This is Step 3 of “4 Steps to Develop a Strategy”, focused on understanding why we’re the company or team that can uniquely solve the buyer’s pain point. In short, we need an ironclad answer to, “Why can’t two kids in a dorm room build this? What are our super-powers?”
(3a) List out the unique assets + expertise we have that makes us the best team to implement this new method of unlocking our chosen value pool (i.e. our sources of advantage)
What do we as a team do uniquely well? What skills, knowledge, or insights must we really leverage if we will give ourselves the best chance of building something great? What are our “super-powers”?
At the early stage of identifying a problem to solve and building a product, you may not have a specific solution in mind. Nonetheless, you should at least have some idea of the core competencies you can bring to any problem and be able to articulate why those competencies will be the cornerstone of a viable solution.
What are the technical insights or tools we have built (or see a clear path to build) that are beyond what others are seeing today? Can we inject them into the solution for a value pool?
What will allow us to help our customers accomplish something 2-, 3-, 5-, or 10-times faster, cheaper, or better than they otherwise could?
What are the insights we have about what creates value for our users and buyers that others are not adhering to? For example, in my current company, a relentless focus on teeing up specific actions for users to take versus just showing them data in a dashboard was such a source of advantage for us that we rallied around it constantly. It defined us and our product. It was an insight that, when built into the culture of the company, became a consistent source of advantage.
In one of my prior companies, we built an e-learning platform for doctors and nurses. We had illustrators, learning designers, engineers, clinicians, copywriters, assessment question writers, statisticians, and many others who worked together to create hard-hitting content. That collection of individuals, working within a process that we had developed over the prior years was a definite source of advantage. Our competitors may have been able to mimic some of our outputs but it would have taken years for them to recreate the engine we had put together.
Why can’t two kids in a dorm room do this? What are our sources of advantage?
You need to have a good answer to the question of why you are uniquely situated to build the solution. Because if that answer isn’t strong, you’re probably underestimating the challenges.
Know your strengths and play to them. Generally speaking, for example, 35-year-old corporate executives don’t break into professional baseball.
The same is true of a startup. If you can’t articulate and quantify why you are uniquely the right set of people to tackle a particular problem, then you should at least ask yourself why hasn’t somebody else solved it?
What privileged information do you have about your buyers and their needs? What do you know about your users and how they experience the world? Do you have a unique technology?
As a new company, consider what personal strengths the founding team has, such as industry knowledge, an ability to operate with high mobility (i.e. fast-product-feedback-loops), analytics horsepower, unique customer insights, sales connections into the customer base, or access to founding capital. Compare these to strengths a startup most likely doesn’t have, though incumbent competitors often do: strong brand recognition, at-scale engineering and marketing teams, distribution relationships, and global scale such as in hiring employees and buying supplies.
Strategic jiujitsu: Lessons from Southwest Airlines
Can you create a source of advantage by inverting what appears to be a barrier to entry?
Southwest Airlines gives us a great case study here. In the 1970s, all the incumbent major airlines had purchased the rights to the gates of the major airports, thus preventing new airlines from flying out of them.
Conceivably, anyone could buy planes and hire grounds crew, but there were no gates available to dock those planes at the major airports. However, this approach had also caused those incumbent airlines to abandon gates at smaller airports. By buying the rights to those gates, Southwest was able to overcome a major barrier to entry and then leveraged the positive aspect of those assets (e.g. faster gate turnaround time) to build a unique solution. How’s that for some strategic jiujitsu?
(3b) Identify the trends in the macro environment that our method can tap into
No one can predict the future and no strategy should require you to do so. Your strategy should hold strong as the future unfolds in unexpected ways.
While surprises can appear, there are always macro trends that move slowly and if you’re tapping into them, your odds of success are much higher.
Likewise, your odds of becoming extinct are high if you are fighting against these trends.
Cisco is a great example. To understand its enormous success in the 1990s, we need to observe the trends it was fortunate to ride. Cisco started by creating super-fast routers that build clever code into the chips in its router. None of the other players could replicate it because it codified the skill of its nimble team of experts into software. Riding this first trend of hardware to software allowed Cisco to overcome the size advantages of IBM and AT&T.
Cisco was well-placed for the rise of corporate networks when companies went on major spending sprees to implement internet connectivity in their buildings. And then they positioned themselves a few years later for the public internet when it created a similar need for networks in people’s houses.
McKinsey’s research shows that about 40% of a company’s success, on average, is determined solely by the industry that it is in.
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This article is an abridged chapter from a book of mine, 4 Steps to Develop a Strategy