We are suggesting, however, that companies start from the opposite direction, figuring out what they’re really good at and then developing those capabilities (three to six at most) until they’re best-in-class and interlocking. We’re not suggesting that companies disregard market signals all strategy is set within that vital context. Strategy development follows the well-worn path from the market back to the boardroom. In most companies, strategy and capabilities are treated as separate topics. Cost-cutting, for example, is usually an across-the-board exercise, rather than a considered reallocation of resources. Even in contraction mode, when companies hunker down and try to wring more out of execution, most strategies fail to pay sufficient attention to capabilities. Their growth emanates not from the core but from the acquisition of apparent “adjacencies” that are often anything but and the exploration of “blue oceans” that turn out to be unswimmable. They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success. Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities. They can be brought to market with relatively minimal effort, resources, and risk and swiftly boost a company’s bottom line. With such innovations, much of the work has already been done. The six most common types of in-hand innovations include products that failed to launch because of particular circumstances, which may have changed since then previously developed capabilities and features addressing customer needs that have recently risen in prominence products that customers like for unexpected reasons and that could take off if repositioned extras created for bundled offerings that could be spun out as stand-alone products separate components that could be combined into an enhanced offering and overdesigned products that could be simplified to help the company reach new customer segments. The trick is to find the promising assets you already have in hand.Īccording to strategy consultant Lance Bettencourt and consumer-products executive Scott Bettencourt, almost every company has previous discoveries with overlooked market potential. But even then, it’s still possible to launch new offerings that excite customers. This makes innovation initiatives hard to justify when money is tight. Typically, innovation success rates are low, and returns are slow to materialize-if they’re generated at all. No investment in innovation is ever a sure bet.
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