In the whimsical world of Lewis Carroll’s famous tale Alice in Wonderland, the author paints mind-bending pictures of some of the most pressing questions in modern society. Though many regard this classic as merely a children’s story, every modern CEO can appreciate several scenes woven through the book that can be applied, succinctly and directly, to the challenges of today’s global business environment.
A particularly poignant scene is set in the forest, where Alice finds the eccentric feline and asks him for directions. Politely, she inquires, “Would you tell me, please, which way I ought to go from here?” The Cheshire Cat answers, “That depends a good deal on where you want to get to.” When Alice answers back that she “doesn’t much care where,” the Cheshire Cat simply replies, “then it doesn’t matter which way you go!”
The cat’s reply makes sense for what Alice is trying to accomplish (or the lack thereof) – but when it comes to you and your business, you’re definitely not in a dream sequence! As a CEO with everything on the line, you do care where your company goes from here. In order to master the navigation of your industry and organizational challenges – you must undertake any strategic path with a clear, focused roadmap to business success.
As Business News Daily notes, companies that pick a clear strategy based on market insights, and steadily pursue it, reap the rewards. Teams that don’t? Like the cat said, it doesn’t matter which way you go – you’re headed down the rabbit hole. Let’s help you avoid that situation by carving out your company’s strategy roadmap.
Carving A Successful Strategy Roadmap – A Case Study
Today’s CEOs often think strategy is big – big resources, big bets, and big risks. In some cases, this is true. One of the most poignant examples I can think of is the Boeing Company, who made a huge strategic bet on behalf of the entire airline industry.
For years, airlines developed and worked with “hub and spoke systems” – for instance, changing planes in Atlanta on your way to Orlando. For a while, it was efficient, and worked for the industry, as it loaded up the designated hubs with traffic, and worked pretty well for domestic trips. However, as global air travel expanded, the hub and spoke system made an already lengthy travel experience even longer.
A trip from New York to an interior Chinese city required a flight to Tokyo or Shanghai, followed by a two-hour wait, and then another flight. In those days, it wasn’t possible to fly direct – no plane could do that economically – and customers simply had to deal with the headaches – or not fly at all. To disrupt the tired system and change the industry, Boeing bet $30 Billion (yes, with a capital B) that they could use advanced technology to build a plane so efficient that it could fly the “long, thin” routes. They doggedly pursued their strategy when a lot of people – and competitors – thought they were just as crazy as the Cheshire Cat.
Luckily, their big bet paid off, and the outcome of the strategy is called the 787 Dreamliner. First flown in 2009 – and with more than 400 of them flying direct routes today, Boeing has allowed airlines to not only open up new markets, but to charge a premium for direct flights. It’s a dream for passengers, too, shaving hours off each journey. In this case, Boeing followed an uncertain path that ended up being the right path – and transformed the industry with its bold strategic leadership.
Defining Growth Strategy Options for Your Business
With that example in mind, are you willing, as a CEO, to bet your entire company on a risky growth strategy? Probably not. While yes, the 787 and the $30 Billion spent on it was very much a drastic, “bet the company” strategy, your company’s focused strategy does not have to be an all-or-nothing proposition. Instead, you can lead your team on a road that can be both incremental and sequential, using a combination of four growth alternatives that can create steady momentum, without incurring too much risk:
Growth Option No. 1: Keep your company doing what it is doing – selling current products in your current market. “Stick to your knitting” is the name of this strategy. It’s often a good place to start, but a hard place to stay. It may work fine for a while, but at some point, this space gets saturated, growth stops, and margins drop.
Growth Option No. 2: Expand current products into a new market. This is often seen as the “easy” growth strategy. If you sell diapers to supermarkets and now can sell diapers to Sam’s Club, you’ve added new business with very little effort. Where it is feasible, this type of “fill-in” strategy makes a lot of sense. But, often the new market has its own characteristics that need to be understood; sometimes as simple as sizing and pricing, but sometimes, it’s more complex than that.
Growth Option No. 3: Expand new products into your current market. This is a classic growth strategy that leverages the combined knowledge of your company, and your knowledge of the market space, in order to innovate. The innovation typically increases the size of the market, which is great, but not all new products are successful – so this strategy comes with some risk.
Growth Option No. 4: Expand new products in a new market. While this sounds bold and exciting, and often looks like it may drive enormous growth, the combination of developing new products and entering into a new space adds major risk. This is a tough strategy to pull off organically, but can often be accomplished by obtaining the needed expertise through an acquisition.
Boeing chose to fly with Growth Option No. 3 – and focused on innovative products in their current market. As experts in airplane design and technology, they had already spent a lot of time with their airline customers to understand market needs, and had the fortitude to nearly bet the company on their growth strategy. However, it’s not typical.
How do you, then, take advantage of the four growth options above to grow your company at reasonable risk? Staying with the child story theme, we’ll explore the tale of two, small local businesses.
A Tale of Two Businesses
It’s a tale of two businesses; one, a racquetball club with a very small, devoted following. The other? A summer swim club, again with a small, but devoted family clientele. Both were modestly profitable – but not growing.
The racquetball club was bought by new owners with a growth focus. First, they utilized Growth Option No. 1, and improved the facility and amenities to keep the current customers coming back. Then, they used Growth Option No. 3, and added new products, like a fitness facility and an indoor pool, to their current services. Business boomed as their current customers spent more of their recreational dollars with them.
The swim club, by contrast, picked Growth Option No. 1 as well, not just as the first step – but as the only step. It was comfortable; they ran a great business; and they really didn’t have time for growth. Can you guess what happened? The racquetball company moved forward and added Growth Option No. 4, by entering the seasonal outdoor business with the addition of an outdoor summer pool. They completed their transformation to a total family fitness and recreation center, and put the swim club out of business.
For today’s CEOs, it may feel like it’s best to stick with Growth Option No. 1 – to keep your head down, stay focused, and become very good at what you already do. In some cases, this strategy works out fine; but in a dynamic market, your competitor who is thinking of a more aggressive strategy, may very well not only outgrow you, but ultimately threaten your business.
That great American Philosopher Yogi Berra certainly learned a few things from Alice and the Cheshire Cat when he put his own unique turn to their phrase, saying “if you don’t know where you are going, you’ll end up someplace else.” As the leader of your organization, become the master of your fate. Know exactly where you and your team are headed, so that you and your company end up in the right place.
Topics: CEO Marketing Strategy, CEO Strategies, Marketing Strategy, CEO Business StrategyTue, Jun 21, 2016