SWOT: The Outside Environment Un-Controllable

Strategic inflection points—changes that alter the taken-for-granted assumptions underlying a business model—can feel sudden.  In reality, however, they tend to build up slowly, gathering momentum until the transformative shift becomes clear. When these shifts occur companies tend to fall into three categories:

  1. The first are those that have missed the inflection point entirely. These firms often shrink or disappear i.e. internet-fueled retail apocalypse.
  2. The second group comprises those that realize and inflection point is underway and place a huge, last minute bet on catching the wave. This sometimes works i.e. Adobe’s dramatic shift from selling shrink-wrapped software to software on a subscription only basis is a stellar example.
  3. The third set of companies are ones that have placed a number of small bets over time to position themselves to take advantage of shifts when they happen. These investments are in effect options companies can exercise once the new landscape is more clearly in view. For instance, Echolab has evolved over decades from a company that created a better way to clean hotel carpets to one that is involved in a number of opportunities with clean water management, taking advantage of the inflection point of increased demand for environmental sustainability.

The challenge for leaders is: how do they prepare to see an inflection point coming—so they don’t need to make a last-minute turn? And, how do they bring the organization along into the post inflection point world? Let’s start with the problem of seeing an inflection point coming. Unless leaders have well-honed ways of challenging their assumptions it is very easy to fall prey to blind spots.

A useful way for leaders to gain perspective on their assumptions is by using Clayton Christensen’s idea that companies are selling “jobs” to be done. He argues that rather than thinking of customers buying products and services, it is more helpful strategically to consider the outcomes customers want; in effect, they are “hiring” products and services to achieve those outcomes. What becomes clear when looking through this lens is that outcomes can be achieved in many ways and do not always conform to traditional industry boundaries.

Consider the milk business. Some jobs of milk might include quenching thirst as a beverage, softening the bitter taste of coffee, and accompanying a bowl of cereal for breakfast.  Each of these outcomes could be achieved in some other way. In fact, dairy milk consumption in the USA is steadily dropping (per the Economic Research Service) as people drink more bottled water, deploy plant-based alternatives such as coconut, almond, and oat “milk” at the coffee shop, and opt for on-the-go and high-protein alternatives to cereal. As a consequence, dairy producers are grappling with declining demand while oat “milk” makers are struggling to keep their products in stock.

Having identified a coming shift, leaders can experiment with ways to help their company take advantage of it.  As they make these small bets over time, they can increase their commitment and shift resources to those areas in which new models are changing the status quo.

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©2020JMT

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