Understanding Driving Forces

Transcription

1 Understanding Driving Forces An Action Learning Document for CEO IQ Members Only 2011 CEOIQ - all rights reserved. Permission to quote with attribution granted. Unauthorized reproduction,distribution or transmission by any form or means without prior written permission is prohibited. Please see all our terms, policies and disclaimers at

2 Overview Driving Forces How your organization sets itself up to compete defines your position in the marketplace, with the markets and customers you serve. Your definition is a conscious (or unconscious) expression of competitive positioning or competitive advantage in your market. A well-known consulting think-tank, Kepner-Tregoe in Princeton, New Jersey, through their work with Fortune 500 Companies, developed the concept of a Driving Forces Model. Driving Forces are those key differentiators that establish the basis for competing in any industry. Top Management Strategy, a book by Ben Tregoe and John Zimmerman introduced the concept to a broader business audience. Since being introduced in the 1980 s several practitioners have evolved the Driving Forces concept, including James Morrisey in his book Strategic Thinking: Building Your Planning Foundation. Kepner-Tregoe updated the model in a book titled Vision In Action: Putting a Wining Strategy to Work. The original work by Ben Tregoe identified nine primary or core Driving Forces that most organizations find important to their short and long term success. More recently, a tenth force has been added - in this wired world of the 21 st Century, Image or Brand Identity has been added as a Driving Force. These ten forces define the playing field. You need to have some competency in each of them in order to stay in the game. And, there are ONE of them that really define your position in the marketplace, how you show-up as a competitor - at a particular time, in a particular place! You may identify two or three additional Driving Forces that are major decision influencers, supporting or focusing your strategic choices around THE central Driving Force. You may also identify one or more Driving Forces that are particularly unique to your organization and operating environment. Those can be added to your Strategic Thinking process of determining what Driving Force is the focus of your strategic direction over a month time-frame. You use the Driving Forces to sort what matters most to your organization. They then create a framework for ongoing Strategic Thinking, strategic choices and ultimately, Action Planning & Accountability. Here is some additional background on the ten Driving Forces from the Kepner-Tregoe Model. Read thru these descriptions and spend some time thinking about them before you complete the Driving Forces Ranking Diagnostic. Driving Forces - Page 2

3 Market Responsive Organizations that are Market Responsive have identified a specific or named market to which they choose to respond. Once this market is clearly identified, Market Responsive companies develop new products and services that are responsive to the needs of the specific market. The market responsive organization focuses on understanding the needs of the market more than the specific products and services provided. Once a market s needs are clearly identified, the Market Responsive organization responds, developing or gaining access to the products the market is requesting. This differentiator is usually characterized by a large and diverse offering of products or services, a if you want it, we have it approach. Examples of successful organizations that use market responsiveness as a Driving Force are: Toys R Us, Weight Watchers, FedexKinkos, 3M. Product or Service Superiority This Driving Force focuses the organization on being a specialist. By intensely focusing on a narrow product or service scope, the organization is generally known as the best, or the acknowledged experts within their product or service area. Organizations using this Driving Force tend to specialize and strive to be the highest quality provider in a specific market segment or service area. The organization is focused on increasing quality and reputation of a limited product or service line. Some successful companies using Product or Service Superiority as a Driving Force include Rolls Royce, Singapore Airlines, Rolex. Production Efficiency / Service Capability Organizations that are production efficient make it a top priority to operate existing production or service capabilities at full capacity and maximum operating efficiency and effectiveness. These organizations are positioned to provide fast turn-around times and highly consistent output (products or services) with minimum customization for individual customers. Or, they practice mass customization as a way to differentiate themselves. These organizations are often characterized by their ability to produce products and services in large volumes, in short timeframes at very competitive (often the lowest) price in the market. Successful organizations using Production Efficiency as a Driving Force include: Ford Motor Co. (for their Ford brand), McDonalds, Anheuser-Busch, Wal-Mart. Driving Forces - Page 3

4 Human or Natural Resources Controlling either human or natural resources can create competitive advantage in many marketplaces. The key to control is controlled access to the resource. Human resources can be positioned to create competitive advantage. A top-name, world-renowned chef in a New York restaurant or a top scientist who is widely published on your research team are examples. If customers are attracted to your organization because of an individual or group of people who work for you, that becomes a significant element of competitive advantage. Natural resources are usually thought of as fossil fuels, minerals or precious metals, woodlands (timber), crops (wheat, corn). And, there are other dimensions to natural resources, including physical location of business (high-traffic retail areas, tax-free enterprise zones, economic development areas) that represent control of a limited resource to create competitive advantage. Some successful organizations using Natural or Human Resources as an important Driving Force differentiator in their business include: International Paper Company; McKinsey & Company; Stanford University, DeBeer s. Market Dominance If your organization is the largest (or one of the largest the top two or three) in your business, then Market Dominance becomes a real Driving Force. Market dominant organizations typically own a majority market share of their chosen market segment. And, these organizations set goals to build, expand and control even more market share. Once a brand name is developed and has captured a large percentage of the target market, that brand is in a position to control pricing and quality standards within the industry. These organizations are driven to grow market share and use a combination of organic growth (internally generated) and inorganic (acquisitions externally generated) to maintain and expand a dominant position. Price-cutting and significant investment in expansion are also hallmarks of market dominance. Competitive advantage is achieved through sheer size and widespread brand recognition. Organizations that successfully use Market Dominance as a Driving Force include: Coca-Cola, Microsoft, Amazon.com, Wal-Mart. You might also notice that other nationally and internationally known companies mentioned as using other Driving Forces are also intensely competing for market dominance in their target markets. In considering market dominance as a Driving Force (what company doesn t want to dominate its market), think about the difference between a desire to grow and market dominance. Some important questions about market dominance include: Will increased size provide competitive advantage? How? Or, is growth simply a desirable Driving Forces - Page 4

5 result of a successfully executed business strategy? Where that is the case, market dominance is not likely to be effective as a Driving Force for your business. Short Term Profit Organizations that are driven to generate short-term profits are in constant harvest mode. These organizations are characterized by choices to, eliminate, reduce or delay significant investments in themselves because the priority is short-term profit margin. Research and Development, physical plant, innovation are low priorities in these organizations. They typically see the investor / shareholder as the primary customer and return on investment is the primary indicator of success. In many situations, organizations using this Driving Force as a differentiator are being prepared for sale. If publicly held, the focus is on near-term value of the stock. While all business organizations need to make decisions that are financially responsible, and profit is clearly an appropriate motivator for being in business in the first place, wanting your organization to be profitable does not equate to short-term profit being a Driving Force. When this is a Driving Force, generating short-term profit becomes your major decision making criteria. And, generally, this is not a sustainable course for the long-term. Questions you want to ask include: Is short-term profit, at the expense of other considerations, your goal? Or, is profit the result you would like to see as a result of strategic positioning of your business? If profit is the expected result of the organization s success then it is not necessarily a Driving Force differentiator for you. Publicly held companies that are in crisis often focus on short-term profit as a differentiator this is a turnaround situation. Examples come and go with time. Similarly, companies on the block or in play as public entities are often focused in this direction to enhance sale price. Method of Sale To make Method of Sale a Driving Force differentiator in your organization, you have to find a way to sell your products or services that other organizations in your industry are not currently using. Finding innovative ways of making the sale can be turned into significant competitive advantage. Examples include online catalogs, time-shares, multi-level marketing, franchising. Successful method of sale differentiators include:, Amazon.com and Home Shopping Network. Driving Forces - Page 5

6 Distribution Method Your distribution method is the way you provide (deliver) your products or services to the markets you serve. distribution methods can create clear competitive advantage, making them a Driving Force differentiator. Examples include duty-free stores; buying clubs, online downloading of software or books, wholesale distribution networks. When a distribution channel is well developed, it can be optimized by using it to plug-in additional products / services that will generate additional growth. Examples of successful distribution method organizations include Amway and Avon Products Technological Advantage Organizations using technology as a Driving Force assure that they are achieving breakthroughs before competitors. They develop and deploy leading-edge technologies in their organizations as a strategic advantage. Technology driven companies make significant investments in research and development, the invest in or develop technology that is new to their industries and not in common use. And, they make these investments year after year in order to stay ahead of competitors. Successful companies using technology as a Driving Force include: Intel, Motorola, 3M, Honda. Organizational Image or Brand The concept of an organization s image or brand being a driving force has been added to the original model of 9 Forces. This Driving Force recognizes that there are situations where the organization has worked particularly hard at creating and maintaining a specific image or brand position in the marketplace they serve, the industry in which they compete. This is a situation where the organization would want to make sure that new products or markets will enhance the image or brand rather than detract from it. In today s Internet Age economy, there are an increasing number of organizations looking to image or brand positioning to win the day for them on the competitive battlefield. Driving Forces - Page 6

7 O.K., that s the background now it s time to start thinking about Driving Forces for your company or organization What you ll want to do at this point is have a focused Strategic Thinking Conversation with your Leadership Team (and anyone else you want to participate in this Driving Forces analysis process). So, before you get the Strategic Thinking Team together for that discussion, it s a good idea to print copies of this PDF file for everyone and use it, along with the other Driving Forces reading material on the CEOIQ website, as the focal point of that conversation. Then, have everyone complete the Driving Forces Analysis spreadsheet - you want your Strategic Thinking Team working on this diagnostic individually - each person separately thinking about how they would rank the 10 Driving Forces for your company. Give everyone a few days (not more than 2 weeks) to get their analysis done...remember, it is a paired comparison analysis and takes some time to really think about each pair in the matrix. When your Strategic Thinking Team is finished with their individual Driving Forces ranking, it s time for another Strategic Thinking Conversation. This one is going to take as long as four hours to complete, so plan on enough time to get everyone s thinking out and on the table. As part of this process, you will integrate your team s thinking about Driving Forces - there s a separate CEOIQ spreadsheet you can use to do that - one way we do it in workshops is to put everyone s rankings up on a large format wall poster - you can do that with flip-chart paper and markers, creating a simple matrix - have the columns be the 10 driving forces and the rows be each person s name on your Strategic Thinking Team. Use this all manual approach and the CEOIQ integration spreadsheet to create a team composite view - you may be very surprised at how differently...or, hopefully, similarly...your team is thinking about the Driving Forces. Your Strategic Thinking Conversation is all about how we decide what Driving Force really matters most to us in the current strategic horizon (usually months) and what we re willing to put our time, energy and resources behind to emphasize during that time frame! Once you have agreement with your Strategic Thinking Team about Driving Forces Priorities...you can then start putting them to work creating your plan! This reading excerpted and summarized from: Top Management Strategy by Benjamin Tregoe and John Zimmerman A Guide to Strategic Thinking by George L. Morrisey Driving Forces - Page 7