Reinvention strategy errors to avoid

Reinventing an iconic global company is a massively complex process. It takes time, hard work, strong leadership, persistence, and probably some amount of luck to get right. In the previous article , we discussed the four stages of reinventing icons: strategy, incubation, integration, and scaling. I mentioned that I thought integration was the most difficult stage, and it's the one I have been working through currently at Lenovo. But all of these stages and their challenges only come into play after you have chosen the right strategy in the first stage. So while choosing the right strategy might not be the most difficult, since it is foundational to everything that follows, it might be the most important!

Unfortunately it’s very easy for company leaders to fall into traps when evaluating what reinvention strategy to choose. Internal executives hear customer problems and see trends through the lens of their existing businesses. This is outstanding behavior for a traditional business leader, but it can become overly narrow when evaluating a reinvention strategy.

This internal context can lead to two different types of reinvention strategy errors to avoid:

1. Staying too close to your core business
2. Copying someone else's successful business

Both of these decisions can lead a reinvention to be both costly and time consuming, without actually making an impact on the core business. Let's look at each case.

Staying too close to your core business

It can be extremely difficult for leaders to uncover new possibilities that are more than a small pivot away from their existing business.?Why? All of their focus, investments, and resources are tied to their core. Let's face it, businesses do not have endless amounts of capital to allocate, so the closer the reinvention business can be to the core business, the better the leverage can be. It's completely reasonable thinking and in the short term, may actually yield better results. Your customers tell you what they want from your existing products and you capitalize quickly.

Iconic global businesses can often find growth in their core. And growth is valuable to buy yourself time to reinvent the company. I saw this at all of the iconic companies I was in. IBM could sell more consulting, GE could sell more maintenance services, Bose could sell more speakers, Lenovo could sell more PCs. All of these are good ideas and there should certainly be leaders in these companies focused on those growth initiatives. They generate much needed cash flow for your reinvention initiatives while they are developing -- that is, as long as you actually reinvest that cash flow!

But reinvention initiatives are different from traditional growth projects. They are designed to find new market segments to serve and new business models to develop with the ultimate goal of increasing the long-term valuation and viability of your company. As we have already discussed in previous Reinventing Icons articles, business models drive valuation. Once your business model is no longer valued as highly by the market, you can improve your top line and bottom line dramatically and you will still see little movement in your corporate value. At that point, a serious Board level discussion about reinvention is a essential, and hopefully not too late!

Selecting a reinvention strategy that stays too close to your existing business is unlikely to unlock any significant valuation growth. You may have a good year, you may pay strong bonuses to your employees, but you will not be on a path to keep your company viable for its next era of growth. This is why staying too close to your existing business is one of the two major strategic errors that companies can make when selecting reinvention strategies and one that I hope you can avoid.

Copying someone else's successful business

The second attractive error that business leaders can make is focusing on recreating someone else's successful and valuable business. Usually this takes the form of watching what another leading company is doing and saying, "I think we can do that too!" This path can be very seductive as it doesn't require as much creativity in finding a new product / market fit for your company, but rather focuses on executing better than other companies.

There are times when this model can work, especially when your company has a core set of differentiating assets that enable it to compete effectively against an earlier first mover. But more often than not, coming into a market late through organic development against well-established competitors can be very costly.

I'll give some examples of this problem using potential strategies some of my previous companies could have considered:

• General Electric could have wanted to enter the Industrial Internet by rebuilding the entire public cloud that Amazon Web Services or Microsoft Azure already had running with large customer sets and broad microservices
• Bose could have wanted to enter into the Digital Audio space by recreating a voice assistant like the Google Assistant or Amazon Alexa that already had over 100K capabilities combined
• Lenovo could have wanted to build solutions by becoming a large consulting provider like Accenture or Deloitte that already had over 1 million consulting employees between them

In each of these three examples, the markets are attractive, and there are strong companies that are generating value from their business models (Amazon, Microsoft, Google, Accenture, Deloitte). But in each case, the iconic global company (GE, Bose, Lenovo) would be showing up late and without significant differentiation. Entering these "red oceans" organically provides little opportunity to win and build a strong reinvention. Likely you will always be behind trying to catch up and not generating the profits you need to grow the business.

The caveat to the organic model limitations is that it is sometimes reasonable to buy your way into a red ocean, if you can afford to invest in a leader. Buying can give you instant access to the customers that you want and the capabilities that you need. But to do this in a way that will have a material impact on an iconic global company (meaning enough revenue to matter), you will need to make a large purchase. This is clearly a Board level discussion that should be put on the table as one option for reinvention.

The ideal path: Leverage company strengths in a new market

In an upcoming article we will talk more about the five core questions for reinvention strategy development. But for now, let's summarize by saying that the goal is to find a market opportunity that is big enough to matter, that leverages your company's core strengths, and is not already dominated by multiple players with significant entrenched leadership. This applies to just about every company. In my experience:

• IBM leveraged strengths in data integration, analytics, and workflow technology to build a portfolio of repeatable Smarter Planet solutions (a "blue ocean")
• GE leveraged strengths in industrial asset operations to develop software-based asset performance management solutions for industrial equipment (a "blue ocean")
• Bose leveraged strengths in wearable audio and consumer distribution to create the foundation for spatial audio and audio-only augmented reality (a "blue ocean")
• Lenovo leveraged strengths in sales channels, services, and supply chain to make business solutions as simple as a PC (a "blue ocean")

Clearly, all of these companies had many different opportunities for growth, some were closer to their core, others were more similar to major competitors. What I liked about all four of these examples is that, in this strategy stage that we are discussing today, all found ways to identify a reinvention approach that worked on paper. And that is the major goal of leading the strategy stage of reinventing icons: address the obvious issues on paper, before it becomes much more expensive and time consuming during the incubation, integration, and scaling stages. (We'll talk about these in the future too.)

Chasing a strategy that doesn’t work on paper is one of the fastest ways to lose both significant time and incredible amounts of capital. My hope is that this article helps set you on a good path for growth. Let me know your feedback and comments. I'd love to learn from your experiences too! And please share if you think this can be helpful to others. All of us can benefit if we work together to share lessons.