DIGGING A HUNDRED SHALLOW HOLES
By Tim Williams
In business as in war, the surest way to lose a battle is to send your troops marching in multiple directions. Military leaders know that battles are won by concentrating their forces on a clear objective.
It’s not just coincidental that the marketing business has borrowed the language of war. We identify “targets” and wage “campaigns.” In fact, the word “strategy” was originally used only in a military context; it wasn’t until the early 1960s that we started using the term in a business setting.
Unfortunately, the lessons that have been learned the hard way by commanders in the field haven’t yet been learned by many leaders in the business world. In conflicts between opposing armies, “positioning” (another military term) is a matter of life and death.
History’s greatest commanders were rightly obsessed with gaining the advantage on the battlefield through careful positioning. As Lord Wellington, who defeated Napoleon at Waterloo, observed: “When you’re positioned correctly, you can win the battle before you fight.”
No reason to exist
In the classic article The Origin of Strategy, Bruce Henderson, founder of Boston Consulting Group, posits that “Unless a business has a unique advantage over its rivals, it has no reason to exist.”
Identifying and developing a unique advantage is a process of deep exploration, not superficial inquiry. When you’re searching for water in the desert, the best strategy isn’t to cover as much ground as possible by scooping out hundreds of shallow holes, but to make the commitment to dig just a few deep shafts that will lead to what you’re looking for.
In the world of professional services, the claim that your firm offers “a wide variety of services in many different industries” is the equivalent of a hundred shallow holes. To say you do everything for everybody is not a strategy, but rather the absence of a strategy.
The few and the many
Positioning means framing your offering in a way that makes your firm the perfect solution for some types of clients, but not all. Harvard’s Michael Porter teaches the idea that developing an effective positioning means committing to one of three basic strategies:
1. Serving few needs of many customers (expertise in a particular type of service offering)
2. Serving broad needs of few customers (expertise in a particular type of customer)
3. Serving broad needs in a narrow market (expertise in a particular type of market)
The marketing firm redpepper calls this level of differentiation “sharp corners.” A commitment to a type of competency, customer, or market gives your company a sharply-defined positioning that attracts the exact type of client you’re looking for.
Where not to look
Just remember that you’re unlikely to discover your points of differentiation by looking at your competitors. As Youngme Moon writes in Different: Escaping the Competitive Herd, organizations get collectively locked into the "cadence of competition" in which the harder they compete, the more they begin to look and sound the same (because they are reflecting, chasing and copying one another's strategies).
Similarly, you won’t find the essence of a differentiating strategy by asking your clients. Positioning strategy is not a popularity contest. Asking customers what your strategy should be will only pull you closer to the middle, because customers can only compare you to what already exists in the category, not what is possible.
Say “no” now so you can say “yes” later
Committing to focus on what you know or do best pays off both in the short- and the long-term. Saying “no” to the opportunities that aren’t a good fit now allows you to marshal your resources so you can say “yes” to future new business that aligns with your strengths — business you can serve effectively and profitably.
Lars Sorensen, head of the global healthcare company Novo Nordisk, named recently by Harvard Business Review as #1 among best-performing CEOs in the world, says the secret to his company’s success has been to resist diversifying beyond their core competency in diabetes. “For the past 20 years,” says Sorensen, “we’ve been focused on what we’re really good at.” The stellar performance and reputation of this company is a testament to the power of doing just a few things well.
A framework for going deep
To get to the heart of your positioning strategy, several different frameworks can be useful, such as VRIO, which asks four constituent questions:
1. The question of Value: Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?
2. The question of Rarity: Is control of the resource/capability in the hands of a relative few?
3. The question of Imitability: Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?
4. The question of Organization: Is the firm organized, ready, and able to exploit the resource/capability?
Developing a business strategy that scores well on all four of these questions means you’ll be digging deep into your competencies, knowledge, and expertise.
In the world of gemstone mining, the rarest and most valuable diamond — the blue diamond — is found only in superdeep mines. The same is true in strategic planning, the further you dig the more likely you are to discover rare value.