For at least a decade, pundits and experts have expounded on the need to innovate. Corporations need innovation, we say, for a number of reasons. The pace of change is clearly accelerating. The average lifespan of a company on the S&P 500 has been cut in half over the last twenty years. Customer expectations are changing rapidly. New technologies emerge constantly. These reasons drive the need for more innovation. But what’s often missing is the rationale and focus.
In other words, corporations often lack the reason to innovate, and the anticipated outcome. The good news is that there is at least one strategy that relies on innovation to achieve its goals, rather than accommodating innovation when it must. That strategy, called maneuver strategy, is described in our book OutManeuver.
Consumers don’t win because factors like customer service and product quality fall as profits fall.
Today, most strategy relies on matching competitive products, feature for feature in head to head competition. This is called “attrition”, and seeks to win by a frontal attack, hoping to grind down competitors and cause them to leave the market. Attrition is simple, because it seeks only to match features, and costly, because there are few differentiators, and the goal is to eliminate competitors. In the end, no one wins in an attrition confrontation. The competitors don’t win because eventually the only competitive advantage is price. Consumers don’t win because factors like customer service and product quality fall as profits fall. In this type of competition, innovation is seen as a distraction, removing assets from the direct confrontation.
Consider for a moment a strategy that relies on innovation. Maneuver strategy is one such strategy. Maneuver is based on the idea that companies should seek to win at the lowest possible cost, leveraging capabilities like insight, stealth speed, agility, and, all of which often require innovation to realize. Maneuver, like attrition, is adopted from the military, but attrition is far simpler to execute, but far more expensive to maintain. Maneuver wins by seeking valuable but unoccupied positions and taking those, or by identifying exposed weaknesses of existing competitors and attacking the weaknesses in such a way that the competitor cannot respond with its full capabilities.
While speed, agility and insight are valuable, they may not provide a specific product, service or business model that addresses unmet customer needs or emerging markets. That’s why innovation is so crucial to maneuver success. Maneuver identifies needs through good reconnaissance and insights, and develops an understanding of critical competitive weaknesses to imagine new offerings or other means to attack entrenched competitors. But maneuver requires innovation in order to bring these new solutions to life, based on the insights that were gathered and the gaps or weaknesses that were identified.
Speed, agility and innovation are topics that occupy the executive suite currently. Every executive knows that their teams should be more nimble, should be operating at a higher speed, and should be innovating. But these are all discrete capabilities, not necessarily in service to any greater strategy, and in fact much of what passes for strategy doesn’t understand how to take advantage of these capabilities. Maneuver strategy, on the other hand, links these capabilities and relies on them for success. Given that attrition strategy is often a race to the bottom, leading to commoditized markets and little profit, doesn’t it make sense to consider a new strategic option, one that requires innovation for success?
By Jeffrey Phillips & Alex Verjovsky
Jeffrey Phillips leads OVO Innovation, an innovation consulting company in Raleigh, North Carolina. Jeffrey has led strategy and innovation projects in a number of industries including pharmaceutical, high tech, financial services, insurance, medical products. He is the author of three books, including Relentless Innovation, and writes the popular Innovate on Purpose blog.
Alex Verjovsky brings over twenty years’ experience in the consulting and technology sectors as both a consultant and entrepreneur. His most recent company, Castor Fields SAPI, reached over twelve billion dollars in sales. Prior to Castor Fields, Alex founded BioFeul Alternatives, a pioneer in the biodiesel market. Alex is a graduate of Columbia Business School.
Alex and I wrote this book because we are convinced that attrition strategy, which has dominated corporate thinking for close to 100 years, is reaching its logical end of life, and should be replaced by, or at least balanced with, maneuver strategy.
Maneuver demands better insight, careful analysis, rapid execution, nimbleness and the ability to innovate new products and services to meet evolving market needs. If we consider how competition, markets and consumer demand is changing, it’s fairly easy to see that speed, agility and innovation are what customers demand.
- Jeffrey Phillips
Image credit: chess from Shutterstock.com