't misinterpret our use of the term ‘markets’ here to necessarily mean geographic markets. A market is a group of customers and/or potential customers with similar characteristics and needs. A new market may or may not involve new geography outside of your existing footprint, it just means a set of customer segments or new potential customers that you want to reach.
As you explore new avenues of growth, your leadership team needs to consider the implications of where new ideas and projects fit into this map, and if the initial allocation will be sufficient to achieve your goals. Plot your current project list on the map and review with your team.
Key Questions to Consider:
Does our current list of new projects match our growth ambitions?
Are we truly doing "new" things to meet customer needs or just copying what someone else has but it is "new to us?"
Are we reaching far enough, or are we too incremental?
Conversely, are we reaching too far and ignoring retention and expansion of our existing customer base?
What is our current share of wallet with our existing customers?
Why is it not higher? Do they have needs that cannot be met with our existing products?
What alternative and substitute products are our customers using with other providers?
Do our existing geographic markets and customer channels offer demographic tailwinds or headwinds towards our growth ambitions? Do we need to consider new markets or channels?
What other new ideas should we be considering that align with our strategic priorities?
As with our first map, there is no magic one-size-fits-all allocation to this map, but in general we recommend in most cases that no quadrant get 0% or 100% of your attention and resources. We have also found that an even 25% allocated to each quadrant generally means you are not showing sufficient managerial courage, and that spreading your attention equally will probably not generate impressive results.
You also need to consider the relative risk and return of any ideas. The lower left quadrant is the safest, because we are dealing with known quantities- your existing customers and markets, and your existing products and services. That also means that your expectations for growth should be lower. Larger opportunities for growth come as you move up and to the right; but because you are exploring new customers/markets and/or new products and services, the risks are higher too. For that we use the next map in our Innovation Atlas, and we will cover that in part 3 of this series, Building Your Innovation Portfolio