Find Your Unfair Advantage

When you start polishing a rough rock, you want to be confident there is a diamond to be uncovered. So how do you at least increase your chances of starting with the right thing?

They say it’s smarter to just get going than waste your time planning in an environment of high uncertainty – so goes the new wisdom about corporate business development and innovation – and for a good reason. Most of the attempts at making a credible business plan fail (or to paraphrase Steve Blank, only old VCs and Soviet commissars expect a 5-year plan anymore). But for all the buzz around starting by talking with your customers, getting your first MVP out there, doing rapid prototyping and failing fast, the question of on what goal should these be focused still remains.

Corporate innovation strategizing – far too often conflated with towering decks of PowerPoint – is at heart the act of discovering and setting a vision of the future, understanding your current situation and seeing what is helping you to or hindering you from making your assumed vision a reality. In the old world this would lead to a grand design of plans, then a period of watering down said plans by internal politicizing and finally execution. But you should not make it this complicated.

At the heart of corporate innovation strategy is a set of simple questions. Why are we pursuing this vision? How are we going to pursue it? And finally what are the actions we are going to take. If you do this exercise right, you will end up with an understanding of the key realization: your unfair advantage for doing what you do.

I think it’s a crucial element of success. In a world where the market risk is rising like a rocket – think how the traditional barriers to entry to most markets are disappearing, well-funded startups and other corporate innovators are coming at you from one direction and from the other the entrepreneurs bootstrapping in their basements look to disrupt your activities – and all but the most advanced technology risk disappearing, you need to ask yourself what gives you an edge against a VC fund that will invest more and the entrepreneur who is smarter and more committed.

That is the unfair advantage you need to have to succeed. And that’s also a great way of keeping your focus on the things you do well, and not going chasing after every opportunity you think you see out in the market.

When we were running the internal incubator at Sanoma, a European media company, the unfair advantage was a question we made ourselves to face constantly, and which also became the core of our investment thesis (which as a term sounds grandiose – it’s basically a statement of how an investment like an innovation project will generate value for your portfolio).

You start with the WHY, as that’s a way of trying to define which market and customer needs you address. For a media company, it’s easy to think it’s in the business of squirting ink on dead trees or transmitting programs for television sets. When you take a deeper look at it, though, you realise that the true value generated comes from creating content that inspires people to get more out of their lives and make better decisions, or publishing hard-hitting journalism that holds those in power to account and informs us all to be better participants in a democracy. Media creates a valuable space where other brands can associate themselves with the values of the media brand (brand contagion) or bring their content to a relevant context. You need to make sure not to get stuck in a narrow definition of the business you are in. (My favourite story about this is how Haier, a household appliance manufacturer, won massive market share by introducing a potato washing button into her line of washing machines for the Chinese countryside; that’s realising you are not just in the business of selling machines that wash clothes).

When you get to the question of HOW, you hit the next challenge. Saying that “we will leverage our brand and the trust customers associate with it” is all well and good – and many companies take that approach thinking you will take an insurance next to your energy contract or buy a prepaid subscription from where you do your groceries. This is a space of both successes and failures, something where the real answer to the “how” would probably be much more intimate than just slapping the brand on the next product. Companies like HEMA in The Netherlands are an impressive example of extending the brand in a sensible, consistent way. 

In the media business a trap of loose thinking also appears around the "how": a typical answer could be that “as a media company, we use our reach to build a massive audience”. I think that was the reason so many media companies launched or acquired local daily deals platforms in the wake of the Groupon success, or many companies rushed to build their Buzzfeed clone. For the "how", you really need to use your understanding of what you are doing. Rocket Internet is successful with their copycat approach thanks to ruthless execution (see their Blitzkrieg memo). In one case, the “how” turned out to be using the company’s existing relationships with the large advertisers to create partnerships which wouldn’t have been possible for a startup. In another, the network of experts using a last generation offering became a great sales channel when the new proposition was developed to really fit their needs.

Of course the WHAT is also crucial. That’s the part covered by the lean startup and agile methodologies that we help teams reach a level of operational excellence in. But there is also the level of being able to act on the “how”. If your goal is to use your media power, you need to accept that as a company your internal policies might not be conductive to it happening. Maybe the opportunity cost is (or is perceived to be) higher than the new value generated, especially in the short term. 

Typically there is no incentive model internally to support achieving the unfair advantages. That’s one of the key things that a corporate wanting to innovate must start getting right. The ability to introduce new targets supporting a new project is something rewards specialists should focus on, especially in a cycle that’s faster than the archaic annual performance review/KPI setting that many organisations are still beholden to.

So time to start asking the questions: WHY, HOW and WHAT. With your unfair advantages & operational excellence of agile implementation of lean startup I'm willing to give you much better odds at getting to success.