The Journal of 2020 Foresight

Reports from the Knowledge Labs about our recent findings, research topics, and interviews with lifestyle leaders who are creating their own futures.

How to stimulate your own powers of foresight. Consider the following thought provokers. Ask yourself, in these categories what are the brand new trends and forces? Which are the ones growing in importance? Which current forces are loosing their steam? Which have peaked or are reversing themselves? Which are the "wildcards" about to disrupt us in the future? POLITICAL AND TECHNICAL thought for food: Electronics, Materials, Energy, Fossil, Nuclear, Alternative, Other, Manufacturing (techniques), Agriculture, Machinery and Equipment, Distribution, Transportation (Urban, Mass, Personal, Surface, Sea, Subsurface, Space), Communication (Printed, Spoken, Interactive, Media), Computers (Information, Knowledge, Storage & Retrieval, Design, Network Resources), Post-Cold War, Third World, Conflict (Local, Regional, Global), Arms Limitation, Undeclared Wars, Terrorism, Nuclear Proliferation, Weapons of Mass Destruction, Governments (More/Less Power and Larger or Smaller Scale), Taxes, Isms: Nationalism, Regionalism, Protectionism, Populism, Cartels, Multinational Corporations, Balance of Trade, Third Party Payments, Regulations (OSHA, etc.) Environmental Impact, U.S. Prestige Abroad. SOCIAL AND ECONOMIC Food for thought: Labor Movements, Unemployment / Employment Cycles, Recession, Employment Patterns, Work Hours / Schedules, Fringe Benefits, Management Approaches, Accounting Policies, Productivity, Energy Costs, Balance of Payments, Inflation, Taxes, Rates of Real Growth, Distribution of Wealth, Capital Availability and Costs, Reliability of Forecasts, Raw Materials, Availability and Costs, Global versus National Economy, Market versus Planned Economies, Generations: Y, X, Boomers, Elderly, Urban vs. Rural Lifestyles, Affluent vs. Poor, Neighborhoods and Communities, Planned or Organic Growth. Got Knowledge?

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Sunday, May 25, 2003

Early Growth Athletes, Bowling Pin Strategy, and Incremental Do's and Don'ts

Chapter Two: The Ridge

By Steve Howard, CKO
The Knowledge Labs

Table of Contents
Chapter One: Basecamp
Chapter Two: The Ridge
Chapter Three: The Outpost
Chapter Four: The Tribal Territories

"The purpose of the bowling pin model is to approach niche market expansion in as leveraged a way as possible, to bowl toward the tornado. Each niche, you will recall, requires its own whole product to be fully complete before it can adopt the new paradigm. At the same time, it finds it much easier to buy in if vendors can supply references from an 'adjacent niche,' one within which it already has established word-of-mouth relationships."

Geoffrey Moore, "Inside the Tornado"

Journal of 2020 Foresight: In our last discussion of the start-up phase we said that the founders hate to step aside during this turning point, even though they don?t have the temperament to be managers.

Trailblazer: That's right. If they don?t, they prolong the inevitable.

J2020F: And you said in the next stage the directive management style required to bridge the gap between start-up and early growth actually plants the seeds for a new crisis at the end of that emerging growth stage.

TB: That's also true. A solution to a previous crisis taken to an extreme in an evolutionary phase becomes a weakness and triggers a new crisis. That crisis forces an urgent new solution.

J2020F: So in this case, how does the 180-degree shift play out?

TB: We'll explore this phase in more detail by looking at the People, Process and Organization Structure changes, but in general it goes like this: Too much DIRECTION causes a crisis of AUTONOMY which forces DELEGATION in the next phase.

J2020F: Earlier we distinguished between loosening and tightening and between innovation and efficiency. The early growth phase is about tightening and efficiency in the evolutionary part of the lifecycle, right?

TB: Right. In terms of People, we see the addition of extreme ATHLETES, the so-called ATHLETE-Athletes .

J2020F: How do they fit in?

TB: They form resilient project teams to accelerate new business formation. Initially, they convert their learning from experience -- the emerging knowledge about each new product -- into repeatable processes and a practical business formula. They become the experts at rapid product introduction. They form the foundation for stability.

J2020F: Earlier we said you called the extreme Agents "Paradoxy-morons" who belonged to the 1% club. Their strength with the help of the AGENT-Athletes and ATHLETE-Agents got their disruptive innovation to the breakout threshold, before they hit the wall.

TB: Yes. In this phase, accelerating growth requires the organization to extend, improve, and modify a formula discovered in the previous phase by trial-and-error. The primary objective at this point is to set up methods to improve those things that work and to discard those things that don't.

J2020F: So, is it fair to say in general the product leadership value proposition begins to combine with the operationally excellent value proposition?

TB: That's right. In the previous stage visionaries and early adopters sponsored applications of the disruptive innovation. But, nobody really understood how the market niche would grow rapidly.

J2020F: So, in this phase more of the pragmatists show up to purchase solutions the visionaries funded. But, this isn?t the introduction into the mass-market acceptance.

TB: Since the business can't expand too fast at this stage ahead of the demand small numbers of ATHLETE-Associates come on board

J2020F: What is their specialty within the Athlete cluster?

TB: They precede the hiring ramp-up and re-organization into functional specialties. During the variable demand period, they lead core business teams and select independent contractors to develop multiple specialty niche products. And, they focus on building high growth, high volume ramp-ups for initial products.

J2020F: So this is the period of time when a smaller group gets to wear as many hats as there are fires to put out and products to ship?

TB: And, they're keeping their collective eyes on potential employees, should the potential high-demand materialize.

J2020F: So they're busy developing emerging best practices in market niches accelerating from 10% to 50% market acceptance.

TB: Yes, and they become experts at rapid response based upon just-in-time after-action reviews. As the hiring ramp-up comes the focus shifts slightly to ASSOCIATE-Athletes:

J2020F: Who are they?

TB: They're motivated by joining an organization they can call theirs, but they still favor the moderately fast pace that the market demands.

J2020F: So these are hyper-teams or teams made up of functional specialists from former niche companies to provide exceptional product introductions -- basically doing whatever it takes?

TB: They typically hit the ground running, since they?ve been there and done that. They display high morale and bond to the team under the stress of fast pace. That's the good news. But, the organization is vulnerable to this core set of team members following a leader who leaves the organization.

J2020F: As the blend in value propositions tilts to favor operational excellence, what happens to the freewheeling, ingenious inventiveness of the previous stage?

TB: Creativity doesn?t entirely disappear. But, it is focused on incremental improvements.

J2020F: And, so the emphasis in terms of process is to build upon a foundation -- get the basics in place while communicating directly with the customer?

TB: Yes. You have to be careful here not to jump ahead of yourself. A lot of the conventional wisdom proves to be counterproductive at this stage.

J2020F: You are talking about practices that hinder and delay success? Like what?

TB: What you want to STAY AWAY from are more mature process practices such as:

Assessing senior management's role in emphasizing business process improvement;

Using world-class benchmarking data and methods;

Relying too frequently on business partners for sources of process technology;

Open planning that encourages widespread input;

Actively encouraging widespread participation in improvement meetings;

Identifying new product and service offerings based solely on competitive or technological threats and opportunities;

Soliciting customer feedback indirectly through surveys;

Developing process technology internally only; or

Using geographical expansion as a strategy for growth.

J2020F: OK. Now WHAT SHOULD YOU do?

TB: Well, here we use a two-step method. The first generates immediate impact within 12 months, while the second method builds upon the first and sustains gains over 3 years.

J2020F: Let's take them in order.

TB: For immediate impact:

Emphasize cost reduction benefits and applications when acquiring new technology;

Make heavy use of process value analysis, but source process technology from the public domain;

Emphasize teams, both departmental and cross-functional;

Provide continuous training in customer relationships;

Promote participation in problem-solving training and suggestion and improvement idea systems;

Increase training on both general and specific topics for all levels of employees;

Use cross-functional teams that include customers to develop design specifications for new products and services;

Visit customers to identify new products and services;

Use internal customer complaint systems for new product and service ideas;

Make heavy use of customer satisfaction measures in strategic planning; and

Focus business process efforts on both building quality in and inspecting quality in.

J2020F: Once the foundation is set, what do you do in step two to sustain the improvements?

TB: Basically 5 things:

Emphasize team performance and quality when assessing non-management employees;

Empower employees responsible for after-sales problem resolution;

Emphasize face-to-face visits with customers to get their feedback and then follow-up;

Use public domain as the source for product and service support technologies; and

Emphasize designing it in as your business process strategy.

J2020F: I've notice that the far ranging creativity significant to the previous lifecycle stage is discouraged, so that a focus based on limit and control can be realized in this phase, right?

TB: Yes. Remember, the emerging to high growth organization regulates its internal processes, supplies, manufacturing, product lines and selling methods and continually seeks to improve and extend its product features and benefits to meet a growing number of market niches.

J2020F: The so-called bowling pin strategy?

TB: That's right. Geoffrey Moore advocated a niche-by-niche advance into the heart of hyper-growth with a leveraged strategy. If organizations go after niches at random, driven solely by sales opportunity, there is no such leverage at all. Each whole product must be built from scratch, and it is only chance if some prior customer is reference-able.

J2020F: So, with growth come more people. New specialties and new functions in the organization appear.

TB: Jobs become more interrelated, levels in management hierarchy multiply and communication becomes more formal and impersonal as the hierarchy of titles and positions build.

J2020F: In terms of strategy and structure, how do they get realigned in this stage?

TB: The new leader and his key supervisors take on most of the responsibility for giving direction to the talent pool. In terms of customers, as the demand accelerates and their customer base expands, the organization will be able to get buy initially with uneven quality levels.

J2020F: What about in terms of product offerings and changes?

TB: In this stage the organization's products differentiate on the basis of technical performance. With more complex products, reliability becomes the issue. Improvements need to be competitive with good quality yields.

J2020F: And, how about manufacturing and distribution?

TB: The organization operates at under capacity levels and attempts to shift to a mass production operations strategy. They scramble to tie up distributors who can give them access to mass channels.

J2020F: What does that mean in terms of margins and profits, then?

TB: There's good news in both high margins and high profits. During this stage the organization can command fairly high prices and realize high price per earnings. This is the type of organization that remains fairly recession resistant, although the industry favors an acquisition climate.

J2020F: What about competition and the overall strategy?

TB: Because of the shear number of new entries and competitors on top of frequent merger and acquisition activity, the key function is marketing.

J2020F: Why marketing and not quality?

TB: The market doesn't demand quality differentiation yet. And, image and brand help take advantage of market turmoil. It?s also a good time to change price.

J2020F: So the best structural alignment is what?

TB: Remember, this is a tightening period initially with a strong centralized and functional organization -- especially in the separation of manufacturing from marketing activities. But, lower-level supervisors are treated as functional specialists rather than as autonomous decision-making managers.

J2020F: So they begin to voice their frustration.

TB: Incentives, budgets, and work standards become more formal -- salary with merit increases for example, and the efficiency of operations gets rewarded, not to mention new accounting systems for inventory and purchasing -- the structure creates a new crisis.

J2020F: I remember, the solution to the start-up crisis was a more directive approach. What goes wrong?

TB: In the beginning it worked to channel employee creativity and energy into efficient methods more conducive to growth, but the practice begins to backfire. It becomes almost impossible to control a larger and more complex organization.

J2020F: What's wrong with the hierarchy?

TB: Lower level employees find themselves overly restricted by a cumbersome and centralize hierarchy, when it becomes obvious that they possess more direct knowledge about markets and operations than do the leaders at the top.

J2020F: So they're torn between being good corporate citizens and following procedures versus taking initiative on their own?

TB: As the stress and frustration grows, a crisis grows from demands by lower-level managers for greater autonomy.

J2020F: If this evolutionary period is long and the management team successful, it must be tough for them to consider any other way of conducting business.

TB: You bet. The solution to the crisis and the successful bridge to the next stage is delegation. Top managers find it extremely difficult to switch from directing to delegating and waiting.

J2020F: I bet the lower level managers love it, though.

TB: Actually, it is just as hard for lower-level managers not accustomed to making decisions for themselves. They don?t know how.

J2020F: How long does the delegation crisis last?

TB: Well, the period of floundering lasts as long as the company adheres to the centralized methods. Consequently, the top talent who demand more autonomy become disenchanted and leave the organization. If they lead a loyal high performing team, the loss can be significant.

J2020F: But, once the crisis is resolved, the next phase is about loosening?

TB: Yes, the 180-degree different practice favors innovation, divergence, and adaptability, as we will see.

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