Consider the oft-repeated statistic that about 90% of people self-identify as above-average drivers, a clear impossibility. Well-documented factors such as confirmation bias, cognitive dissonance, and the fundamental attribution error mean we — in the words of the Talmud — don't see the world the way it is; we see the world as we are. (See Heidi Grant Halvorson's recent blog post "You Are (Probably) Wrong About You" for more on this challenge at an individual level.)
As organizations are collections of human beings, it is perhaps not surprising that most lack grounded awareness about their capabilities and deficiencies. This isn't an academic issue. My latest HBR article ("The New Corporate Garage") details examples of large companies that have had massive impact by intertwining difficult-to-replicate assets and entrepreneurial behaviors. Companies that pick truly unique assets as the backbone of transformational growth efforts stack the odds in their favor; those that don't put themselves in head-to-head competition with legions of startups around the globe.
That means the fundamental question you have to ask is, What makes your company special? Most of the time, this question draws awkward silence before someone blurts out "our brands." I innocently follow up by asking the last time an industry upstart called looking to license a corporate brand (typical answer: never). The next contender is typically scale. While scale can create real advantage, it also can carry downsides such as molasses-like decision making processes or inflexibility.
Luckily, strategists have studied the "what makes you special" question for some time. Gary Hamel and CK Prahalad laid out their view in the Harvard Business Review classic "Core Competence of the Corporation." Michael Porter's trilogy of Competitive Strategy, Competitive Advantage, and The Competitive Advantage of Nations sits on every serious strategist's shelf. And Bain and Company's Chris Zook has written several useful books on the subject as well.
Reading through these classics and studying incumbents that have successfully launched transformational growth businesses suggests that executives should ask three questions to pinpoint assets that have the best potential to catalyze new growth:
- Why — really — do customers choose our offerings?
- Which of our capabilities are distinctly better than those of competitors?
- How difficult would it be for a garage-based startup to replicate what we have done?
The external orientation of these questions is intentional, as it helps to combat the biases that blind even the savviest strategist.
Make sure to push beyond the usual suspects of brand and scale. Those answers might work if you sell a slow-moving consumer good and you have an installed base of millions of loyal consumers. But if you are a services company, your ability to quickly develop young talent could be your secret sauce. For a retailer, it might be logistical acumen.
While it's next to impossible to innovate faster than the market, it is possible to innovate better that the market. A grounded, externally oriented perspective around your unique capabilities is a critical starting point.