Wednesday, July 1, 2009

Skate to Where the Puck Will Be

(from Issues for Growth Vol.18, No. 10)

“ I don’t skate to where the puck is. I skate to where the puck will be.” These words of The Great One, Wayne Gretzky, may not only apply to hockey, but also may be very applicable to business planning for the next few years.

Last week an article in the Wall Street Journal indicated that many are predicting a 10-year secular bear market with the possibility of several selective bull rallies during the decade. If that proves to be reflective not only of the slow-growth economic market but also of market opportunities in general, it will mean that there will be no rising tide that will float all companies and all industries such as we had for the last decade or so.

Is it doom and gloom?

Not at all. The opportunities likely will be in niches. But, deciding on the direction, timing, and the proper niches becomes more critical – and more challenging.

What is your company doing to identify the niche opportunities? Since predicting which areas will explode with 100% certainty is NOT possible, what is your strategy? The chart that follows, illustrates some different approaches that companies take:

1. Betting on the one strategy that would be most favorable (Best Outcome) to your company and hoping that happens. Placing your bet on a future that would be very favorable to your company and hoping it happens. High risk/Low probability of success/Low cost

2. Handicapping the one strategy you think is most likely to occur (Most Probable)based on the past or hunch about the future/ High risk/Low Probability of success/ Low cost

3. Betting on a direction and working to make it more likely to occur (Influence Outcome)

4. Betting on all of the possibilities (Hedge). This is VERY expensive and only the wealthiest of companies could entertain this approach/ High cost/Low risk/High probability of success

5. Deciding on a few possible directions and moving moderately in each direction until the future begins to play out and you then move aggressively in that direction (Preserve Flexibility) Moderate Risk/Moderate Cost/ High probability of success

While they may not always want to admit it, most companies, if they have an approach at all, choose #2, betting on the direction or niche that they believe is most likely based on past experiences or a hunch about the future. The issue with this approach is that most dramatic future growth niches are not necessarily very predictable from the past experience a company has. Disruptive changes often come from outside the industry. For example, The major innovations in the music industry (iPod and iTunes) and cellphones (iPhone) came from a computer-maker (Apple); the major changes in the steel industry (Mini Mills) came from outsiders; the major changes to radios (transistor radios) were introduced by newcomer Sony.

Some rare companies are lucky because they bet correctly. Others, however, have carefully calculated plans. What many may not know is that Microsoft’s bold deal with IBM in the 1980’s for the DOS system – a deal that catapulted Microsoft - was not a “bet the farm” on the “best outcome” or “most probable” strategy. Rather it was one of several strategies that Microsoft was advancing to preserve its flexibility in an uncertain world. Once the direction became clear, Microsoft abandoned the other strategies and put its entire focus behind DOS and IBM.

The environment in 2010 -11 is no less uncertain. The winning companies will be those that innovate, find the new niches and approaches, and carefully position themselves.

What approaches are you using to be able to skate where the puck will be?

How well is your organization prepared to respond in 2010? The market may still be uncertain. While your actions may still be defensive, are they strengthening your company? Are your plans tentative? Are you building flexibility into your plans? Have you changed your approach to planning? Are you prepared to take advantage of the new opportunities and new niches?

No comments:

Post a Comment