Don't Rely on a Single Strategy!

If you have a Strategy, don't fly it solo! It's suicidal. For your business, of course. You need to expand your horizon beyond the fight with teeth and nails for your Current Competitive Advantage. When it will dry out –and you can bet it will– you'll be left hanging in mid air, with nothing else to fly your business on.

Three Horizons of Growth

If you are not familiar with McKinsey's Three Horizons of Growth , now would be a good time to patch that knowledge gap. What the model says, is that we should divide our focus on three time horizons that are equally important to our business. It's not an equal weight focus division: the three horizons don't need the same allocation of company resources (time, money, people), but we should work on them, as a matter of principle, in parallel.

On the vertical axis, we have the economic results, on the horizontal is the time axis. Now, before going any further, I must say that there is a subtle trap hidden in plain sight here. The horizons 2 & 3 are further into the future, and we expect our Next and Future Competitive Advantages to kick-in next year or during the next couple of years. But, for that to happen, we must work on building them today, in parallel with our work on defending our Current Competitive Advantage. Postpone working on the horizons 2 & 3, at your peril!

As we have learned from Geoffrey Moore 's Zone to Win framework, for defending our Current Competitive Advantage, on the Horizon 1, we must focus on two zones: the Performance Zone, which includes the improvement and even extending the solution(s) that support our existing advantage, and the Efficiency Zone, which allow us to reduce our costs, use the volume-related leverages, the continuous improvement programs, and so on, for harvesting more profit generated by our Current Competitive Advantage.

The Horizon 2, and our Next Competitive Advantage, expected to kick-in soon, depend on our foresight of resources that we have allocated last year, and during previous years, on incubating new ideas and experimenting with new minimum viable product (MVP) solutions that may provide us a sustainable advantage in the marketplace. That is why this second horizon is about transforming those incubated ideas and experiments into mature commercial products and services that our business growth should rely on from the next year(s) onwards. We do that by employing different tools, resources, processes, and people than for the work that we do for defending the Current Competitive Advantage, and that work has a different time span. This is the Transformation Zone of our business.

Finally, the Horizon 3 is where we incubate the ideas and build the MVPs that are required next time when we must work in the Transformation Zone, therefore providing us with a viable foundation for the Future Competitive Advantage that comes after the next. Again, the tools, resources, processes, people, and timeline of the activities in this zone are different from the ones employed in the other zones.

The Three Strategies

Perhaps it is a little clearer now why we need more than one Strategy. Even if it's not, we'll clarify this right away. Let us take an example.

Our company manufactures seats for the auto industry and we have setup a high-quality value chain that allows us to successfully compete in this industry, with lasting relationships with customers, a diversified supply chain, and a team of highly-skilled people. Within the Horizon 1, and for defending our Current Competitive Advantage, our Performance Zone business is driven by a Strategy that addresses our customers' Job-to-Be-Done of being more innovative and building safer cars. So, we have focussed our Strategy on experimenting with modern seat designs and novel materials, launching a Creativity Shop that we operate together with our customers.

For our Efficiency Zone, we have focused on lighter seat designs that allow us to use fewer expensive materials, like seats without hardback, and have automated tasks that were too human-intensive, often generating bottlenecks on the manufacturing line. The results lead to several costs reductions, strengthening our Current Competitive Advantage.

But this is only about our Horizon 1. What will we do when more competitors will catch up on our advantages and our profitability will sink into the red, because we won't be able to retain some of our customers and it will be harder to acquire new ones? That's the downhill part of our Competitive Advantage curve.

Well, we have prepared for that. On our Horizon 3, we have started working several years ago on incubating solutions for full car interior lining, styled according to the design of the auto seats we provide. The test response from our existing and potential customers was good, as we anticipated very competitive prices, due to using the same class of materials as for our seats, based on lower costs from our suppliers, for higher order volumes.

That means that we are now engaged in the full manufacturing line implementation, with equipment and automation retrofits and extensions, expecting higher output, due to an aggressive program to acquire new customers for our combined seat + interior lining solution package. That is our Transformation Zone, in Horizon 2, where we must turn our incubated MVPs into full commercial products and services.

Ok, but what about our current Horizon 3 and Incubation Zone? What solutions are we imagining for the future and what are we experimenting with, today? Market research data indicates that there is a certain interest in the airline industry for more comfortable seats in the airplanes business class areas. Of course, cost and quality are essential, but we can build on our expertise in the auto industry to support that. So, our Strategy for the Horizon 3 is to enter the airline industry seats business, and our Incubation Zone people are working hard to turn this idea into a minimum viable solution. Well, they are actually working on other solutions, too, but I won't tell you what those are.

Different Strategic Choices for Different Horizons

As we could see, we are working in parallel on three horizons and multiple Zones to Win, in the case described above. But the approaches, the JTBD that we have focused upon, and the style of solutions matching them are different. So, here are our strategies:

1. Defend & Strengthen: This is our Strategy for the Horizon 1, aiming to increase the support for our customers' innovation and safety needs (Performance Zone), as well as to become more efficient in our manufacturing process, therefore improving our ability to face a tougher competition on price (Efficiency Zone), and improve our profitability.
2. Integrate Horizontally & Expand: This is our strategy for the Horizons 2 & 3, based on the Strategic Choice of providing our customers with a One-Stop-Shop solution package for both seats + interior lining, something that is traditionally called horizontal integration, with competitive benefits resulting from lower input material costs, due to higher production volumes. That is what applies to our Transformation Zone. At the same time, we have decided on a substitute market entry, providing the airline industry with more comfortable seating solutions for the economy class passengers, based on our expertise with auto seats manufacturing. But that is in our Incubation Zone and the results will not kick-in (with more than MVP experiments) before we have finished our work with what we already have now in the Transformation Zone.

So, each of our two parallel Strategies, supporting our sequence of curent, next, and future Competitive Advantages have required different mixes of Strategic Choices, leading to corresponding different required Capabilities & Activities, consequent Strategic Gaps to close, and so on.

As you might have learned from the Balance of Strategic Choices article of this newsletter series, or from previous posts on this subject, we employ two palettes of Strategic Choices, called Penta Model Alpha & Beta, corresponding to the two Strategy dimensions of Where-to-Play and How-to-Win there. Let us see how does the intersection between the Penta Model choices and the two strategies (1 & 2) described above looks like.

The diagram below is based on the Penta Model Alpha for Where-to-Play choices:

Our strategy to Defend & Strengthen our Current Competitive Advantage doesn't target any significantly different customer needs than before, so we have no new Where-to-Play Strategic Choices than the previous one, which is A1 - Specific Needs of Mid-Markets. However, for our strategy to Integrate Horizontally & Expand and the Horizon 3, corresponding to our Future Competitive Advantage, we decided to use new Strategic Choices, specifically the D2 - Needs in New Areas - Substitutes, as we target the airline industry, which is new for us.

What may be, in a completely different scenario, the Strategic Choices that we could use? For example, we could supply auto seats on the aftermarket channels, or directly to the service garages that can add seats retrofitting to their offering. That would be a case of B2 - Convenience Needs - Sales Channels (delivering directly to the aftermarket channel, rather than via the auto manufacturers), and D1 - Needs in New Arenas - Adjacents choice for Where-to-Play. Or we could vertically integrate the full metal parts manufacturing for our seats, something that we now get from our suppliers. That would employ the C2 - Expanded Needs - Value Chain choice. Of course, Strategic Choices ideas are many, but it is important to evaluate the consequences of adopting each of them, in terms of feasibility and viability.

Same goes for the How-to-Win Strategic Choices (Penta Model Beta):

Our strategy to Defend & Strengthen our Current Competitive Advantage employs on the Horizon 1 the G1 - System Integration - Customer Intimacy choices by launching the Creativity Shop that we operate together with our customers. This is for our Performance Zone. In our Efficiency Zone, we have decided to focus on reducing our production costs, not for becoming a price leader, but to better defend our Current Competitive Advantage against low-price competitors, especially Asian new entrants. That is the application of the F1 - Best Fit Solutions - Price Leader choice.

For our Horizon 2 and the Transformation Zone, our strategy to Integrate Horizontally & Expand is employing the G2 - System Integration - Horizontal Value, by providing a One-Stop-Shop package solution (seats + interior linen) to our existing and potential customers. Our Next Competitive Advantage is based on that. At the same time, for the Horizon 3 and our Incubation Zone, we have employed the I2 - Unique Advantage - Unique Enablers choice that matches our Where-to-Play choice of entering a new substitute market (the airline industry). This is regarding our Future Competitive Advantage.

Conclusion

Each of the Three Horizons require a specific strategy, which means that our business needs to design and implement three strategies that must be executed in parallel, but aimed at three consecutive Competitive Advantages. Each strategy executed in parallel is based, at its turn, on specific Strategic Choices, which differ significantly depending on whether we must defend our Current Competitive Advantage (Horizon 1), or build our Next & Future Competitive Advantages (Horizons 2 & 3).

Therefore, the important underlying message of this article is:

Don't Rely on a Single Strategy! We must execute in parallel multiple strategies, defending or building a sequence of consecutive Competitive Advantages.

Thank you for investing your time in reading this article.?Did you enjoy it? As always, I am looking forward to your suggestions, questions or bricks, the only way we can improve what has been described in this article.

Other?Strategy Clockwork?newsletter?articles:

The Strategic Alignm ent

Strategy Skunk Works

Without a Plan, Strategy is a Fairytale

Design Thinking inside Strategy

Beyond [static] Balanced Scorecard

The Deeply Integrated Strategy

The Game inside Strategy

The Balance of Strategic Choices

The Corporate Balanced Scorecard

The Strategy Clockwork Newsletter

Enjoy!