Sunday, October 31, 2010

The Mind of the Pioneer: Triads of Strategic Thinking

Kenichi Ohmae in his landmark book “The Mind of the Strategist” (first published in Japan in 1975, and republished in 1982 by McGraw Hill) provided several useful insights on strategic thinking. Though the book sought to provide a specific strategic perspective of doing business in Japan, the takeaways from the book have had universal appeal. The important insight was that the strategist should identify the key success factors related to the industry as well as the key strengths of the firm and then proceed to cause events that favor the firm’s strengths. The other insights related to differentiation of winners from losers in terms of specific attributes and distinguishing businesses from products. A relentless focus on customers and their needs was expected to consolidate the business base while an entrepreneurial thinking was hypothesized to drive growth. And typical of the Japanese thinking, Ohmae advocated addressing of the problem rather than the symptoms.

Several strategy gurus who came up with subsequent works presented multiple approaches for becoming winners rather than losers in the business arena. Whether Porter’s competitive advantage, Prahalad’s core competence or Hammer’s reengineering, such works focused on identifying the attributes and methodologies that would help companies gain advantage over the competitors. Most of these hypotheses, however, become relevant only in the context of emerging or established industrial structures. Typically, in such established industrial structures the forces of competition and the sources of competitive advantage can be well-identified enabling the strategy prescriptions work well. On the other hand, such strategy prescriptions fail to be less relevant in first-to-lead kind of business ventures. Save Prahalad’s later day classic “Fortune at the Bottom of the Pyramid” there have been very few prescriptions of how strategists need to think and act in pioneering businesses or with sunrise technologies.

Pioneering or sunrise sectors are like no other; they have no established business models, they have inviting but unclear regulatory framework, products incorporate experimental technologies, manufacturing requires multi-pronged collaboration, proven talent tends to be scarce, funding becomes difficult, customers tend to be cautious and even venture investors are prone to be risk-averse. In other words, all the classic strengths recommended for firms in established industries would be conspicuous by their absence for a pioneering firm. The only strength is that of being the first in terms of business ideation and technological commercialization. Even this strength is eroded by the likely competition from follow-on technologies which are likely to be more effective and more efficient, and catch-up players who are likely to have the benefit of knowing a priori the pioneer’s right and wrong moves. Yet, we have countless examples of how pioneers, from Sony and Microsoft to Google and Facebook built new industries around their first-to-think ventures. How then is the mind of a pioneering strategist different from that of an established strategist?

Triad of pioneering strategies

Pioneering has three facets: product, process and business. These three factors can be present in an enterprise independent of each other or all together as a combination.

A self-charging note book computer which uses its own heat to charge its batteries could be a product innovation. However, the notebook computer could be manufactured as per established processes and delivered in established business models. A cellular phone or a note book computer which also is capable of projection would be a product innovation but could share manufacturing processes of electronic devices and get delivered in the marketplace through established business models.

An automobile of established design could be manufactured out of just two monocoque (single shell) pressings (upper and lower) to deliver unique strength and lower cost. Conventional automobiles manufactured through such unconventional processes could still be marketed in conventional business models. An established drug which is chemically synthesized can be produced through a novel enzymatic process, or a known naturally fermented drug can be chemically synthesized as a novel route but neither case would alter the basic product characteristic or the business the concerned drug caters to.

On the other hand, conventional products, manufactured through conventional processes, could be delivered through pioneering business models, as Amazon did by marketing and distributing a whole breed of books and other items through the Web, leveraging electronically physical infrastructure. Disbursal of classic loan products to underprivileged sections of the population through microfinance business models represents a business innovation. If mobile telecommunication services take on the responsibility of being a platform for all online payments it would be a novel business model for such companies.

Similarly, there could be product and process innovations that are delivered through established business models. A biopharmaceutical product that is produced through mammalian cell culture represents a combination of product and process innovation that is ultimately sold in the established pharmaceutical business process. An established product such as computer was assembled through custom build process and delivered direct to customer by Dell in a novel combination of global customer-driven assembly process and business management.

Logically, an enterprise which has product, process and business pioneering rolled into one would taste success beyond anticipation. Google is a remarkable example. Its product offering of web search engine was unique and pioneering. The way it was “manufactured” was also pioneering, through a complex network of servers and nodes which could bring out millions of search products for billions of information seekers in milliseconds simultaneously. The business model which offered the web search service for free, earning revenues through web based advertising was also pioneering, integrating a huge market place and a large supplier network seamlessly. Companies which had two or more pioneering dimensions could create whole new industries effortlessly, or could reinvent themselves completely.

Triad of enabling attributes

While product, process and business are the fundamental drivers of a pioneering enterprise, establishment of a pioneering enterprise requires an enabling triad comprising intuition, passion and focus on the part of the founding team or management team. Pioneering enterprises are based on an unflinching faith of the founding members in their product, process and business concepts.

Intuition on the future rather than experience of the past counts as most pioneering enterprises are based on products, processes and business models that have not been fully tested. A keen observation of technological evolution, need fulfillment, customer segmentation and likely product appreciation in the marketplace together create an intuitive force that reinforces the pioneering spirit. This does not mean that experience is not required in setting up pioneer enterprises. Intuition borne out of experience helps pioneers tread new paths with confidence and innovation. JRD Tata, Chairman of India’s truck and bus giant Tata Motors (then Telco), while taking over a die and tool making shop in the 1960s stated that the acquisition would play a major role in shaping Telco as a major automobile corporation. As several subsequent events would prove, the tool and die infrastructure gave Telco a unique capability to design and manufacture cabs for trucks and later car bodies, making Telco lead the indigenous revolution in the Indian automobile industry that was hopelessly dependent on imported designs, tools, dies and pressings.

Passion is the second leg of the enabling triad. Passion has no limits. It is verily the fuel that provides the energy to the founding team to conquer the challenges and vicissitudes of a first-to-lead journey. The founders of Bell Labs, Sony, Panasonic, Apple, Microsoft, Google, Twitter and a host of pioneering companies powered by pioneering ideas had passionate founders and CEOs. The pre-independence industrialists of India, the Tatas and the Birlas, the license raj industrialists of India, the Bajajs, Godrejs, Mahindras, Ambanis, Jindals and Munjals and the post-liberalization entrepreneurs of India, Murthys, Reddys, Rajus and Raos , all of whom pursued completely different product, process and manufacturing approaches had only passion in common. The passion enabled all the pioneers, whatever the ilk or vintage, to keep pressing their innovative ideas to commercial fruition.

Focus typically characterizes all successful pioneering leaders, and is the third leg of the enabling triad. Exploration of the unexplored requires an ability to identify the precise directions which could lead to maximal discovery and commercialization opportunities. Products such as Ford’s Model T car , Sony’s Walkman, Microsoft’s Windows, Intel’s chip, Google’s search engine, Apple’s Mac and later iPod came with the ability to identify the right product niche and user functionality amongst several potential directions that could be possible in each case. Pioneering minds are creative but commercially pioneering minds are also focused. The focus typically also comes with the intuition that such leaders possess, and the passion that drives a single minded pursuit.

Triad of pioneering business strategies

The two triads we discussed, namely the pioneering triad of product, process and business, and enabling triad of intuition, passion and commitment often merge in different shades to result in three distinct models of pioneering strategy. These are inventive-pioneering, adaptive-pioneering and execution-pioneering models.

Inventive-pioneering strategy

Typically, the most successful business models are those set up by inventors who pioneered product, process or business discoveries. Ability to convert laboratory inventions of others into practical successes also pioneered growth of business houses. Sony was perhaps not the first to invent transistor radio but certainly was the first to pioneer commercialization of a practically ubiquitous transistor radio. It was also the harbinger of the iPod generation with the development of Walkman as a miniaturized rendering of tape recorder-player. Daimler-Benz created the first commercial automobile and a whole new industry around it. Bell Labs saw the invention of Graham Bell take shape as a commercial telecommunications reality. Ford’s innovation of standardized assembly line manufacturing process of cars helped Ford take his automobile company to a new trajectory. Microsoft grew based on the invention of commercial operating system for desktop personal computers by Gates and Allen.

Many companies make pioneering their strategic DNA by which inventions, either from their internal laboratories or external licenses, are constantly utilized to create new product lines and businesses. Popular perceptions of some companies such as DuPont, 3M, Google, Sony and a host of industrial leaders reflect the fact that such companies constantly look for pioneering ideas to drive new commercial successes. In fact, the ranking of top patent applicants by World Intellectual Patents Organization correlates with industrial leadership by companies. The largest and best-known companies such as Panasonic, Sony, NEC, Sharp, Toyota, Honda, Asahi, Fujitsu, Konika, NTN and Mitsubishi from Japan, Samsung and LG from Korea, Bosch, BASF, Philips, Siemens, Ericsson, Nokia, Unilever and Alcatel from Europe, Microsoft, HP, Proctor & Gamble, Intel, Lucent, Caterpillar, and Kimberly-Clark from US and Qualcomm from Canada rank high in PCT filings. Such patents usually cover product, component, process and usage innovations.

Loss of innovative edge leads to business decline and even structural atrophy of industries. Companies in the innovative pharmaceutical industry, in particular, survive and grow entirely on product patents. Lower ranking of pharmaceutical firms in global PCT ranking, declines in new drug approvals and reverse entry by innovator pharmaceutical companies into the generics industry are symptomatic of loss of pioneering as a theme in an important industrial sector. Strategists need to conceptualize alternative strategies to revive pioneering spirit in innovation strapped organizations. One such recent move has been by GSK to spin off its R&D organization into a number of discovery oriented venture teams. The other is a general realization in the pharmaceutical industry that creativity is better fostered in smaller organizations and larger organizations could benefit by either outsourcing research or in-licensing proven developments.

Adaptive-pioneering strategy

Not all pioneering ventures are based on discoveries and inventions. Thinkers who observe the innovative developments in different products or regions around the world adaptively weave such observations into pioneering ventures in other products and other regions. Apple’s iPod and iPhone brought touch screen technology from industrial sectors to a hand held product platform in a revolutionary form. Japanese automobile manufacturers were the pioneers in light, mini and micro truck technologies. However, it was an observant Indian truck manufacturer, Tata Motors, rather than any other Indo-Japanese automobile manufacturer or Indian manufacturer who walked away with laurels with an indigenously designed and manufactured mini truck, Ace. It was a perfect case of adaptive pioneering, successfully transplanting a proven concept to highly different regions and diverse user conditions.

Designs and processes that deliver new products with localized features and pricing have enabled many companies to pioneer new products for established and emerging markets. Brazil’s Marcopolo bus trains, Haier’s compact refrigerator with computer table, Tata Motors’ Nano car, Hindustan Unilever’s Pureit water purifier, and GE India’s VScan portable ultrasound machine and MACi, a portable ECG machine, Samsung’s and Nokia’s ultra low cost mobile phones for India are a few examples of corporations acting locally to pioneer revolutionary new products. Pioneer strategists of this ilk have a sharp sense of local user needs and market eco systems, besides a grasp of technological adaptation that could deliver new cost-effective utilitarian products.

Leveraging of technology for better enablement of consumer behavior and enhanced need fulfillment also lead to outstanding adaptive-pioneering models. Facebook has less of technology and more of social behavior as its bedrock. Digitization of people’s yearning to communicate and network with each other characterizes its initiation, evolution and ramp-up. So is twitter which leverages the concept that in an environment of information overload it is sufficient to have core thoughts not exceeding 140 letters as a requirement to create a universe of interconnected community. Differentiating themselves from Google’s question-answer and data mining model, Facebook and Twitter evolved a new information society based on social networking.

Critical observation and creative application of native practices and local cultures could also lead to pioneering ventures. Biodiversity has been a source of innovation for entrepreneurs with pioneering thinking, not necessarily pioneering inventions. Himalaya Drug Company of India pioneered traditional ayurvedic medicine for mass markets by applying modern characterization and manufacturing approaches even as global pharmaceutical firms with much greater resources remained diffident to the opportunity. Similarly, global giants such as Unilever and Colgate had been in India for decades but it was the innovation of Indian companies such as Dabur and Vicco that helped them to utilize Indian herbs, spices and plants to develop novel tooth pastes, hair oils and nutrition products. Traditional products such as honey and Indian foods have seen new products through technological translation. Adaptive-pioneering models are potentially the optimal models with a reasonable risk-reward ratio.

Execution-pioneering strategy

Mirroring more of business pioneering, execution-pioneering strategy combines firm level competitive advantage with national comparative advantage to pioneer effective business models in a globally competitive manner. The global delivery model of software services pioneered by the Indian software industry, the India-centric, fast-track and low-cost development of bulk drugs and generic formulations for global markets by the Indian pharmaceutical industry, the cost-efficient but curatively efficient medical tourism industry pioneered by the Indian corporate hospitals, the family oriented retail chains established by the Indian business houses are but a few examples of high caliber execution creating models of global comparative excellence. Execution pioneering is not necessarily dependent on scale; neither is it the preserve of large corporations. Accomplished teachers from India, individually for example, pioneered electronic tuitions to a global community of students.

Execution-pioneering creates centers of excellence in specific industrial and business sectors. India and China have executed successful models of global back office and global workshop respectively. Within broad industrial-country segments, some firms excel more than others by pioneering execution. A few Indian pharmaceutical companies have pioneered their entry over five decades ago but new entrepreneurial companies, despite much later start, achieved global leadership through their choice of niche therapeutic areas and efficient execution of research and manufacturing processes. Execution pioneering relies more on the enabling triad of intuition, focus and passion. These act as a synergistic winning combination motivating higher levels of performance.

An execution-pioneer usually happens to be a unique combination of reflective thinker and quick silver implementer. The strategist in him needs to understand the available windows to gain competitive advantage over others, whether in an emerging industry or established industry. Leaders in execution pioneer models typically have to choose one generic strategy or a combination of generic strategies from among scale leadership, cost leadership, differentiation and niche to achieve execution efficiency. Parallel processing of multiple activities and critical-path resolution skills enable a company become a pioneer in execution. Technology adds additional edge to execution capabilities. A construction firm can deploy novel foundation, column and slab laying technologies to execute projects in a pioneering fashion. Clearly, execution-pioneer depends on a high level of management capabilities to achieve innovative resource assembly and deployment.


A pioneering venture, as any of the successful corporations mentioned herein, is necessarily a resultant of one unique factor, or a combination of several unique factors that constitute the three triads of pioneering (of product, process or business), of enabling (intuition, passion and focus) and of establishing (inventive, adaptive and execution). A combination of pioneering and enabling triads, with all the six factors in full play, would help a company be at once an inventive, adaptive and execution pioneer with an outstanding success potential. Typically, most firms coast to success on a few factors, with product and process pioneering leading the way and passion and focus reinforcing grit and tenacity in the face of adversities that a pioneer has to necessarily face. At the same time successful pioneers tend to lose the edge on some of the core factors even as new pioneers begin to compete successfully with the established pioneers on the very same pioneering strengths. The mind of the pioneer verily works to institutionalize product, process and business creativity as well as stand by intuition, passion and focus in the organization for sustainable success.

Posted by Dr CB Rao on October 31, 2010

1 comment:

Narayanan said...

A compelling article and a persuasive narrative on strategy as it applies to pioneering. There are a couple of other considerations although not related to strategy per se but has an impact on the formation and sustenance pioneering firms. Serendipity (and god forbid its antagonistic cousin Bahramdipity)is as relevant as ever in translating (or not) a chance observation into a commercially viable product. One perennial question - How can organizations systematically 'find' the Charles Goodyear or Arthur Fry (of rubber and post-it fame, respectively) and help them succeed? Secondly, imperfect valuation models will continue to imperil funding avenues thereby diminishing success rates for pioneers. As James Surowiecki notes in a recent New Yorker article, Groupon could be an example of inventive, adaptive and execution pioneering - all together in various aspects but not necessarily another Google i.e., a change agent in the 'disruptive' sense of the word.