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Strategy Decisions - Actions to Live By, Catalytic Mechanism, X Factor

Posted by Douglas A Wick on Mon, Feb 23, 2015

Decisions equal success. There are four decisions, in growing your business, that you must get right or risk leaving significant revenues, profits, and time on the table. These four decisions are: People, Strategy, Execution, and Cash.  Most growth firm’s face continual challenges in all four areas, at any one time the challenges in one of these areas overshadows the rest. Therefore, your first decision is to choose which one of the four to focus on next.

describe the imageAs previously noted strategy challenges are indicated by a slowing in top line revenue growth. If revenue is not growing as quickly as you like, then it’s time to re-examine your strategy i.e. what you’re selling to whom.  We’ve explored the resources Gazelles coaches and specifically Positioning Systems provides to help our customers grow their top line revenue the past three blogs and prior to that we shared the People Growth Tools that help your business create a culture of accountability

Previous blogs in this series included:

Rockefeller Habits 4 Decisions Tools - People

Rockefeller Habits 4 Decisions Tools – People Continued

Four Decision Growth Tools – Strategy Yields Top Line Revenue Growth

Four Decision Growth Tools – Strategy for Top Line Revenue Growth (Cont.)

Four Decisions Strategy –7 Strata, WHO, Brand Promise, Profit Per X

Let’s continue sharing the resources and specific Growth Tools to help you generate more revenue:

Actions to Live By

In Michael Porter’s Harvard Business Review article “What is Strategy? he defines and shares the value and example(s) of having 3-5 operational activities (processes a company does to deliver its product and/or service), to both differentiate and give a company a competitive edge in their market space.

Let’s look at an example and the key elements of these Activities.

Many of you have either flown Southwest Airlines or have heard about the “Southwest Experience” through your reading, colleagues or the media features on the “Company of Luv”. They are one of the best examples of thoughtfully developing and using Differentiating Activities to outperform their competitors in the market and deliver industry leading profitability.

What have you experienced or heard are the SWA Differentiating Activities?  What might be their 3 to 5 Differentiating Activities in regard to Southwest Airlines?

Here are a few key attributes of Southwest Airlines Differentiating Activities:Southwest Airlines logo resized 600

  • Flying only 737 aircraft
  • A,B,C Boarding process
  • Point to Point (versus hub) air routes
  • “Bags fly free” policy,

As you think about the SWA examples, ask yourself “how could we do the same in our industry or market space?  Here are a key attributes that you should consider including in your Actions to Live By:

  • Few, yet specific actions on “how to” execute business.
  • Differentiates you from your competitors execution
  • Synergistic when 3-5 actions are combined
  • Results in “barriers to entry”: by competitors
  • “Derived from your One Phrase Strategy”

Based on these, can you determine what might be your company’s Actions to Live by?

Catalytic Mechanism

Catalytic Mechanism, a powerful managerial tool that helps organizations turn goals into results. It is based on Jim Collins’ article “Turning Goals in Results: The Power of Catalytic Mechanisms” (HBR July/Aug 1999).

The Catalytic Mechanism is a tool that helps you to achieve your BHAG, but unlike the X Factor (explained next), which looks to overcome an external industry obstacle, the Catalytic Mechanism is an internal policy that drives significant results inside the company.

An example of a Catalytic Mechanism comes from the accounting software company Intuit, which offered its customers “Free Customer Support.” This scared the whole company so much when it was developed that it forced the development team to build bulletproof software that was incredibly easy to use. The only way to make money was to make sure that the customers had no reason to call.

Catalytic Mechanism: The Brand Promise Guarantee

  • Galvanizing and non-bureaucratic
  • Creates discomfort for sub-par results
  • Attracts or repels the right people
  • Produces an ongoing effect
  • Distributes power to overall system

The policy must do the following things listed above. In Intuits’ case, the policy forced all sorts of unpredictable and creative ways the development team found to monitor customer behavior to make sure that the software was as simple to use as possible. It distributed the power that the development team would typically hold – and put them in a tremendous state of discomfort. The sharp teeth were held by the customers: They could call as often as needed for free. Clearly, if people didn’t excel, customer satisfaction would not survive in such a customer-centric environment. Finally, the policy helped to keep the focus on solid, easy-to-use software even as the company expanded its product line over time.

For an example of Granite Rock’s catalytic mechanism read the end of Positioning Systems blog Brand Promise Guarantee – Seven Strata of Strategy.  Your Brand Promise Guarantee is thus a catalytic mechanism. 

X Factor

The X-Factor is designed to help companies develop a 7-10 time advantage over the other competitors in their industry. Rockefeller himself developed many competitive advantages in his day, which today we would call X-Factors.

An example occurred when he realized that the oil business was dependent on the barrels that were used to ship the oil in that day, so he bought all of the companies that made the metal castings that held the barrels together. When his competitors couldn’t get barrels, Rockefeller developed a tremendous advantage.

Here is an example of how an X-Factor revolutionized not only a company, but an industry many thought was fragmented and stale. Vistaprint set out in the mid-2000s to test their belief that marketing and printing offerings could be provided to small businesses in a profitable manner; much to the chiding of an established industry that believed that small business printing services were not scalabX Factor IP resized 600le.

Vistaprint challenged this industry belief and developed printing technology that enabled it to aggregate and print customers’ small orders in a highly scalable way. As a result of this technological innovation, Vistaprint developed an X Factor that turned the industry on its head and enabled the company to grow from $5 million to $25 million in revenue over a 5-year period, servicing nearly 10 million clients each year in over 120 countries.

There are several aspects of X-Factors that you need to know to maximize their use. First, you seek X-Factors in your company by trying to overcome common industry bottlenecks. Look for bottlenecks with questions like: “What is the largest cost component in my industry?” or “What is the part of my industry that I hate the most?”

Go to your industry trade association tradeshows – look at the breakout session agenda/topics over the last several years and look for patterns. These are “top of mind” problems for your industry and all of your competitors are faced with the same challenges.

Next, begin looking for solutions that will give you an exponential competitive advantage (7-10x) for your industry. Once you figure it out, don’t tell anyone. The X-Factor is not on the plan for this reason. Once you find an X-Factor, other competitors will eventually figure it out (once they know you are doing it, they’ll know it’s possible and they’ll keep working until they find the answer). People work differently when they know something can be done.

Therefore, start working on your next X-Factor as soon as you can after you launch your last X-Factor. X-Factors take some time to find. Solutions to complex problems that have stumped your industry for years won’t appear with just one brainstorming session. But the purpose of our session today is to get you to understand X-Factors and to begin the process of finding one for your industry.

Another example of an X-Factor is the Aussie-themed chain restaurant Outback Steakhouse.  We share their X-Factor in our Private and Public Workshops.  They found a way to have restaurant managers, who typically stay 6 months in a position, retaining them for 5 years and longer. Better store managers improved the quality of the people that worked in the restaurant, in turn, helped keep the quality of the food and the customer experience high.  Outback is so confident of its restaurant managers’ tenure that they put managers’ names in gold leaf in each restaurant’s entry way.”

We’ve made some significant progress on identifying Strategy Decisions Growth Tools that Positioning Systems and Gazelles coaches offer to help them generate revenue growth.  We still have BHAG, 3-5 Year Plan, the Innovation Window to discuss. We’ll wrap up Strategy Decision with these three Growth Tools next blog.  

Topics: Business Growth, Four Decisions, strategy, catalytic mechanisms, X Factor, actions to live by, Brand Promise Guarantee

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Certified Gazelles Coach

Doug Wick, President

Positioning Systems

 

The Strategic Discipline Blog focuses on midsize business owners with a ravenous appetite to improve his or her leadership skills and business results.

Our 3 disciplines include:

- Priorities
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