From Good … to Great … to Gone. Developing a Business Strategy in a Disruptive World

Bob Nardelli and Billy Iuso

The corporate graveyard is littered with companies that “used to be great.” Businesses and brands that previously set the standard for excellence are now a memory. 

Not that long ago, retail titans like Sears, Kmart, JC Penney, Radio Shack and Borders were anchors in shopping centers across America. In the technology arena, Atari was the gaming leader, Netscape was the browser of choice, and Palm (Blackberry) dominated the hand-held devices landscape. Xerox was synonymous with copies and Hostess was the only snacking cake we knew. Today, these companies are either all but dead or on life support.

In assessing how these former leading businesses transitioned from good to great and then, essentially, to gone, there is an all-too-common thread: They either did not anticipate disruptive threats or failed to capitalize on disruptive opportunities. Incorrectly assuming success would breed success, they learned a rather harsh reality: Success can also breed complacency which, if unchecked, fosters failure.

Blockbuster Video’s fall is the story of a business that, in the space of just a few years, went from video rental store pre-eminence to obsolescence. Netflix, a textbook disruptor, provided first a home delivery service and later a streaming service that transformed Blockbuster stores from an industry leader to an unfortunate loser in the movie distribution game.

Toys-R-Us suffered a similar fate. Once positioned as the place where every child had to be when new toys and games were released, the company over-estimated the value of the in-store experience and was swept away by Amazon’s online accessibility. It’s a sad statement, though: Certainly you can shop online or in a single aisle at a big box store, but you simply can’t replicate the mystique of the shopping experience at Toys-R-Us with your wide-eyed child or grandchild.

Another store that has almost disappeared from the retail landscape is Sears, which failed to leverage the value of iconic brands like Craftsman, Kenmore, Weatherbeater Paint, and Diehard. Its probable demise is shared with many other brick and mortar retail chains that waited too long to recognize and then adapt to disruptive forces.

On the surface, the rapidly changing and disruptive digital environment could not have been predicted or identified by the traditional strategic planning process. That process, so vital to the success of many of the formerly great companies, has little relevance today. 

Still, as impractical as applying the old strategic planning process may be, making certain your business has the appropriate strategic plans in place to contend with and address the challenges of the 21st century is more important than ever.

Developing a business strategy in a disruptive world

So, looking ahead, if we work from and accept the premises that the strategic planning process of the past is no longer relevant and having a sound strategy is essential to business success, what’s next?

The quick answer—to just not use the old process—over-simplifies what is hardly an easy process and risks some version of “throwing out the baby with the bath water.” While the old process is not applicable, certain elements still make sense. Ensuring that we have a clear understanding of the market, the customer’s desires and the competitive landscape will never go out of style … but that’s clearly not enough.

Essentially, success in developing a strategic planning process that will work in today’s volatile environment involves critical changes, not abandonment. A fundamental change is needed to the traditional SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. Typically when undertaking this analysis, companies place significant focus on their strengths—what they do best, in other words. The thinking is that if they do more of what they are good at, that will help overcome the weaknesses they identify. As important as this may be, in today’s environment much more must be put on what can hurt the business (the threats) and how to grow it (the opportunities) than on what the business already does well.

The strategic planning process, then, involves moving from a primary multi-year focus on competitive strengths and weaknesses to a primary constant focus on disruption opportunities and threats. In today’s business, everyone must wake up every day and ask the following questions:

1.     What could happen today that will fundamentally alter the way we are doing business and damage our customer relationships?

2.     What can and should we take advantage of that we’re not doing today?

3.     When we think about innovation, are we thinking about it in its broadest form—encompassing product, process and people?

As businesses assess and plan for disruptions and take advantage of potential opportunities, they need people who possess a knowledge and line of sight of the entire company. Their strategy must have purpose and a clear mission that addresses a broad range of constituents. Most importantly, the people in roles like this must understand, be comfortable with, and actually embrace change.

As we all know by now, change is the only constant in today’s environment. To develop a winning strategy, a constant scan and comprehension of the economic, political, regulatory and—of course—technological environment is necessary when exploring disruption and threats.

Once identified, swift action is essential to capitalize on the disruption. In many cases, this may mean acquiring or partnering as opposed to trying to internally develop the technology or capability that will be needed to meet or exceed customer expectations. This is especially true—and important—if what’s needed is in an adjacent market area or in what is identified as a “blank” space in the market.

It’s also critical to understand that this process never ends! No matter how well your business may be doing today, you could easily be one good competitor’s idea away from obsolescence. Let’s go back to Netflix, which now faces its own disruptive threat in Disney and Apple. These two new offerings are competing ferociously and—along with Netflix and Amazon—are spending billions of dollars for content. It will be fascinating to see what moves are ahead for these companies.

If there was one golden rule of the new era of strategic planning, it is to never look away. Constant and diligent focus must be given to potential disruptive forces and for opportunities to disrupt the competition. The alternative is to be “Amazoned” or “Ubered” out of existence.

Equally important is action. Knowing something could hurt you is nice, but it’s even nicer when you turn the tables on a potential source of disruption and use it to your advantage.

In the end, a strategic planning process is only as good as the results it delivers. No longer providing only a one-and-done annual review, boards of directors are being encouraged to take a much more active role with management in reviewing strategies and strategic alternatives, and board members are urged to bring their individual expertise to the discussion. Shifting the traditional SWOT focus to concentrate less on Strengths and Weaknesses and more on Threats and Opportunities will allow a company to shape its own future as opposed to being shaped by the future. In that way, it can sustain, perhaps even grow to be great—and avoid being gone.

Read more about Bob Nardelli at www.bobnardelli.com.

Bob Nardelli has more than 100,000 followers on LinkedIn. During nearly five decades in the business world, he has grown the sales and profits of a number of multi-national corporations including the General Electric Co. and The Home Depot, and he helped save Chrysler and its iconic brands when the American auto industry began to collapse. In addition to his board and volunteer service, Bob is the founder of XLR-8, LLC, Investment & Advisory Co., which helps companies identify weaknesses and improve performance.

Billy Iuso is president and chief executive officer of Strategic Resource Allocation Inc. A consultant for Cerberus Capital Management and strategy consultant for Chrysler LLC, he formerly was a strategy consultant for The Home Depot, vice president and managing partner of The Michael Allen Co., manager of consulting resources and marketing research services for General Electric’s Corporate Marketing Consulting Services, and manager of consumer research for GE’s former Housewares and Audio Business Division. His most significant contribution to his strategy development clients has been to convince them to strategically allocate resources cross-functionally rather than by function, which is the typical allocation process.