The Chemistry of Strategy tm Newsletter April 26, 2013

What can a wasp, a fly and a bottle teach us about strategy?

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Here’s an experiment from which we can learn a valuable business lesson. Place a bottle at one end of a darkened room and a bright light at the other end. Rotate the bottle so the open mouth faces the light. Trap a fly and a wasp in the bottle and see how long it takes for them to escape.

The wasp will move directly toward the light and will exit the bottle almost immediately. The fly, on the other hand, will bounce frantically around the bottle, hitting the glass sides until it discovers the opening by chance and finally escapes. Clearly, the wasp has the better strategy.

Doubling down is the best strategy for companies that have the bright light of a market in front of them, an established customer base and proven product. Why waste resources bouncing around from market to market or product to product when the path to success is so brightly lit? Southwest Airlines, for example, didn't grow by adding first-class seats and food service; it grew by following its winning operational strategy and doubling the number of cities it served.

Let’s go back to our original experiment, except this time we’ll rotate the bottle so the bottom is facing the light. What happens now to a wasp and a fly inside? The fly will bounce around until it finds the opening and escapes. The wasp, however, will remain fixated on the bright light. It will pound against the unyielding glass bottom of the bottle, trying to achieve a breakout until all its resources are exhausted. Even if it changes its strategy at this point, it won't have enough energy left to exit the bottle and will die.

For a company, doubling down when a market has metaphorically moved the location of the bright light is akin to suicide. Replacing the sales force, doubling advertising spending, or giving away a toaster with every product won't enable you to escape a collapsing market. Polaroid Camera wasn't saved by their in-store promotions or instant video film -- the bright light had moved to the digital photography space.

Companies that can see their markets collapsing in the future need to implement a fly-like strategy to identify viable new markets today that can be doubled down on in the future.

Every product/market strategy has a mix of wasp-like exploitation and fly-like exploration. Over time, the appropriate mix will change. You should focus over 90% of your developmental resources on exploitation when you have identified the winning formula for a large, growing market. When you suspect that a market won't sustain you in three to five years, it's time to focus over 90% of your resources on exploration. Once you've identified your future market, shift to exploiting it.

In simple terms:
Exploration is "ready, fire, fire, fire, fire -- then assess and aim."
Exploitation is "ready, aim, fire - fire - fire - fire - ..."

Knowing which of these strategies to apply and when is an essential key to business success.

Create a strategic plan with your team

"Management is doing things right,
leadership is doing the right things." -Peter Drucker

Designing the best strategic plan requires balancing competing considerations such as exploration and exploitation. The more issues that go into the plan, the higher its integrity. The best way to raise, understand, and balance issues is through a facilitated strategic planning process.

How long have you been saying that you are going to develop your strategic plan, but you haven't yet done so? Why? Perhaps it remains on your to-do list because it feels like a huge, laborious process and you haven't the time to spare to do it. Peak-performing companies have a clearly defined strategic plan…and it doesn't have to take long to create an effective one.

Your executive team costs you over a million dollars a year. Are you fully utilizing them? It's a waste of time and money to create a plan that they don't own and implement.

John W. Myrna

is co-founder of
Myrna Associates Inc


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John Recommends

Gung Ho!
by Ken Blanchard

How do you engage all your employees?

Ken uses his distinctive narrative style to communicate three secrets for motivating your employees: The Spirit of the Squirrel, the Way of the Beaver, and the Gift of the Goose.

Every manager can benefit from this easy- to-read book.


Speaking Gigs

John loves to share his insights. Email him if you'd like to have him speak at your next meeting.
success@myrna.com


True or False?

"It will take years to see the impact of strategic planning." 

  Answer


 

"Strategic planning is a reason we're growing 20% a year!"
Shawn Eastham,
President,
Polyguard Products

Myrna Associates Inc.
421 Timber Creek Drive, Athens GA 30605-7027
success@myrna.com  http://www.myrna.com
800-207-8192

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