“We talk about the need to execute and transform. If you do things and don’t transform, you don’t have a future. If you change and don’t perform, you don’t have the here and now. So in our scorecard, we measure both”.
Frans van Houten, former CEO of Philips.
How much time do you and your team spend on the “execution” and “transformation” areas of your business? Do you feel like you’re running on a hamster wheel just trying to keep up without a chance to observe the road ahead? Well, you’re not alone. Research shows that 63% of leaders surveyed said they have no plans for more than a year ago, and half have no formal plans for this year!
You wouldn’t trust a pilot without a flight plan, and you wouldn’t trust a surgeon without an OR checklist. So why should we trust a leader who is not competent or disciplined enough to plan for the future of the business?
The best leaders I’ve worked with create a plan for their current business and spend time thinking about the future of their business – how they want to be positioned in the next 3-5 years. A common answer here is: so much has changed, it’s impossible to know where the market or our business will be in 3-5 years. Absolutely—you just don’t take the time to think about the future of your business because you’re too busy with your day-to-day activities.
I developed a concise yet comprehensive process to help leadership teams think about the future state of their business and prepare accordingly. The Future State Workshop process takes a systematic approach to answering the following questions:
1. Where are we today? An underrated and untapped activity is getting your executive team to talk about the current state of the business: what’s working, what’s not working, and why. By discussing the current business environment, you’ll be surprised by the different assumptions and perspectives you’ll come up with about what’s happening and why. I developed a tool called Situation Radar to help executive teams map the “current state” of their businesses. Situational Radar helps create conversations around how individual leaders on the executive team view the market, customers, competitors, and the company.
2. What challenges should we address? Research on creativity and innovation shows that in order to maximize productivity, it is helpful to establish parameters for pursuing new value. In this step, we use a simple formula to identify the most relevant customer pain points or challenges and then generate a list of potential solutions. For example, Mirror Corporation created a $500 million business and sold it to Lululemon by following the following formula and answering three questions:
1) Why do I have to go to the gym and exercise under the guidance of a trainer?
2) What if we move the gym to your home?
3) How do we combine the professional guidance of the gym with the convenience of home exercise?
They’ve created a “virtually invisible home gym” housed in a stylish 52 x 21-inch reflective screen, complete with a companion app that offers expert guidance from certified trainers. Mirror’s advanced camera technology and customized playlists allow users to compete for points or connect with friends to workout and track results.
3. What could we do differently? Looking at the development and launch of new products and services in many markets, it is surprising how often new products merge with competitors. Competitive convergence occurs when we fail to create any meaningful and relevant differentiation from the competition. To excel, or to achieve excellence, means to “deviate from the norm.” Doing the same normal things in the same normal way as your competitors is a great way to bury your business in the grave of mediocrity and allow your product to compete on price.
In this step, we consider current market norms and identify deviations from these norms in a way that customers are likely to value. For example, norms in the automotive industry include two main options for regular use of a car: buying or leasing. Volvo was one of the first companies to deviate from this norm, offering an all-inclusive car subscription that featured no down payment, a flat monthly fee, no end-of-lease fees, and included insurance. Volvo also offers ease of registration online or via mobile app, fast delivery within weeks and the ability to upgrade to a new car after twelve months.
4. How can we do things differently? Former Apple CEO Steve Jobs said, “Creativity is about connecting things.” One of the great untapped sources of growth and innovation in your business is reconfiguring your current products into new sources of customer value . To facilitate this conversation, I developed a framework called the Strategy Spectrum to visually represent the current components of a product as well as some new ones, and then mix and match the combinations.
For example, a traditional financial services company might consider mixing and matching current products with new ones to form a portfolio that delivers financial education to college students on campus using a video game format in mobile devices to begin developing a value-based relation.
5. What new value can we provide? The biggest frustration for sales reps and account managers is having to constantly communicate back to customers without any new information. Innovation is about creating new value for customers, and many organizations fail because they refuse to get off the treadmill and spend time creating new value for customers. One exercise I developed to help executive teams think about and discuss opportunities to create new value is the Value Discovery Matrix. In this exercise, we get back to the core of value: customers and needs by systematically examining current and potential options.
In a strategy workshop using a value-mining matrix, a medical device company viewed potential customers as a hospital’s entire operating room, not just the specialist physicians using its current product. In the process, they are creating a way to provide a holistic service to the operating room staff, something the market has yet to address. Five years later, the idea turned into a business worth nearly $100 million.
6. How should our business develop? The final step in the future state process integrates insights from previous exercises into focus areas of customer needs. This need is then used to lay the foundation for future business models by identifying how the business will create, deliver and capture value in 3-5 years.
It’s easy to become addicted to the adrenaline-fueled fire drills and flurry of activities that take place every day. It’s easy to focus on today’s issues, this week’s finish line, and this season’s numbers. But if you’re a senior leader, simple isn’t enough. Raise your head, stare into the distance, and squint your eyes. Is it starting to come into focus? Yes, this is…your future. Do you like what you see?
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