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Is the only purpose for discovering opportunities to increase revenues and profits?

Is there a process for any employee to identify an opportunity and develop it?

Discovering opportunities is more than just revenues and profits.  Discovering opportunities unleashes the potential creativity of all employees, your internal experts, who are your eyes and ears in your markets and industry.  Discovering opportunities creates a culture of entrepreneurship, trust, management seeing employees’ potential to contribute to the long-term durability of the company.  This has played out in a number of examples that contributed to companies being built to last.

2022 Budgets, strategies, departmental plans are most likely completed.  Is there an opportunistic element for 2022?

With all the 2022 planning, can you determine if your company or employer is built to last?  Is the existing business going to be strong, viable, relevant to the market, to fund the operations and provide all the resources for what’s next?  The what’s next is your future revenues and profits, customer requirements met, anticipated customer requirements met.  If not opportunistic or built to last, what needs to change?

The next blog series is on “built to last.” Jim Collins published this book in 1994 with new editions in 1997 and 2002.  Consider all the differences then and now.

Jeff Bezos in an article published November 16, 2018, thinks Amazon will fail and go bankrupt (Source: https://www.investopedia.com/news/why-jeff-bezos-saying-amazon-will-ultimately-fail/).  Jeff Bezos explained this to employees at an internal meeting.

At any of your companies or employers, has this statement ever been made?

If it could happen at Amazon, could it happen anywhere?

Does this mean Amazon’s compass heading is in decline now or in the future?

The existing business then is not built to last.

Is the threat internal or external?

Do the shareholders question him, seek new board members or what action should they take?

Is Amazon worth fighting for?

The book, Built to Last, by Jim Collins, researched elements of companies that have existed since the 1800’s.  The Innovation Advantage LLC blog will examine these companies with a perspective of 1994 to 2002 and through the lens of now.

To develop possibly your interest in built to last, take a self-assessment for your company or employer.  Do any of the elements listed exist where you work?  If so, how are they demonstrated?

• Visionary
• Operate with a core ideology, values, purpose.
• Make goals that capture people to excel, stimulate progress.
• Achieve goals.
• Broad range of objectives.
• Opportunistic, experiment, trial and error, these are an element of strategy, planning.
• With senior leadership changes, company continues to thrive.
• Are senior leaders promoted from within or from the outside?
• Overcome obstacles, setbacks, failures, self-inflicted mistakes, resilient, sustained long-term performance, made an imprint on the world around your company.
• Focus on yourself, how to achieve more, better results daily.
• A drive for progress that embraces change, innovation.
• It is a great place to work.

These are a few points to review for yourself.  Built to Last by Jim Collins reviewed these characteristics and more for the 18 “visionary companies” in the research.  These 18 companies began between 1812 and 1945.

For companies that are 77 to over 200 years old, does it take more than optimization projects/improve productivity to be built to last?

We are all on a journey to make our company or employer to be “built to last.”  It is a journey built on a framework that has multiple moving parts.  We will examine this as we move forward through this blog series.

All the best Discovering Opportunities and the journey to be “Built to Last.”

The Discovering Opportunities’ topics covered to date are all within a business, industry or market.  The opportunities maybe external to your company but when you look for them, they are there.  For business leaders, large or small companies, your employees are potential experts to discover these opportunities.

With the current economic, political, social, pandemic, population shifts, education challenges, tensions between countries/government, central banks, inflation, interest rates, stock market ups/downs – you name it for the US and globally – if you are business as usual, you may want to reconsider.

The external characteristics for discovering opportunities – demographics, change in perception, meaning, mood and new knowledge were defined by Peter Drucker in 1985 in Innovation and Entrepreneurship.  Again, the approach for this blog is “then” and “now.”

Demographics – “change in population, its size, age structure, composition, employment, education status, income (p 88).”  Drucker stated that these are the most predictable.

Change in perception, meaning, mood – simply stated, Drucker discussed the “glass half full/glass half empty” for perception.  The facts don’t change – their meaning does.  I think today a possible reference for this is “spin” to a certain perspective regardless of the facts.  It switches conversation to glass half empty/glass half full.  Drucker cited a number of examples in 1985 that today some would not be openly discussed because of the perception you or your company could be labeled.  I will review some of the topics then and what is now possible perceptions.

New Knowledge – then, the “superstar” for opportunities and entrepreneurs, received the publicity, funding, what people considered when they think of innovation.  Let’s be clear, innovation is this but much more.  Knowledge based innovation initiatives can be technical, scientific as well as social based.  Key elements of discovering opportunities – knowledge based are different from the others because “time span, casualty rate, predictability are factors for development and delivery.”  The lead times are longer because of the requirements to be developed from the knowledge, then products, process for manufacture or delivery of service into a global market/supply chain.  This longer lead time applies to non-technical, non-scientific knowledge as well.  Drucker cited a number then of new knowledge examples and I will highlight some from now.

Demographics

Your business, industry or market may be dependent on an understanding of demographics.

One example cited by Drucker, those who plan to retire between 2050 and 2060 (Drucker used 2030 year) are in the workforce now and are in their 30’s and 40’s.  He narrowed his analysis on the group in 1985 and most likely for now, “the occupation group that they will stay in until they retire or die (p 88).”  This may be true for some now but not all.  I provided data for the age group of 30’s and 40’s to total population.

Income, another important data point for demographics is the other statistic that I reviewed.  It is the population and per capita income from 1968 to 2020.  Is your business dependent on consumers’ income overall or their discretionary income?

Source: https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-people.ht

Drucker highlighted the following demographic predictions.

1938 – US population would peak around 140 million in 1943/1944 and then slowly decline (p 91).  The current population in US is over 332 million and counting (Source: https://www.census.gov/popclock/).

1972/1973 – prediction by experts that participation of women in the workforce (then over 33 million) would continue to decline (p 91).  The current number of women in the workforce is over 75 million (Source: https://www.dol.gov/agencies/wb/data/lfp/civilianlfbysex)

Drucker cited Black Death as one example of demographic catastrophe and now in the modern era, there is COVID.  While COVID is not on the scale of Black Death (nearly 136 million throughout its history (Source: https://worldmedicinefoundation.com/health-news/bubonic-plague-death-toll-how-many-people-died-from-the-black-plague/), we observed in the US the impact across many areas in the economy.  More will be learned as COVID issue remains in the news.  The point here – change is upon us all, good or bad.  During this period of change, are there opportunities for your business?  I believe that there are and my search continues.  Are you searching?  For business leaders, I expect that many are trying to develop a go forward strategy.

The age structure within the population is an important factor to understand.  How long have we heard about the aging population of the US and now globally?  Population shifts are underway, state-to-state because of remote work options that could impact your business.  Employment pre-COVID and post-COVID most likely will continue to be different.  In April 2020 there were 20.5 million pink slips.  In August 2021 4.3 million American quit their jobs (Source: https://time.com/6106322/the-great-resignation-jobs/).  15% of the workforce plans to quit their job between September 2021 and December 2021 (Source: https://www.resumebuilder.com/1-in-7-workers-are-quitting-this-fall/)

Change in Perception, Meaning, Mood

How many of you have considered this area and pursued business opportunities?  I have not.  My research into changes in perception, meaning, mood was a learning experience for me.  Some characteristics of change in perception according to Drucker are (pp 104 to 105):

“Change in perception, the facts do not change, meaning does.”  Meaning changes from glass half full to glass half empty.  An example is “working class to middle class.”

The perception may not be explained by sociologists or economists.  Change in perception is a fact, may not be quantifiable or if it is your opportunity to leverage for revenues, profits, growth or affect may be too late.

It appears perception in our world today is promoted daily from social media, media in general and some of the population takes its cues.  Now polls are a popular instrument today.  It seems polls are done to shape perception positively or negatively.

An important element to determine about change in perception for Drucker, is it a fad or permanent?  If a fad, its life cycle is short, 1 or 2 years.  You could invest in something that is not sustainable.

If a change in perception is determined to be permanent or more than a fad, the process to leverage needs to be simple, small and specific (p. 106).

Some “then” examples from 1985 include:

Health – perception in 1985, glass half empty.  Today, does perception remain the same?  Equipment for home use is advertised constantly, new products are introduced regularly, now with videos, support, tracking apps on phones, apps for all things tech.

COVID pre and post perception for social distancing, social isolation – now what is perception – football games, no masks, no social distancing but go into stores, doctors’ offices, medical facilities – signs remain to social distance, masks required.  Vaccine mandates or no mandates in states.  What are the facts vs perception? The glass half empty seems to apply.

In 1985, Drucker also cited the perception around African American population, American Feminists and the Ford Motor Company Thunderbird.  In a previous blog, I highlighted his observation about the Edsel and Thunderbird.  Drucker pointed out the success of the Thunderbird was due to a perception change.  The automobile market was defined by income group but segmentation shifted to lifestyle (pp. 99 to 104).  Your product, your service, how is the market divided?  Is it different now than 5 or 10 years ago?  Is there a perception change in your business, industry or market?

New Knowledge

In the past 50 years what new products or services have been discovered and capitalized on that started with new knowledge?   What new products/services for your company?

New knowledge opportunities’ characteristics are long lead times, higher failure rates, can be technical, scientific, social, non-technical, non-scientific.  All knowledge may not be available, delays completion, increases risks.  Drucker presented that the timeframe for new knowledge ideas to develop is 25 to 35 years.

Some examples of New Knowledge from the past

• Light bulb, was the new knowledge needed for the electric power industry
• Airplane, two knowledge roots are gas engine and aerodynamics
• Computers, the knowledge-based requirements were “a scientific invention, the audion tube, a major mathematical discovery, binary theorem, new logic, the design concept of the punch card, concepts of program and feedback (p 112).”
• Newspapers, telegraph and high-speed printing

Now examples – a limited few

• EV, batteries
• Space travel for all – incremental knowledge, NASA developed, now private business leads
• Stealth, a brief history of the new knowledge needed
  • 1940’s – Jack Northrop’s YB-49 flying wing, smooth surfaces, rounded edges, no tail, no fuselage. YB-49 cancelled in 1949
  • 1960’s – Pyotr Ufimtser, Russion physicist developed a theory on electromagnetic waves but was ignored
  • 1970’s – current military aircraft vulnerable to radar. In 1974 DARPA and Air Force began a major effort for stealth. Contracts awarded in 1975
  • 1981 – F117 made its first flight, Lockheed
  • 1981 – Northrop awarded contract for what would become B-2
  • 1982 – Northrop BSAX demonstration, Tacit Blue first flight that made a total of 135 test flights. This became the B-2 with its first flight July 1989
  • Initial trade-offs for stealth aircraft were speed and aerodynamics
  • These were overcome in 1997 with the F-22 and in 2006 with the F-35

Source: https://www.airforcemag.com/article/History-of-Stealth-From-Out-of-the-Shadows/

The Discovering Opportunities’ Blogs (a total of 6) were done to demonstrate that opportunities are in the marketplace and an approach for you to think and find them.  The blogs were based on the concepts from Peter Drucker’s book, Innovation and Entrepreneurship.  There are two major categories for discovering opportunities, those within a business, industry or market and those outside.

However, you search for opportunities it requires a process, support by leadership (time, resources, patience, involvement, direction) and hard work.  For any opportunities your current employees are potential experts.

Change is upon every business, big or small, what are you waiting for to discover opportunities that could impact your revenues and profits?  Innovation Advantage LLC could help.

All the best in your discovering opportunities’ journey.

Let’s examine two elements of this – then and now.

Peter Drucker in Innovation and Entrepreneurship wrote in 1985 on discovering opportunities.  Change in industry and market structure opens up opportunities for innovation, increased revenue and profits.

The “then” scenario to industry or market structure change in 1985 had some indicators that Drucker shared (p 76, 83 to 85).

• Change allows opportunity for innovation.
• “Requires entrepreneurship from every member of the industry.”
• The question, what is our business – should be asked.
• Rapid growth, higher growth than in economy or population which will lead to structure change.
• In rapid growth scenario, the lens for leadership to “define and segment” the market can’t be based on past information, it is historic, no longer valid and the company will miss an opportunity.
• The way business is done is changing rapidly.

What does industry change look like?  Drucker examined several industries and the steps of change can run for decades.  Drucker looked at Automotive, Securities, American Health Care, Phone Service, Insurance for Art and American Physician Practices.  Drucker’s evaluation of change and response covers the period of 1900 to 1985.  These same industries continue to change offering up more opportunities for innovation and companies to grow and expand.

For example, if you consider the automobile in 1985 to 2021, what changes in the industry or market are there?  A significant change in the automotive industry is technology. Technology is the key advertising concept now versus the past of horsepower, fuel efficiency, style, performance, safety, luxury seats and more.

Another example of an industry or market structure change – steel industry.  The past steel manufacturing plants required a significant investment and increased market consumption of steel. In 1965 Nucor entered the steel manufacturing industry and the results were dramatic.  Before 1965 Nucor did not produce any steel.  Nucor led the mini-mill shift and in 30 years made more profits than any other American Steel Company (Collins, Good to Great, 2001, p 76).  In 2021 Nucor continues to improve with the first half earnings in 2021 exceeding the record full year diluted earnings in 2018. In Q3 2021 Nucor is expecting another record quarter.

From Drucker’s guidelines in 1985 are any still valid today for your company?  Since we are at the year 2021, what drives industry and market structure change now? How has your industry or market structure changed because of:

Technology

• Internet – dialup to broadband
• Browsers
• Windows
• Wireless
• Digital – many things digital in the past, just no way to move it around the world
• Cloud
• AI
• VR
• IP
• Cyber security, risk, hacks
• Landline, cell phone, smart phone
• Email
• Apps
• Media – live streaming, social media
• E-commerce

Operations

• Efficiency, productivity, performance
• Quality
• Global Customer needs
• Global Customer expectations
• Globalization of operations
• Globalization of supply chain
• Global manufacturing
• Remote work

Companies/products

• Retail
• Amazon
• Apple – iPod, iPhone, iPad, Mac
• PC’s – all other manufacturers with Windows, Office
• Additive manufacturing
• Manufacturing 4.0
• All companies are now to a degree technology companies
• Changing business models
• SaaS

What applies to your company, what are the ones missing?  Once an opportunity is identified then what?  Here is a process collected from various sources.

• Start small across all startup aspects.
• Have a broad approach for ideas, in this case more is better because many will not develop.
• Due diligence.
• Present to an open-minded decision-making group with the CEO as the lead.
• Pilot – go/no go
  • Be flexible
  • Decisive
  • Entrepreneurial in approach
  • Right people, right seats
  • Defined expectations
  • Budget
  • Deadlines
  • Ensure all necessary technology, knowledge is available, affordable – don’t get cart before the horse, learn from the light bulb invention
• Scale.
• Commercialize – integrate into the existing business, retain some team members from initial phase.
• All of this supported directly by a senior executive.

The existing business and what’s next/innovation are inseparable.  The existing business continues to develop within the industry or market structure amidst change.  Both the existing business and what’s next/innovation are to support the future.  The future is funded by the existing business and by discovering opportunities that will become the existing business of the future through innovation.

How is your company, your employer doing with discovering opportunities, developing to commercialization and the turnover to the existing business operations?  This is the fourth in the series of discovering opportunities.  The series provides slices of the discovering opportunities pie that should be a focus for every company, large or small, every executive.  The entire corporation’s personnel are potential experts to discover opportunities.

The blog series on discovering opportunities is an important aspect for Innovation Advantage’s strategy.  While some success is realized, a continued focus remains.

All the best in discovering opportunities.  Next up Discovering Opportunities – Demographics.

In the past 6 months have you led or corporate leadership conducted a discovering opportunity review?  In the past 6 months have you, corporate leadership or operation’s management conducted a monthly operation’s review?  Most likely, no to the first question and yes to the latter.  For the existing business monthly reviews (weekly, daily for day-to-day personnel) are critical to evaluate performance to plan.  To ignore discovering opportunities as a monthly requirement may limit the business for growth, increased profits and potential new markets.

The current conditions – economic, political, COVID scenarios, supply chain, office space, communication is it virtual or face-to-face, work remotely or at the office, education at all levels, labor force and others are certainly reasons to evaluate the external process within your industry.  Since January 2020 businesses have seen changes to processes, some are upside down and there are most likely more opportunities.  Some companies are innovating that will impact their revenue and profits positively.  Does your company, your employer have the resources to discover opportunities and drive them to revenue and profits?

I suggest that you consider two aspects for discovering opportunities – process need.  First, what to look for to identify the process need.  Secondly, what the corporate business model is to advance ideas and achieve revenue and profits.

What is required for discovering opportunities – process need in industry or service?  Peter Drucker in Innovation and Entrepreneurship presented some guidelines.  The ultimate objective is to identify and lead to increase revenues and profits.  You and all in the company are potential experts.  Are you on the hunt?

In order to identify a process need, what should you focus on?  According to Peter Drucker, it has these characteristics (p 69).

• “It exists within the process of a business, industry or service
• It begins with the job to be done
• Task focused
• Perfects a process that already exists
• Replace a link that is weak
• Redesigns an existing old process around new available knowledge.”

Let’s break this down into some specific requirements or details.  The clearest opportunity in process is based on a need that Drucker said, “the need must be felt,” and the need must be understood (p 74). Drucker provided further guidelines in the identification of a need with the following (p 73).

• “A self-contained process
• One weak or missing link
• A clear definition of the objective
• That the specifications for the solution can be defined clearly
• Widespread realization that there ought to be a better way, that is highly receptivity.”

Because process need is within an industry or service, everyone that works in them (you for example) are a potential candidate to identify, present, communicate and advance the idea.  Drucker noted, “everybody in the organization always knows that the need exists” (p 69).  Unfortunately, no one does anything.  Why?  There were reasons then (1985) and now.  One way to ensure for any idea’s success, there is a clear pathway to advance the idea.  Without a clear pathway, the obvious could remain dormant only to be discovered by some other company or an employee who leaves and takes the idea out the door.  William Connor was one example in the past. This is not to be another level of bureaucracy but an additional functioning segment.  It is specifically for discovering opportunities.

Several key elements for a corporation to discover opportunities of any kind includes a process – with responsibilities, accountability and expectations clearly defined, built upon an organizational structure that supports it, focused, simple and nimble; assigned employees (volunteers) who are committed with the professional skills required; provided the needed resources of funding, executive insight, governance, guidance, sponsorship, and compensated accordingly.  The purpose of the process model is to collect ideas, evaluate, document, recommend the idea to a review panel who are objective, unbiased and move forward to test, pilot, scale and commercialize.  A discovery opportunity model will prove in the long-run to benefit the existing business.

The organization structure for the discovering opportunities model needs to be separate from the day-to-day operations.  Direct reporting should be to the CEO or another C-level executive.  Otherwise, it will become lost in the existing business challenges or crisis for meeting customer expectations.  This is true for any innovation or new thing to the existing business as Drucker clearly explained based on his experience.

The right people in the right seats are imperative.  This group will have passion for new, embrace change, comfortable in an unscripted environment, discerning, leverage information and research, seeks out of the box ideas, relies on creative thinking, collaborative, decisive, willing to trust their team members, demonstrated ability to communicate with all levels of the organization, committed to deliver results and be held accountable.

The need for executive resources – governance, guidance, sponsorship, coaching and mentoring requires clear explanation, timely reviews, updates and those who are invested completely in the program’s objectives and outcomes.  The executives need to resist delegation for discovering opportunities or any innovation program because it generally leads to failure.  The executives need to recognize the team for their success and take/share responsibility for failures.  The funding and all resources need to begin small, budgeted, updated, monitored as any other investment or expenditure in the company.  However, to measure the value of the program can’t be the traditional metrics applied to the existing business.  The reason is because the dynamics of this specific program.  A one size fits all model is difficult because how this program unfolds in each company most likely will have nuances.  One thing for all companies that will promote the program and lead to success is an engaged, committed executive team who ensures needed resources, sets aside their own preferences, recognizes success and support for failure.

Drucker provided 3 specific guidelines to consider with discovering opportunities – process need

• The opportunity must be felt and understood. Understood so specifics for a solution can be defined, engineered, developed, presented and a clear response for the opportunity promoted to the market.
• Knowledge to meet the process need is required. If the knowledge is yet to be discovered then now is not the time to proceed.  An example of this is in the light bulb opportunity.
• “The solution must fit the way people do the work and want to do it.” People in 1985 and now appreciate simplistic solutions which is now highlighted because of technology, mobile apps.  A click away is a mainstay for advertising (pp 73 – 75).

With the rapid advance of knowledge, access through the internet, knowledge may not be the barrier it was in 1985.  However, barriers within any company remains when it comes to change of any kind or something new that impacts status quo.  Drucker clearly explained this in 1985 and it remains.  His example, it only takes one executive to say NO to the entire process for discovering opportunities or innovation and it all stops immediately.  I personally witnessed this and it unraveled long-term employees’ lives and destroyed momentum.  What the long-term implications are unknown to me.

Companies are generally not organized for discovering opportunities or successful at innovation from idea to commercialization.  Does your employer or the company that you lead include discovering opportunities regularly?  Have you discovered any opportunities?  Have you taken any action?  Is there an internal process established?  If not, should there be?

For the foreseeable future COVID scenarios and many other global economic conditions requires every company large or small to be on the hunt for discovering opportunities especially in the area of process need.  During COVID missing links or weak links were clearly displayed.

One metric for you to examine if you need to discover opportunities or innovate, what is the company’s annual revenue and profits from new products or services for the past 1, 2, 3, 4 and 5 years as a percent to the total?  Does the leadership identify a reasonable percentage target to achieve?  Should there be?

All the best in your opportunity journey.  Check out my website for more information on the existing business, discovering opportunities and innovation.

My next blog on Discovering Opportunities is on Industry and Market Structures.

This blog is the third in the series of Discovering Opportunities.

What we are looking at is most likely not going to be reviewed in a management report or discussed at a monthly executive meeting.  The purpose of the blog is to create questions, provide some examples but the answers for your business could be in front of you.  The questions are to encourage you to think, examine, learn and take action.

Discovering opportunities are not taught in business schools but there are professionals who are successful at it.  Is your company as effective to identify opportunities, leverage for future revenue and profits, conduct due diligence, pilot, scale, commercialize as improving the profitability of the existing business? If not, why?

Peter Drucker in Innovation and Entrepreneurship identified various categories to uncover opportunities.  The next area to look for opportunities is from your industry, market, process.  The general category is incongruities.

Incongruities, these opportunities are more visible to your company’s industry, market or process.  According to Drucker, “it is in front of them but overlooked.”  Drucker outlined some general areas and provided examples of opportunities, identified and commercialized.

What is incongruity between the economic realities of an industry?  This incongruity relates to if demand for production or service is growing steadily then performance should improve.  A lack of profitability in a growing industry suggests incongruity.  Several examples were identified and how it was taken advantage.

One example, large steel mills lacked profits in an industry that only made profits in time of war.  The opportunity “mini mills” concept emerged and changed the steel industry footprint and process of the large steel mill with success.  Over that past decades another opportunity was discovered from the brick-and-mortar retail model to the e-commerce model.  The latter continues to unfold with new technologies all on a cell phone.  You may think of others.

What is “the incongruity between the reality of an industry and the assumptions about it?”  This is about the misconception of reality based on incorrect assumptions.  We all make assumptions in every aspect of the company’s business model.  Here is one example of an incorrect assumption.

Ocean going freight companies concentrated on reducing operating costs and increased speed while in transit.  This created congestion in ports and longer delivery times and ships idled longer.  The exact opposite of what ocean-going freight needed.  Then, a better solution surfaced – “concentrate on the costs of not working (ship is idle, debt and interest still there) rather than on those of working.  The answer was the roll-on, roll off ship and the container ship.” (p 63).  Does this cause pause for you to step back and re-examine what your company is doing to increase productivity?  Will you re-examine the assumptions in your business model or product offering?

The best results for this incongruity from Drucker, “be small and simple, focused and highly specific,” (p 64).

Another incongruity to look for is what “incongruity within the rhythm or the logic of a process?”

Processes are built from logic; one observes a working process and identifies an opportunity.  For example, in the early years of lawncare, companies’ “products were promoted based on research, science and testing to ensure their product was the better choice for the best lawn.  There was a difficulty with this scientific approach that growing the best yard at your house is a precise, controlled and scientific process,” (p 67).  Until O. M. Scott and Company developed the Scott Spreader, no tool was available for the customer to apply this precise, controlled and scientific product.  Without the tool an incongruity existed in the logic of the process and customer.  As Drucker promoted, this tool fit the formula of small, simple, focused and highly specific.

This type of opportunity identification like all opportunity identification requires an organized and systematic approach, (p 68).  In your industry or market, now what are you going to look for that according to Drucker is in front of you?  Do monthly reviews include an opportunity focus, innovation focus or are they related to operational performance only?  Without a focus on opportunities, how successful do you think that you will be?

Now, what action will you take to identify opportunities?  It could be as simple as changing your monthly reviews to incorporate an opportunity session.  According to one executive, allowing an opportunity focus in the monthly process allowed for an entrepreneurial mentality to develop and spread in the company.

All the best in your opportunity journey.  Check out my website for more information on the existing business, discovering opportunities and innovation.

My next blog on Discovering Opportunities is on – process need.

Looking for the unexpected could put your company, your employer on a path to leverage opportunities for revenue and profit.  The unexpected category for opportunities as Drucker identified in his book Innovation and Entrepreneurship is one path to consider.  My previous blog on “Discovering Opportunities” was on “unexpected success.”  This blog will highlight the other two in this category – “unexpected failure and an unexpected outside event.”

As Drucker explained, the “unexpected failure” could result due to a couple of things – “mistakes, the result of greed, stupidity, thoughtless bandwagon-climbing or incompetence, whether in design or execution.”  On the other hand, if failure comes, “despite carefully planned, carefully designed and conscientiously executed that failure often bespeaks underlying change and with it opportunity.” (Drucker P 46)

For products and services, assumptions are made.  If failure for whatever reason is the result, the assumptions don’t fit reality.  The unexpected failure could be due to a market branching into other customers who purchase based on other requirements.  An understanding is important to know.  What is important to take away, “unexpected failure was a symptom of basic change.” (Drucker pp 46, 47)

A response for this unexpected failure, Drucker suggested “go out, look around and listen.”  Failure should always be considered a symptom of an “opportunity for innovation and taken seriously.” (Drucker p 49)

Did you grow up with the Edsel Story?  I did.  The story of this unexpected failure fell on Ford.  However, I did not hear the entire story.  Ford examined the results, failure against its assumptions, plan, strategy.  The result which I never heard and Drucker explained – the Ford Thunderbird.  The Ford T Bird allowed Ford to reclaim lost ground in the automotive industry.  The Ford T Bird is one example of failure turned into success by listening, going out, understanding and innovating.  (Drucker pp 50-52).

The unexpected outside event – Drucker defined this as “events that are not recorded in the information and the figures by which management steers its institution.” (Drucker p 52).   Drucker cited two examples – IBM’s personal computer and Book Store Chains.  While these are good case studies from 1985, let’s examine the characteristics of an unexpected outside event that you may use to filter information through for a benefit.

• IBM and Book Store Chains represents “genuine innovation and not diversification” (Drucker p 54). IBM remained in the computer industry and chain book stores remained in the retail industry.
• A success factor for an unexpected outside event – “it must fit the knowledge and expertise of one’s own business” (Drucker p 54).
• The event could “be an extension rather than a diversification” (Drucker p 55).
• The unexpected outside event requires innovation in product, service, distribution channels (Drucker p 55).

We all observed how companies, large and small, changed in response to a global unexpected outside event – COVID

• Honeywell – N95 respirator mask production, shifted 2 chemical manufacturing plants to produce hand sanitizer.
• Ford in partnership with 3M used modified auto parts from the F-150 to produce respirators.
• SC Johnson in partnership with DOW produced hand sanitizer.
• Brooks Brothers shifted shirt and tie production to masks and gowns.
• GM shifted production in partnership with Ventec to produce ventilators.

Source: https://www.triplepundit.com/story/2020/companies-retooling-operations-covid-19/88921

There are many more examples of companies, large and small, that shifted production in response to COVID.  Follow the link for the complete list: https://www.aei.org/multimedia/defense-production-act-production-tracker/

The unexpected outside event was obvious and many companies responded.  However, unexpected outside events may not be so obvious.  If not obvious, what can a company’s leadership and employees do?

• Leadership needs to seek out opportunities of all kinds on a regular basis.
• The search for opportunities of any kind requires organization, function within an established process, provide necessary resources, accountability, allow employees to present, innovate, test, pilot, present findings for acceptance, to leverage for revenue, profit and meet market demands.

Corporation’s monthly reviews should be a twofold process as I wrote in my previous blog on “Discovering Opportunities.”  One review is for operations and the second is focused on opportunities.  As I cover the various categories for opportunities from Drucker, you will have criteria to review for your specific company.  For now, specific criteria for unexpected success, failure, outside events has been provided.

Discovery analysis is not one dimensional but should be multi-dimensional around the company’s short-term and long-term objectives.  For this reason, Innovation Advantage LLC includes three areas with our Discovery Process to meet client’s short-term and long-term objectives.  Please check out our website and other blogs there for more information.

Next blog in discovering opportunities is on Incongruities.

All the best in your opportunity journey – identification, developed, piloted, scalable, commercialization.

Then, how are opportunities evaluated, selected, pursued, developed, piloted, scaled, commercialized to deliver revenue and profits?  Unfortunately, most companies are not equipped for opportunity analysis or successful in developing opportunities to commercialization.  What are corporations good at?

Corporations, large or small, focus on monthly, quarterly, annual performance results.  These are normally year-over-year, across all business units and down into the weeds.  The purpose is to ensure operational performance improvements.  Corporations are mostly successful in this process.

In my consulting journey, scorecards and dashboards were developed to identify any change in operational performance during the project.  The metrics captured a broad base of current data that was compared to an approved baseline.  These measurements demonstrated that the project was on track to deliver expected levels of operational improvements.

Managers/leaders in existing businesses have problems presented to them constantly and addressed at operational reviews.  The problems require action to eliminate and return to normal or higher performance levels. This most likely allows no room to see opportunities.

There is a balance between the existing business and what’s next.  They are inseparable.  Peter Drucker in Innovation and Entrepreneurship provided an example of the twofold review process that included the existing business performance and opportunity focus.  To implement a twofold review process will require management and leadership to undertake a process and behavior change.  The process change will require management/leadership to accommodate an existing performance and opportunity reviews in the same month.  The behavior change will necessitate that management/leadership focuses their vision on opportunities.  Drucker explained, “people see what is presented to them and what is not presented tends to be overlooked.”  Drucker cited an example of the twofold process in Innovation and Entrepreneurship.

The company held an operation’s review meeting twice a month.  This meeting focused on the typical operational results, the problems that impacted performance, the required action items and follow-up.  Another meeting was held monthly with a focus on opportunities: areas better than expected, any product sales growing faster than expected or orders for new products coming in from unexpected markets that the product was not designed for.  While these are important discoveries, the CEO stated, the meetings “are not nearly as important as the entrepreneurial attitude which the habit of looking for opportunities creates throughout the entire management group” (Drucker. p 157).

The opportunity practice requires specific follow-up steps.  The opportunities that are identified by an individual or team should be assigned specific responsibilities, accountabilities and deliverables to advance the opportunity to a decision point.  The company example included the following points (Drucker. p 158):

• Submit, in a reasonable time, “a working paper to the presiding senior and to their colleagues in the session, in which they try to develop their idea.”
• What would it look like if converted into reality?
• What in turn does reality have to look like for the idea to make sense?
• What are the assumptions regarding customers and markets?
• How much work is needed?
• How much money?
• How many people?
• How much time?
• Expected results?
• My personal point for management/leadership is to recognize, reward the individual or team regardless of outcome.

This type of opportunity falls under what Drucker called “unexpected success.”  From the standpoint of opportunity, these opportunities are with the least amount of risk.  Drucker identified six other opportunity categories to pursue by any company.  The additional six categories will be covered in the future.  A company should consider the importance of an opportunity focus analysis platform and accept it as a regular practice.

The review process is simple, bite size but carries significant steps and the reward could dramatically impact the existing business.  The commercialization of the opportunity needs to be the objective, revenue and profits in order for the company to be durable.

All the best in your opportunity journey – identification, developed, piloted, scalable, commercialization.

Please check out Innovation Advantage LLC Website for more information on compass heading, existing business and innovation.

The market no longer supports the same companies as in 1955 on the Fortune 500.  In 2014 only 61 companies were on the list from 1955 and in 2020 only 30 companies were on the list from 1955.  I have the details if you want to review.  The requirements for the Fortune 500 list are based on annual revenues for the US Companies that filed their 10K.  More than 1,800 American Companies have appeared on the list.  Investopedia listed several reasons why companies move on and off the list: M&A, shifts in production, bankruptcies, recession. I would add the lack of innovation.  Lack of innovation is a key reason for the list of company failures explained below.  The key metric for the Fortune 500 list is revenues (https://www.investopedia.com/terms/f/fortune500.asp).

Markets support your company if you provide what it requires.  The markets shift and now it shifts quickly.  How does a company stay relevant in a market?  They identify opportunities, invest in innovation to develop opportunities and deliver to the market.  Innovation is one important factor that delivers what the market needs.  But what is it?  From Peter Drucker’s book, Innovation and Entrepreneurship, p. 30 and 31, “Innovation is the act that endows resources with a new capacity to create wealth.”  “Whatever changes the wealth producing potential of already existing resources constitutes innovation.”

The existing business is important and needs to improve year-over-year.  It pays the bills, employs many, generates cash flow, return to shareholders dividends, stock price appreciation and funds the future.  Innovation because of investment from the existing business profits brings new products, services that the market can support to extend corporate longevity.

Two sources provide a list of 50 examples of corporations that failed to innovate             ( https://inquentia.com/50-examples-of-companies-that-failed-to-innovate/ and (https://www.indiehackers.com/@Taylor_Ryan/50-examples-of-corporations-that-failed-to-innovate-8b7baa56ca). Without innovation the corporation is at risk and your career is at risk.  Taylor Ryan identified a barrier in the list of 50 failed businesses.  “The majority of businesses listed went out of business.  They didn’t accept that to stay on top you need to take risks, adapt and open up to changing business climate.”   These failures demonstrate that to stay successful corporations must continue to identify opportunities, support, sponsor, fund and innovate.  However, corporations through the decades have demonstrated poor results with innovation.  Why?

Corporations to be successful at innovation need the right people in the right seats, leadership, strategies and accountability.  Peter Drucker expressed specifically that “the new, has to be organized separately from the old and existing.”  Another specific reason for corporates and their unsuccessful innovation programs, corporations are focused on operations, efficiency, meeting customer demand, handling the day-to-day crisis that develops and ensuring operations deliver products, services on time and at a profit.

Some reasons for corporation failures from the links are:

Kodak – “management did not see the potential of digital photography.   However, a Kodak engineer invented the first filmless digital camera in 1975.”

Nokia – focused on their hardware and not the use of data.

Xerox – first to invent the PC.  Management decided against digital because of the expense and avoid the risk.

Yahoo – in 2005 it was the online advertising leader.  Two deals escaped them because the leader was not willing to go through the process.  Google in 2002 and Facebook in 2006 when Yahoo lowered its offer.

MySpace – social network leader until Facebook surfaced.  Mark Zuckerberg offered to the CEO of MySpace, Facebook for $75 million.  MySpace CEO, Chris DeWolfe said no.

Toshiba – a classic example of a tech giant fall and become irrelevant in 10 years.

Motorola – declined because of a lack of innovation for the small phone market, Greg Brown, CEO stated, “failure was our fault, not the economy.”

Sony – the Walkman, 1979, was the gadget for teens in the 90’s.  Because Sony didn’t embrace technical innovations, digitalization and software development it missed the market opportunity.  Their management reason, “company afraid to test out something new, thinking it would threaten their compatibilities on the market.”

The failure of these corporations in their own industry/market is devastating and management justified the decisions at the time.  Unfortunately, the reasons are short sighted and the results painful for so many.  If your company, your employer is not innovating to meet market trends, what are the reasons.  You may want to compare the reasons to the ones in the link.

It is time leaders consider opportunity over risk, the future over the past, products have a limited life cycle, manage the risk, manage the innovation program for results, ensure accountability and capture market opportunities.  Then possibly the company will be successful and avoid failure.

You have heard the sayings; change is inevitable or the only constant is change.  This is true and innovation is inevitable or the company’s future is at risk and another company will seize the opportunity.

Phil McKinney, CEO, Cablelabs is quoted as saying, “without a robust and resilient innovation strategy, no company can survive.”  At the center of a robust innovation strategy is a mindset to look for opportunities and how to bring to them to full commercialization.

A search for opportunities is a journey we are all on.

Next blog is about opportunities and finding them.

Concrete plans in today’s world might be difficult because of uncertainty.  However, uncertainty has been around a long time.

Peter Thiel wrote in Zero to One, 2014 – “US companies are letting cash pile up on their balance sheets without investing in new projects because they don’t have any concrete plans for the future (p 77).”  The top 10 companies in the 2020 Drucker Institute Company Rankings are in order 1 to 10, first row then second row. For all the details of the Drucker Institute Survey follow the link: https://www.drucker.institute/programs/company-rankings/

Microsoft	Apple	IBM	Amazon	Alphabet
Cisco	Intel	P&G	J&J	HP

The total cash on their balance sheets in 2019, the last year reported numbers available for all is over $594 billion.  In 2014 when Thiel wrote Zero to One the amount for the same 10 companies was $99 billion.  What do you think about the increase?

What about the company that you lead or are an employee?  How much cash is on your company’s balance sheet?  What is planned?  What is leadership investing in for the durability of the company?  Any investment in new equipment, technology, innovation or facilities?

What new products or services have been introduced by any of these companies since 2014?  What new products or services have been introduced by your company?

Why are corporations allowing cash to sit on their balance sheets?  Is it for a rainy day?  If not for expansion, new products, services then what?  One concrete plan for corporations that they are communicating, stock repurchase.  What is the rationale for repurchase of stock?  Stock repurchase does not add to growth in sales or profits because of new products or services brought about by innovation nor does it optimize the existing business.  There are benefits to the overall repurchase plan.  Who benefits from re-purchased stock?

Investopedia stated this about a corporation buying back its stock.  “Companies issue shares to raise equity capital to fuel expansion, but if there is no potential growth opportunities in sight, holding on to all that unused equity funding means sharing ownership for no good reason.” This sounds a little like Theil, no concrete plans, let’s shrink the ownership base.  Is this the rationale?

How much stock has your employer repurchased in the past 5 to 10 years?  What new products or services has your employer introduced in the same period?  Are revenues and gross margin improving year-over-year?  Peter Drucker explained that the existing business needs to improve year-over-year to fund innovation which is the future.  If the corporation doesn’t have improving the existing business and innovation as part of the concrete plan, what future is there for your employer?

Peter Thiel recommended corporations avoid seeking a competitive advantage because it only leads to lower revenues and smaller margins.  What increases revenues and margins is new, completely new, zero to one.  Thiel described this in his book, Zero to One.  This leads to a market dominant position, increases in revenues and profits.

Let’s go back to repurchase stocks, what does it do?

• Reduces the number of outstanding shares. This alone could drive up the share price.  Apple for instance for the past 7 years has almost 1/3 of Apple shares removed from trading (2.5 billion shares/ $327 billion, average price $131 per share).  Apple has averaged 5.4% repurchase of its shares annually since 2013. (https://investorplace.com/2020/01/apple-stock-gets-boost-buyback-program/ and https://www.aboveavalon.com/notes/2020/4/23/apples-460-billion-stock-buyback.
• Microsoft from 2017 to 2019 repurchased 419 million shares for $35.7 billion https://markets.businessinsider.com/news/stocks/microsoft-stock-price-hits-record-high-on-buyback-dividend-plan-2019-9-1028538625?op=1
• Microsoft and Apple are #1 and #2 in the Drucker 2020 Rankings. The cash on their balance sheets in 2020 totals over $328 billion
• Through research, corporations will sometimes borrow money to repurchase shares of stock
• Less outstanding shares increases EPS
• The effects on dividends – same total amount of dividends paid equals more dividends per share
• Not mentioned in any article from research – if CEO compensation plan is structured with stock performance would this impact CEO overall compensation?

The existing business and innovation are two key elements for any company.  It takes work to improve the existing business year-over-year.  It is essential in order to fund the innovation for the future durability of the company.  Innovation is defined as “changing the yield of resources or changing the value and satisfaction obtained from resources by the consumer (Drucker. Innovation and Entrepreneurship. P37).”  Any company needs these both to be focused on results and part of the concrete plans going forward.  Otherwise, the future may not be long lasting.  What concrete plans for the existing business and innovation are underway at your employer or the company that you lead?

Innovation Advantage LLC helps clients with both the existing business and innovation.  Both are inseparable.

History recorded a password for George Washington.  This account is written in David McCullough’s book, 1776, pages 273 – 284.

Under Washington’s command – 1 victory at Boston, 4 defeats at Brooklyn, Kips Bay, White Plains and Fort Washington.  Fort Lee was abandoned without a shot fired as Washington called for another retreat to fight another day.  Fort Lee was abandoned leaving behind supplies of all kinds – guns, stores, tents, even breakfast cooking on the fire.

Joseph Reed wrote to Washington on December 22, 1776, it was time for something “aggressive, surprising, failure was better than sitting doing nothing.”  Washington already planned an attack on Trenton, NJ.  A victory was essential for the morale of the army and the country.

The account of the battle of Trenton is one for the ages.  They overcame setbacks, two supporting units weren’t able to proceed, shortages (coats, shoes), the army marched through the night on December 25^th, weather – a cold Northeaster bringing rain, snow, ice in the rivers and mud.  Upon arrival in Trenton, 3 hours behind schedule and in a snow storm, the army had to engage the Hessians whose accommodations and supplies were much better than Washington’s army.  In less than 1 hour, the battle of Trenton was over.  Hessians surrendered, their commander was killed, 900 prisoners and valuable supplies taken and not one American was killed.

Washington protected this battle with a password – VICTORY OR DEATH.

In 2021, do you have an event planned that is essential for you or your company?  Do you have it password protected?  I do, like Washington, I have an event and a password.

It is time to learn from our victories and defeats, plan a course of action, set the objective and password protect it.

Go ahead create your password now.

 

All the best