Fundamental changes always start outside your own organization. If you fail to systematically collect, organize, and process relevant information about your business environment, your chances of success will be slim. The strategy pursued by an organization must be based on information about its context: only then can you set the direction to be taken by the organization and match its specialized know-how to a need.
Most people regard the need to be informed about customers, markets, and technologies in their own sector of activity as obvious. It is essential, however, not to overlook the fact that in the past most new technologies that fundamentally altered an entire sector stemmed not from within that sector, but from elsewhere. This makes it indispensable to monitor other branches of industry very closely indeed. Since many organizations do not systematically do this, those that do also stand to gain a considerable, and easily leveraged, competitive advantage.
The same applies to customers. Most managers will immediately say that it is strategically important to understand their own customers. Far less widespread, though, is the realization of how crucial it is to adopt the mind-set of noncustomers. For a company to command a 30 percent market share is a tremendous feat, yet this also means that 70 percent of the market remains to be conquered. Practically all organizations (there are very few exceptions, regardless of the degree of success achieved) have far more noncustomers than customers. For this reason, fundamental change almost invariably stems from non-customers before affecting the sector as a whole.
Let us consider the above against the backdrop of the runaway success of sporting goods manufacturer Nike: Phil Knight (born in 1938) turned what had previously been a simple accessory, the sports shoe, into a high-tech products, and converted a small company into a group that dominates its sector. Nobody has revolutionized sports marketing more than Knight, and over the past 40 years few people have made such a lasting impression on the world of sports as he has done. Knight, like no other, has been both praised and vilified for his business practices, but whichever view one adopts, there is no denying that he played a major part in creating an entirely new lifestyle industry that developed from the production of a humble sports shoe.
Knight can certainly teach us all a thing or two about strategy, because it is flagrantly obvious that he not only understood and drew conclusions about his market, customers, noncustomers, technological possibilities, the development of his and other sectors of industry, and changes in both the global economy and society, but did so differently and better than anyone else in his field at the time.
The list of things he did differently thanks to his alternative outlook is long, extending from the use of new materials to the adoption of more efficient manufacturing processes and of a radically different approach to marketing. For example, long before sports shoes became fashion items, he had the idea of linking the Nike brand with leading sports stars. The greatest success in this respect was undoubtedly Nike’s collaboration in the 1980s with basketball superstar Michael Jordan, who played for the Chicago Bulls. The Air Jordan sport shoe, named after the iconic hero, proved a phenomenal success, generating unbelievable sales for Nike.
Then, in the early 1990s, Nike’s growth, which had previously been driven by the popularity of basketball in the United States and the boom in jogging, began to falter. Once again, however, Knight exhibited an ability to spot the next big trend and strategically reoriented the company accordingly. He turned Nike into a manufacturer not just of sports shoes in particular, but also of other sports articles and clothing as well. At the same time, though, the company stuck with its stalwart stars, concluding contracts with top sportsmen like Andre Agassi, Kobe Bryant, Cristiano Ronaldo, Tiger Woods, and Roger Federer.
Knight’s recognition of successive trends was definitely no coincidence. No human being or company can remain successful for 40 years by chance or through luck alone. The key is to view strategy as a continuous, adaptive process. To this end, an organization’s management team must set targets in the following eight areas: market standing; innovation; productivity; physical and financial resources; profitability; managers’ performance, development, and attitude; employees’ performance, development, and attitude; and corporate social responsibility. These are key areas on which a strategy should be based. (Chapter 13 on IBM CEO Andy Grove takes a deeper look at these key areas.) The important thing is to regard strategy as an evolutionary process. Many organizations review their strategy only at lengthy intervals instead of constantly developing it. Yet continuously adapting the potentially shifting content and limits in the eight key areas listed above is far more effective, because it substantially tightens the focus of the organization’s strategy, thus enhancing its general orientation. When doing this, it is also important not to ignore the links between the eight aforementioned key areas; after all, they influence each other and are interdependent. Analyzing them in isolation or taking action in just one area would result in a strategy that was anything but balanced and holistic in its outlook.
Time and time again, Nike’s adaptability and the unerring correctness of many of its strategic decisions underscored the need to adopt a holistic, evolutionary view in that domain. Closely in keeping with the spirit of the age, Nike switched its focus from sports shoes to sports clothing and equipment as well as lifestyle products.
Another lesson on strategy to be learned from Phil Knight is this: Just do it! Even the very best strategies and plans are worthless unless they are actually implemented. One decisive feature of a strategy that genuinely achieves tangible results is that it assigns the best people in the organization to fulfill key tasks. Strategies that fail to clarify who needs to do what by when will remain ineffective, de facto leaving the organization in question without any strategy at all! At best, such woolly strategies can be described as no more than “good intentions,” whereas good strategies are geared toward practical implementation and result in the right people doing the right work at the right time, thereby achieving the desired results.
Saint Augustine (354–430 AD), the bishop of Hippo Regius, once said: “One prays for miracles but works for results.”1 Herb Kelleher, the unconventional former CEO and founder of Southwest Airlines, who like Phil Knight pretty much overhauled an entire sector, said much the same thing, just worded more pragmatically: “We have a very special plan, it’s called doing things.”2
So far Nike has been portrayed in a very positive light. But there can be no denying that the company has also made some big mistakes. In the late 1990s, Nike slipped into a grave crisis in light of persistent reproaches that it was both exploiting workers in the low-wage countries where its products were being manufactured and still using child labor. Only when public pressure really mounted and the company’s image had sustained considerable damage did Phil Knight make a public pledge to improve working conditions in factories turning out Nike products. What the company achieved over the ensuing decade is exemplary and earned it widespread recognition. In 2008, Nike climbed to third place in the annual rankings of the “100 Best Corporate Citizens” compiled by Corporate Responsibility Officer Magazine to map companies’ commitments in the social domain. And in the 2011 list, Nike still figured in the top ten.
At the same time, this example also shows just how important it is not to ignore any of the eight key areas listed above. Nike’s failure to tackle corporate social responsibility temporarily caused it serious damage and plunged it into a deep crisis. Since, as stated above, these key areas combine to constitute an interlinked whole, decisions made and results achieved in one area will always have an impact on one or more others. Any decisions that ignore this fact are likely to fall short of achieving the desired outcome.
What can you do tomorrow to improve your own personal understanding and your company’s perception of the context in which you operate? Make sure that you keep customers, non-customers, markets, the technologies of your and other sectors, and social and macroeconomic changes on your radar and expand this list of relevant factors as the need arises.
Put your strategy to the test. Where do you stand in relation to the targets you set for yourself with respect to the eight key areas?