CCG helps create the Electric Aviation industry

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Over the last 6 months, CCG has been working with Yuneec to form GreenWing International (GWI), a company dedicated to bringing Yuneec’s electric aviation projects to market. Acting as a temporary member of the executive team, and serving in roles spanning COO and GM responsibilities, Eric Bartsch of CCG has helped create the new business in this emerging and highly-innovative industry.

The recent AirVenture show provided a platform to announce the formation of the new company and to launch its first product, the single-seat eSpyder, into the market. The customer and media interest in the program has been overwhelming and CCG is excited to have played a role in the formation of the electric aviation industry.

GreenWing website: www.greenwing.aero

AOPA magazine: http://www.aopa.org/News-and-Video/All-News/2013/June/27/electric-aircraft-poised-to-reach-market.aspx

Wired magazine: http://www.wired.com/autopia/2013/08/electric-airplane-for-sale/

GizMag: http://www.gizmag.com/greenwing-espyder/28565/

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Meaningful Differentiation – The common goal for both Strategy and Innovation

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A good Strategy is critical to creating a successful business. Likewise, Innovation plays a key role in the long term success of most profitable businesses.

However, neither Strategy or Innovation are an end in themselves. Both are methods for achieving something far more important: Meaningful Differentiation.

Meaningful Differentiation occurs when customers see a worthwhile difference between your products/services/brands and those of your competitors. This differentiation can occur through a strategy that creates a new value proposition for your customers. It can also occur  if you create innovative products that deliver more value to your targeted customers than your competitor’s products. Often the best companies use a combination of Strategy and Innovation to Meaningfully Differentiate themselves.

We see many examples where Meaningful Differentiation results in long-term sustainable profitable results. Southwest Airlines is a great example. Southwest follows a different strategy than its competitors by flying one type of plane, avoiding hub and spoke operations, minimizing add-on fees, and focusing on efficiency. They also encourage innovative ideas from their employees to perpetuate their strategic advantages in cost and customer service. The result is an airline that over the long term has been more profitable than all of their US competitors combined. The reason for this outstanding performance is that they have used Strategy and Innovation to achieve Meaningful Differentiation in the eyes of their customers.

Apple is another great example of Meaningful Differentiation. Their strategy of creating a closed system of hardware and software (OS) is different than their competition. Their product innovations with design, new product categories, and more useable user interfaces; have all further differentiated Apple from its competitors. The combined result of their Strategy and Innovation is Meaningful Differentiation, and it has driven outstanding results.

In each of these examples, the past performance of Apple and Southwest are no guarantee that they will continue to be Meaningfully Differentiated in the future. However, clearly both companies have demonstrated the ability to achieve this goal for a sustained period of time, despite being in very competitive markets with numerous commoditized competitors surrounding them.

Often we hear debates on whether a company truly has a good Strategy or whether their products are really Innovative. The real litmus test for both, is whether it can be said that the company has achieved Meaningful Differentiation. If the goal is achieved, then long term profitability will follow. Debating whether their Innovations are “breakthrough enough” or if their strategy has a unique enough value proposition is missing the point. If the end result is a clear Meaningful Differentiation in the eyes of the customer, then the important goal has ben achieved. If on the other hand, the company and its products are commoditized (like the major US airlines or the majority of computer manufacturers) then it is irrelevant how “breakthrough” their Innovations seemed or how unique their Strategy appeared.

Focusing on Strategy and Innovation is important for business leaders. However, we must all remember that neither of these is an end in itself. As we refine strategies and strive for innovative products, we must always measure the results on a scale that ranges from Commoditization up to Meaningful Differentiation. Those who differentiate meaningfully will survive. Those who do not, will find themselves in a dangerous place.

Meaningful Differentiation is the goal. Strategy and Innovation create a path to reach the goal.

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War and Business Strategies have similarities and also significant differences

One of the Business Strategy forums has a current discussion on what can be learned from War Strategy and applied to Business Strategy. While there are a lot of similarities, there are some key differences that need to be considered when comparing the two. Often businesses miss these nuances when developing their own strategies. Here are five key differences to think about when comparing the two:

* War strategy is about dominating the opponent. The goal is to continue until the opponent gives up and surrenders. In business the focus should be on winning over the customer. You can dominate your opponent and still lose if the market changes around you.

* A third party gets to decide the winner in business. Your customer gets to ultimately decide whether you or your competition gets the sale (maybe both of you get the sale if you are positioned differently and deliver different value). A third party exists in war (the population of the warring countries) but they rarely get to decide the outcome.

* There can be multiple winners in business. A great strategy gives a business a unique position to profit in the market. There can be multiple successful businesses in a market segment, and multiple companies can serve a single consumer group.

* The territory being disputed in war is typically a fixed geographic area that is easy to define. The territory in dispute in business competition is a market segment or consumer segment that is very fluid. The territory could change or even disappear while competing businesses are fighting over it.

* War typically involves two sides (us and them) while business strategy involves numerous competitors who are all bumping into each other in the market.

Studying war strategy is valuable but not sufficient to understand business strategy. The same could be said about applying business knowledge to the battlefield. Useful and interesting to learn from each other, but not identical situations.

Eric Bartsch
@ChanuteGroup
http://chanuteconsulting.com

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Understanding Michael Porter – Great Overview of Strategy and Competition

Anyone involved in strategy has been exposed to Michael Porter’s work, but we could all use a periodic review of his contributions to understanding competition and strategy. Joan Magretta has provided us with a great refresher course on the best of Porter in her book: Understanding Michael Porter.

http://www.amazon.com/Understanding-Michael-Porter-Essential-Competition/dp/1422160599

If it has been a while since you have read Porter’s works, or if you are about to embark on strategic planning for your business and need to get grounded in what strategy is, this book is invaluable.

Go get a copy of the book and read it if you have any interest in strategy. Until you have the opportunity to sit down and read it, think through the following criteria as they apply to your business:

Five tests of a good strategy:

1) Unique Value Proposition

2) Tailored Value Chain

3) Trade Offs are Different from Rivals

4) Fit Across the Whole Value Chain

5) Continuity Over Time

 

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The Link Between #Strategy and #Innovation

I recently finished “The Lords of Strategy” by Walter Kiechel III, and it is an interesting read for anyone wanting to understand how we got to the current understanding of the role of strategy in building a business. It also paints an interesting picture of the key individuals and firms involved in creating the strategic consulting industry. The origins of BCG, Bain, and McKinsey are explored, along with the academics from key universities who contributed to the growth of the field. While this is more of a historic view than a tutorial on strategy, it does clarify the link between the different thought leaders in strategy.

One topic that gets brief mention in the book, is the link between Strategy and Innovation. Too often these are seen as separate disciplines, when in fact the two must exist together for a business to be successful over a long period of time. At CCG we believe that Strategy and Innovation are inseparable if a company intends to succeed for the long term:

STRATEGY

You will find many definitions of strategy, but a combination of several of them may be necessary to encompass the full scope of what strategy really means to a business. In one sense it includes the goals of a business, action plans to achieve the goals, and resource allocation to support the goals (1). In another sense it defines the value proposition a company brings to its customers and specifies the value chain used to be used to create this value (2). It is also the answer to a list of questions that include: What are the goals? How do we get there? Who is the customer? What must we do? What are we not going to do? Who is the competition? What must we do to deliver better value to the customer than they do?

A good strategy is able to address all of these areas, to allow a leadership team to rally a company around a common direction. However, these definitions all are relevant to a point in time. Businesses don’t have the luxury of focusing on winning only in the context of the status quo, they must also maintain their relevance as markets evolve, new competitors appear, and the needs of customers change. This is where Innovation becomes critical as a piece of strategy itself.

INNOVATION

The definition Chanute Consulting Group uses for innovation is the combination of three required elements:

1) The generation of new ideas…

2) that add value for the customer…

3) leading to profitable business results.

A company that succeeds at these three things, can be considered to be innovative. Including innovation at the highest level in a corporate strategy is critical because the business environment is a moving target. The best products of today may be only average a few years from now. Your customers may have very different needs next year than they do now. Your current competitors (and the new ones that may not even exist yet), will be working hard to innovate in their own ways, to leap ahead of your products or services.

This is where the role of innovation in a corporate strategy becomes vital. A good strategy will include the role innovation plays in keeping the strategy relevant as the world changes around a company, to all of the employees (not just the R&D organization) around a common direction:

  • What will our market(s) look like in the future?
  • Where do we have to add more value for our customers to remain competitive in the future?
  • How will we occupy a unique value proposition to differentiate ourselves from the competition?
  • Are the competitors of tomorrow different than the ones today?
  • What do we have to learn to do differently/better to remain relevant?
  • Where will the new ideas come from and what will we do with them?
  • What resources are available for innovation, both internally and externally?
  • What dimensions of our business must we focus on for innovation? (everywhere? core product lines? new markets? cost competitiveness? performance? efficiency? speed? flexibility?)
  • Where are we deliberately choosing not to focus?
  • How will we profit from our innovation?
  • Will the business model need to change as much as the products do?

If all of these elements are not clearly defined in a corporate strategy, then there is a risk that the strategy is too focused on the current environment around a company, with too little consideration of the changes that are inevitable. Some companies have great strategies that work for a period of time, but only until the next innovator appears. Obvious examples of both businesses and industries that have seen leaders come and go are:

Movie Rental: Blockbuster -> Netflix -> Redbox -> ?

Transportation: Railroad travel -> Major Airlines -> Low Cost Airlines -> ?

However, some companies have demonstrated skill in staying ahead of changes in their markets, to remain relevant even as the markets, customers, and competition are evolving significantly. Examples include: P&G and IBM.

The inclusion of Innovation as a major element of a corporate Strategy is the difference between a strategy that wins at a point in time, and one that can be more robust for the long term. While it is difficult for any organization to lead forever (it is more likely than not that Apple and Google will eventually be surpassed) it should be the goal of every CEO and executive team to weave innovation throughout their strategic plans, to proactively address the inevitable changes that will occur over the lifetime of the strategy and the company.

 

 

(1) – Alfred Chandler Jr – Strategy & Structure 1962

(2) – Michael Porter

 

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