What can you do when faced with commoditisation?
When doing “more of the same” is no longer enough
“What the hell is happening?” wonders Frank Seeheeho, looking at the sales curve of the last 3 months! Minus 15% for the first time since the company was started 70 years ago!
The company has lived a 70-year uninterrupted growth period up to getting the reputation of world leader in its field. The success of its “star” product enabled a worldwide deployment, always doing the same thing, only better.
Shareholders are satisfied. Without any involvement on their part in the strategy, the company generates cash for them and that’s what they consider as important. Traditional investors, in a way! With a sharp vision on the bottom line and on profit.
Everything might have gone on like that forever. At least that’s what some hoped and believed.
But, at the same time, the market started being literally invaded by competitors of various origins. Some offer copies of the products at half the price. Not as good and coming with a shorter guarantee, but good enough to be attractive. And moreover, today, who is still interested in a 30-year guarantee for a product at half the price? Others offer « services » with a high « Peace of Mind » added Value and creating the type of savings in time, energy and efficiency which really attract customers
Following these arrivals on the market, the company which was in a Sur/Petition position thanks to a unique competitive advantage, finds itself in a world of Competition and of « struggle for Life ». !
A General Manager is then hired to come up with the necessary measures, reforms and Changes. And what do you think that person does? Exactly what hundreds of CEOs have done and keep doing all over the world: adopt and implement the “SOS” (Same Old Solutions) approach, the one we call the traditional 4 Rs:
React, Restructure, Reengineer, Relocalise
A few months later and a few people less, the company has become what is known as “mean and lean”. But it is so lean that it cannot really be mean and the people present are not able and capable to think about the Future and to invent it!
So…there it is
- The company offers an excellent product but manufactured at lower costs elsewhere
- It perfectly masters its production in a traditional Take Make Waste logic
- It’s Value chain is well-structured and essentially centred on its “core” activity: manufacturing /production
One thing is missing: an adequate answer to the question: what might our Business become and look like in the Future? How could we deploy, develop and succeed?
Invent one’s Future(s)
This is when, after some Thinking assistance, they decided to start a Strategic Innovation Process, which, three years later enabled them to multiply their turnover by 5!
Of course, at the very start, no one knows what they are going to find. You rarely know that beforehand! Of course, they want answers immediately when the first key thing to do is to ask oneself the pertinent questions. They wish to be able to decide before exploring! They wish they could “know” before they would “see” how drastically the world has changed around them. And it will keep changing!
They are anxious to “protect” and even “increase” their market share whereas the vital question is how to innovate and create Value. One of the main shareholders absolutely wants to know, before even starting, how much the process will generate in terms of revenue and profit. He considers as sheer folly what we tell him i.e. “Profit is the reward of the Value created”.
A few months later, after seeing the results, he will shake our hands with a king-size smile and a wink of deep appreciation.
Strategy as “invention and dialogue”
To reach such a spectacular result, we launched an exploration process with a broad team made of people coming from all levels in the company and we worked step by step.
1) Develop the right mindsets capable of anticipating in an uncertain world
Whatever they say, few people really like to explore the Unknown. Often because they don’t know how to do it! Even less in an uncertain environment in which predicting the Future is totally impossible and strategic Thinking consists first in asking the right questions rather than bringing the wrong answers (often to the wrong questions).
Then, the pressure on decision makers is huge. At the end of the day, this team will have to make decisive choices for the Future of the company and its entire workforce.
Deciding without having any precise “maps” of what is going to happen – and when what can emerge in an uncertain world in not one but several Futures – is difficult.
That us the reason why, in the majority of companies, teams busy with Strategic Thinking endeavour to reduce Uncertainty in three ways
- By reducing Strategy to short-term Management, which leads to “reaction” rather than to “anticipation”
- By implicitly considering the Future as an extrapolation of the Past
- By devising a “rigid” strategic plan or a roadmap linking A to B, dangerously betting on the hypothesis of a future context
In the above cases, the strategic plan which emerges is based on a set of predictions, on analysis and linear Thinking and this generally only leads to incremental Innovation and repetitive, commoditised strategies.
The first stage consists in adapting the strategists’ mindsets to today’s world. In our case, the CEO proved to be so open to the various questionings that everyone was able to abandon his/her protecting mask along the process.
We also were able to support the following evidence : decisions depend on perceptions which are more or less right and in sync with with world.
So, we then boosted the creative capacities, skills and mindsets of the team members.
2) Focus and ambitions :
Saying that you are going to invent the Future is easy …. but sharing an ambition, create Adequate Thinking spaces in everyone’s mind is something else !
If we wish to really develop a strategy and not limit ourselves to Managing the Present, the pertinent question is : «What is going to allow us to remain pertinent over the next 10/15Years?”. This does not mean that nothing is going to be done in the short term. What it does mean is that we are going to anticipate and open minds. In other words, develop better perceptions and make today the best strategic choices to become both robust and flexible and prosper in a completely different world.
3) Motivating the right people
Everything varies according to the Culture and the size of the company.
You can find 10 motivated people, or 100. One of the few rules is that 30% of the people present be less than 30 years old and/or be working for the company less than three years. Moreover, all people involved in the process should happy about it. This is of course the ideal situation but it rarely happens.
4) Implement the right process supported by the adequate methods and tools
A shared Vision begins with shared “maps.
The core of the strategic work is to “regenerate” a team’s world maps, to challenge them, to enrich them and to share them. For the team, it means to change the way they look at things, to re-perceive their Business and their opportunities, to develop a common understanding and a shared Vision of the Present and of the potential Futures so that they can make the optimal choices.
That is what we call “Strategy as Invention” rather than “Strategy as analysis”.
This happens by associating the power of Lateral Thinking, of scenarios and of Imagination with the Art of of Strategy, in order to help people in charge of Strategy to anticipate and creatively imagine possible Futures rather than applying standard answers or pretending forecasting the Future.
We thus started this exploration of the Unknown based on 4 structured movements:
1. SEE: Observe and decode the internal microcosm and the emerging strategic landscapes with fresh eyes.
The first map we drew was the “Historical Map”. Does everyone agree on the decisions that have been made and the strategies that have been put in place – and by whom – to bring the company where it is today? What did we neglect? What did we underestimate? Who made the decisions? Following what? Have we been over confident? Not curious enough? Not imaginative enough in our Business Models? What Business Models did we apply? Did we adapt them as time went by? What is our current Business Model? Since when are we applying it? For what reason(s)?
We also developed new “Actors Map” and of the “Portfolio of changes Map” scanning what has taken place in the Strategic Landscapes. The team became aware of many changes that no one in the company had measured the importance of. Things which had begun to appear sometimes years before such as the increasing importance of Ecology, of circular approaches, rejection of oil-based products, search for recyclable solutions either upstream or downstream, transition from products to services and systems, evolution from Manufacture to Value Facture, the emergence of new Management and Marketing concepts such as the Liberated Company, the notion of Decrease or Sur/Petition.
All these elements nobody -that nobody ever imagined – put together account for the 15% drop in sales. And that’s only the beginning!
2. SENSE the needs, the opportunities, the risks and constraints in a world of interdependencies. The team was able to feel new demands and real opportunities. It became able to consider Circular Economy as a great opportunity! Instead if focusing on the sale of their products, they started from their customers‘ needs and demands and from the kind of Value these customers were looking for.
3. SEIZE these opportunities creatively thanks to a non-linear, non repetitive, creative Thinking approach. That is when we drew the Future possibilities map and designed an Innovation Portfolio.
The team was able to conceive bio degradable products, imagine leasing services, financing systems in order to enable clients to benefit from global solutions. They imagined a totally new Business Model: dismantling old installations, recycling them, replacing them by new ones cost- free, and being paid with the economies made by the clients on their Energy bill thanks to an ecosystem of partners.
4. ACT different and SHAPE your reality
Once choices have been made – among which the alignment on the quadruple bottom line, it is then possible to decide and act “Back from the Future”.
The Future becomes the cause of the Present and everything is put in place to reach the desired and shared Future(s) expected by all the organisation’s members. Even by other actors involved. The Stakeholders.
The team was able to implement a 3-horizons strategy in order to keep the best and reinvent the rest.
The company moved from a typical industrial organisation, from a “manufacture” focused on its products to a “Hot House” generating exceptional Value, a ValueFacture proposing unique solutions to its clients through an ecosystem of partners.
They did discover that Profit is the reward of the Value generated, since this new approach multiplied their turnover by 5, from 25 to 125 millions if Euros, in a period of crisis.