Friday, November 18, 2005

Chapter 7: Step Three: Identify the Future Best Practice and Measure It

Chapter 7

Step Three: Identify the Future Best Practice and Measure It

The material in this chapter expands upon pages 163-177 in The 2,000 Percent Solution.

You should now begin using the measurements that you identified in chapter 6. Use those measurements to estimate the most effective way that your current and potential competitors will be pursuing the nth degree opportunity that you identified in chapter 4 by using the implementation choices you uncovered in chapter 5. In looking for the answers, stay open to identifying other possible opportunities and implementation choices that will work even better.

The future best practice often isn’t much more than a few percentage points of improvement over the current best practice. Why should you bother to identify the future best practice for such a small potential gain? First, the current best practice is often several hundred percent better than the average current practice. So the gap to the future best practice may be wide from where you are today unless you already are the industry leader in these dimensions. Second, you probably haven’t looked at this perspective before in the context of the best nth degree opportunity, and positive surprises are likely. Checking will help you avoid shooting too low with goals for your new approaches. Third, thinking about the future best practice is a helpful context for seeing unexpected opportunities well beyond what the future best practice is.

It’s hard enough to find out what the current best practice is. How can we hope to know what the future best practice will be? Obviously, no one can be sure. … but you can learn important lessons even if your conclusions are wrong in detail.

How should you proceed? A good starting point is to locate the current best practice. You can often find the current best practice by simply looking at outstanding successes by competitors and reading articles about what those competitors and their customers say in print that the companies do well. You can find out more from those who know the competitors well. Possible information sources including former employees who have been gone for a few years and suppliers who have not been sworn to secrecy. Naturally, you should follow good ethical standards in your research and not mislead anyone about what you are trying to learn. In addition, you can interview relevant customers and other key stakeholders to find out how they perceive the best practice offerings and how those offerings are provided. In some cases, you can even become a customer of the competitors and directly experience what they do.

Once you know the best that competitors do now, shift your attention to what developments they are working on. These developments are often hinted at in financial reports, press releases, stories in various technical, trade and business publications, talks at conferences and in advertising to fill new positions. From such sources, you can get a sense of what size commitments are involved in the developments, what the proposed targets and deadlines are, and what progress has been made so far.

Independent of those investigations into competitors’ plans and progress, look at the rate of improvement that competitors have typically achieved. Once you have measured that rate of historical progress you can project its continuation into the future.

What if you have potential competitors who are more capable than current competitors? Many companies do. Focus on those potential competitors who could bring some important new advantage to the industry. Such innovators are often start ups led by seasoned executives with innovation experience. Also watch out for are those who are very strong in other industries who could easily transfer those strengths into your industry.

You should also consider if you are threatened by new government programs that are advancing public domain capabilities (such as new technologies) that could be applied against you as well as new organizations that are pooling essential resources in new ways.

If you are in an industry that is affected by technology, be sure to also be on the watch for new patents and technical standards that could provide large advances for some companies as compared to others.

Applying these thoughts to our publishing example, the publisher should look at both what traditional publishers are doing with celebrities and new trends in how agents, impresarios, producers and other creative intermediaries are changing their relationships and contracts with the celebrities. Since Viacom is a powerful force in television, motion pictures, cable programming and books, the publisher should consider how Viacom could combine its resources and relationships in new ways to create the future best practice. In the process, the publisher should consider what advantages could be gain by teaming with Viacom as a partner to pursue 2,000 percent solutions.

Questions to help your organization identify the future best practices for implementing your nth degree opportunities.

Most companies have limited competitive information beyond what is regularly published by other companies in their financial reports, industry tracking services and occasional measurements in marketing research studies. Investigating the future best practice involves some additional data development as well as analysis of new circumstances that are affecting or could potentially affect your industry.

1. For the ways you want to implement your nth degree opportunity, which competitor does each aspect of that approach best?

In answering this question, feel free to break down performance into bits and pieces that could be combined in more effective ways by partners, suppliers or those providing outsourced services.

In the publishing example, the publisher could begin by finding out which celebrity books and publications have done the best which had a connection to a well-regarded nonprofit organization. This search should include how it was done in different categories. For example, Peter Drucker played a role in creating a nonprofit organization that originally bore his name, The Peter F. Drucker Foundation for Nonprofit Management. That organization was folded into a new organization, The Leader to Leader Institute, that continues to benefit from ties to Professor Drucker as well as his brand-name appeal to many authors, professors and business executives. Although business books are not such a large category in the industry, there may be best practices there that will apply broadly to trade books and novels by celebrities. Ms. Oprah Winfrey has also played a defining role in influencing the sales of books through her television show and magazine. Other lessons can be drawn from that example. Actor Paul Newman created a nonprofit company to benefit children and has written books to promote that charity as well as the products the company makes. Yet other lessons can be garnered from that example. Surely, other examples will occur to the publisher and to you.

2. What improvements have each of these competitors made in the last several years in the most effective aspects of what they do?

Your purpose in answering this question is to identify information to use in estimating how fast future improvements might follow. Be sure to gather information about when these improvements were made and how long it took to develop the improvements.

3. What improvements in their most effective activities are these competitors known to be working on?

Be sure to look for both improvements in the current best practice methods and in related methods that could advance best practice performance.

4. When is it likely that these improvements will reach the marketplace?

In drawing your conclusions, consider how long experts estimate that it would take them to achieve the new results, the speed that the competitor has advanced in the past and any public hints you can find of progress along the way. Be especially vigilant about looking for tests in progress that you can monitor.

5. Which potentially effective competitors seem to be planning to enter against you in the next five years?

Be sure to track announcements of new partnerships, new contracts, new hiring and new tests that might tell you something about the potential competitors’ intentions.

6. When might these new competitors begin making their offerings?

Here, you are better advised to look for the earliest date rather than the most probable date. That’s important because putting forward your innovations before the new entrant does will be a more effective way to compete.

7. Which start-ups and new ventures could become effective best practice competitors during the next five to ten years?

Almost every industry has conferences at which companies describe what they are working on and what their prospects are for the future. You would do well to visit those conferences as well as any trade shows where such companies would be telling future customers about what the companies are working on. In addition, check any other public sources of information you can find about these companies.

8. When could these start-ups and new ventures first reach best practice effectiveness?

In particular, you should think about which customers will be most attracted by these new forms of effectiveness.

9. What new technologies and industry standards are being developed that could change the future best practices?

Be sure to consider technologies and industry standards aimed at suppliers, distributors, customers and end users as well as those that will directly affect you and your competitors.

10. When will the best practices brought about by new technologies and changed industry standards first reach customers?

If the new technologies and industry standards are being developed in part by those who are not your competitors and your company is a potential customer, you can probably find out all you need to know through technical discussions.

11. What best practice improvement areas are not being pursued by anyone with the resources required to succeed?

These gaps in new developments are potentially rich areas for your organization to consider, particularly if you can conceive of a rapid and relatively low cost way to make progress in those areas. In our publishing example, the lack of a focus on publishers developing projects and then looking for the talent to execute them is an example. Television shows and motion pictures have always been developed that way. Why should publishing projects be any different? By drawing on the skills of those who are already familiar with the process, rapid progress should be possible.

Copyright 2005 Donald W. Mitchell