The Idea in Brief
If your company is struggling to outsmart formidable rivals, beware the flaws of traditional strategic planning approaches. They cause managers to misjudge the threat posed by more inventive and determined players, and prompt them to scale down their competitive aspirations to match current resources.
Managers who secure a leadership position for their company approach strategy from a very different angle. They nurture ambitions out of all proportion to their firm’s current resources and capabilities. They fuel an obsessive will to win at every level of the organization—and sustain it over decades. And they define a long-term strategic intent that captures employees’ imaginations and clarifies criteria for success—for example, Canon set out to “Beat Xerox.” The payoff? Their companies take the lead and keep it—trapping also-rans in an endless game of catch-up.
The Idea in Practice
Turn Strategic Intent into Reality
Picture strategic intent as a marathon run in 400-meter sprints. You can’t know what the terrain at mile 26 looks like, so you have to focus your company’s attention on the next 400 meters. How? Present corporate challenges—each specifying the next hill in the race:
- Create a sense of urgency. Avoid future crises by exaggerating current indicators of potential threats. Heavy equipment manufacturer Komatsu budgeted based on worst-case exchange rates with an overvalued yen.
- Personalize challenges. When employees see exactly what best-in-class competitors are doing, they become personally focused on winning. Ford fired up workers with videos of Mazda’s most efficient plant.
- Give employees needed skills. Provide training in statistical tools, problem solving, and team building.
- Tackle one challenge at a time. You’ll avoid organizational overload and conflicting priorities.
Stay Ahead of Your Competition
With scarcer resources than your rivals’, you need to continually outsmart your better-financed competition. Competitive innovation can help. Consider these approaches:
- Build layers of advantages. Don’t rely on just one source of advantage, such as cheap labor. Also build your brand, increase your distribution channels, and tailor your products to unique markets.
- Stake out undefended territory. Honda identified “low end” motorcycles as an uncontested market. While selling 50cc bikes in the United States, it raced bigger ones in Europe—assembling the design skills and technology it needed to dominate the entire business. Rivals never saw Honda’s strategic intent and growing competence in engines and power trains.
- Change the terms of engagement. While Xerox built a wide range of copiers it leased to corporate copy centers through a huge sales force, Canon standardized copy machines and components to reduce costs, sold its offerings outright through office-product dealers, and appealed to people who wanted their own machines. By developing capabilities that contrasted with Xerox’s, Canon created a new “recipe” for success, short-circuiting Xerox’s ability to retaliate quickly.
- Compete through collaboration. Electronics manufacturer Fujitsu’s alliances with Siemens and British computer maker STC and with Amdahl in the United States boosted their manufacturing capacity and opened doors to Western markets.
Today managers in many industries are working hard to match the competitive advantages of their new global rivals. They are moving manufacturing offshore in search of lower labor costs, rationalizing product lines to capture global scale economies, instituting quality circles and just-in-time production, and adopting Japanese human resource practices. When competitiveness still seems out of reach, they form strategic alliances—often with the very companies that upset the competitive balance in the first place.
