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The art of making smart big moves is an incredibly useful talent.

SummaryEdit

  • Studied 12 pairs of companies in 5 industries over 15 years, noting market cap and how it related to big moves
  • Most interesting finding: successful big moves were most often a result of “complementarity”, that is, sound logic and a clear flow in terms of innovation, efficiency and customer intimacy
  • Complementarity plays out in three ways:
    • It builds on a dominant, successful business model
    • It relies on periodic shifts in the balance between innovation, efficiency and customer intimacy when the business model is not working
      • Innovation: typically requires a looser organization with room for experimentation, entrepreneurship and flexible resources.
      • Efficiency: depends on greater coordination, leveraging activities in the business system and removing slack from the organization.
      • Customer intimacy: requires a culture of listening and networking with resources directed at building relationships with customers.
    • It promotes a sequenced development of capabilities when the balance shifts

Smart big moves should not be “leaps into the unknown” but rather extensions of the firm’s current strategy or direction.

ExamplesEdit

Both Lipton, when entering the ready-to-drink tea market in the late 1990’s, and Nokia, when it brought its innovative phones to markets in Europe and Asia, demonstrated that the safest big moves build on business models that are already working.

  • In the case of Lipton, its tea division was already twice as large as its nearest competitor, had demonstrated success in the tea business and made the sensible decision that would allow it to capture new market share.
  • When Nokia entered these new markets it kept adding to its product line, wooing customers in different segments and encouraging users to upgrade their phones whenever there were new features. 

BMW Group and Daimler-Benz both attempted to take an innovation-heavy approach by expanding their product line through the acquisitions of Land Rover and Chrysler, respectively. However, both companies ran into integration problems, forcing them to redirect their emphasis toward efficiency.

Ericsson then tried to extend its market position based on volume efficiency, which limited its available resources for innovation. Its rigid structure and enfineering-dominated culture also made it difficult to meet the demand for more variety and made the firm unable to increase efficiency with process improvement.

Closing RemarksEdit

Smart big moves leverage the company’s previous experience, either in earlier periods, pilot projects or small business units. People should understand the business model, organizational requirements and leadership that are needed. The subtleties of the new capabilities required should be familiar to at least some managers. Those initiating big moves should also be clear on their personal motivations. Once the necessary ingredients are in place, managers should not hesitate to shift resources and decision-making power to the standard bearers of the new direction.

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