In the past month, I have had two unique opportunities: the first was to spend a few days in Boston with one of my clients and Frances Frei from Harvard; the second was a fireside chat with some fellow CEOs and author Malcolm Gladwell (Tipping Point, Outliers, What the Dog Saw). There were some great strategic nuggets interwoven into both conversations, and I want to share with you what I learned.
Frei is a professor in Harvard Business School’s technology and operations management unit and the chairwoman of the MBA required curriculum. Because Frei’s work focuses on how organizations can more effectively design service excellence, I was eager to hear her thoughts on organizational strategy. I was not disappointed.
Here are some key points I took away from the conversation.
Choose great over average. When you’re considering your points of differentiation as an organization the key is not to try to become five out of five on all aspects of your client value proposition; by diffusing your efforts as an organization among so many things you end up becoming three out of five (average) on everything.
Really great, standout companies figure out what they can sacrifice (areas where they are at about a one out of five), so they can truly be five out of five on the areas that count most to their customers.
Choose differentiation versus “me-too.” For true differentiation you need to do something that the competition can’t properly replicate. Consider the example of the Heavenly Bed Wars. Once Westin hotels rolled
out its heavenly beds campaign, all their competitors had to do was provide a similar quality of bed – a simple yet costly undertaking, the net result being that consumers now get better beds from all competing hotels. But each is still in the same price-competitive space: higher cost, lower margin and no differentiation. The trick is to focus on providing something to your customer that is difficult for your competitors to replicate.
Put economies of scale before economies of scope. Growing the scope of your offering by trying to provide too many new opportunities to your customers can diffuse your brand and increase your cost of delivery without the commensurate increase in profits. Starbucks tried to grow by adding other purchase options (music) into its stores and, as a result, diluted the customer experience and damaged its brand.
Thrive through constraints. Provide people in your organization the constraints within which they can work and they will thrive. People need direction and parameters to help guide them toward creating the right outcome. Without constraints, myriad options can be overwhelming and lead individuals to either head in the wrong direction or get stalled by not knowing where to begin.
Find creativity in white space. Structure your weekly executive meetings to include 50% free time: no set agenda. Use this time to allow a free-flowing discussion where executives can bring an opportunity or issue to the table and use the collective brainpower of the group to come up with a solution.
After my experience in Boston, I joined some fellow CEOs and entrepreneurs in a fireside chat with GladwelI.
He spoke about the research he’s been doing for his next book and his reflections on his previous research. As I was listening, I saw some interesting links between his learnings and organizational strategy.
Skill and luck. The key distinction between people who are lucky and people who are lucky and successful is the ability to recognize a lucky break and take advantage of it. Don’t stop at feeling lucky when an opportunity comes your way. Work to leverage its potential.
Tweakers beat innovators. Steve Jobs was never the first in an industry; his skill was seeing the potential in someone else’s idea and tweaking it to make it perfect. Tweakers make innovation useful.
Profit over size. Focus on profitability and enjoyment versus size for size’s sake. There are significant risks associated with growth over a certain size: increased complexity, loss of control, lack of communication, loss of line of sight to your customers, etc.
Taking risks. Entrepreneurs take risks. The most successful stay away from operational risk; their risks, instead, are purely social: other people think it’s a bad idea to do what they’re doing. If you can eliminate operational risk, don’t worry if other people don’t like your idea. In fact, if people think your idea is crazy you’re probably on the right track. Just make sure all the operational details can be taken care of (eliminate operational risk) and stick to social risk.
The upside of failure. Set up an environment where everyone feels compelled to try new things by making it OK to fail. Only one outside-of-the box idea has to work for this approach to payoff in a big way.