Pivot Points II

A pivot point magnifies the effect of effort.

At the same time 7-Eleven was expanding its operations in China.  There, Murata explained, their outstanding advantage was cleanliness and service.  The Chinese consumers were used to being supplicants at a retail outlet and 7-Eleven Japan's tradition of spotless interiors and white-gloved service personnel who greeted customers with bows and smiles, as well as its good-tasting lunches, were producing twice as many sales per square foot than any competitor obtained. 

Murata's strategy focused organizational energy on decisive aspects of the situation.  It was not a profit plan or a set of financial goals.  It was an entrepreneurial insight into the situation that had the potential to actually create and extend advantage.

A pivot point magnifies the effect of effort.  It is a natural or created imbalance in a situation, a place where a relatively small adjustment can unleash much larger pent-up forces.  The business strategist senses such imbalances in pent-up demand that has yet to be fulfilled or in a robust competence developed in one context that can be applied to good effect in another.

ACTION POINT: Identify your natural or created imbalances and use them to magnify effect and effort.

Pivot Points

...a pivot point that will magnify the effects of focused energy and resources.

To achieve leverage, the strategist must have insight into a pivot point that will magnify the effects of focused energy and resources.  As an example of a pivotal objective in 2008 Noritoshi Murata, the president and chief operating officer of Seven & i Holdings was discussing competitive strategy.  This company owns all of the 7-Eleven convenience stores in the United States and Asia, as well as grocery superstores and department stores in Japan and other ventures.

Focusing on Japan, Murata explained that the company had come to the conclusion that Japanese customers were extremely sensitive to variations in local tastes and fond of both newness and variety.  "In Japan," he said, "consumers are easily bored.  In soft drinks for example, there are more than two hundred soft-drink brands and lots of new ones each week.  a 7-Eleven displays fifty varieties with a turnover of seventy percent each year.  The same holds true for food categories."

To create leverage around this patter, 7-Eleven Japan has developed a method of collecting information from store managers and employees about local tastes and forming quick-response merchandising teams to develop new product offerings.  To further leverage this information and team skills, the company has developed relationships with a number of second and third tier food manufacturers and found ways to quickly bring new offering to market under its own private-label brand, at low prices, using the food manufacturerss' excess capacity.

ACTION POINT: Look for the trends that will lead you to focus on pivot points for creating strategic advantage.

Anticipation IV

In many circumstances, anticipation simply means considering the habits, preferences, and policies of others, as well as various inertia's and constraints on change.  

Anticipation does not require psychic powers.  In many circumstances, anticipation simply means considering the habits, preferences, and policies of others, as well as various inertia's and constraints on change.  

Thus, do not expect California to balance its budget anytime soon, but you can expect a continued exodus of talent from the state.  We can expect another serious terrorist attack on the United States, but should not anticipate that the stultifying iron curtain between the CIA and the FBI will be removed short of all-out-war.  Google will continue to develop office-oriented applications that can be used online through a browser, but don't anticipate effective responses from Microsoft, who will be loath to cannibalize its PC-based Microsoft Office business.   The use of smart phones will grow rapidly and the infrastructure will probably end up being overtaxed so industry consolidation will be likely.

All of these are examples of anticipation based on considering the habits, preferences and policies of others.

ACTION POINT: Observe the habits, preferences and policies of others to develop anticipation.

Anticipation III

If there is a storm in the Himalayas, you can confidently predict that tomorrow, or the next day, there will be flooding in the Ganges plain.

Most strategic anticipation draws on the predictable "downstream" results of events that have already happened, from trends already at work, from predictable economic or social dynamics, or from the routines other agents follow that make aspects of their behavior predictable.

Some of the most striking anticipations made in any modern business were created by Pierre Wack and Ted Newland of Group Planning at Shell International.  In 1980 Wack said that "certain aspects of future events are predetermined: If there is a storm in the Himalayas, you can confidently predict that tomorrow, or the next day, there will be flooding in the Ganges plain."  The flood Wack and Newland had predicted back in 1970 was the rise of OPEC and ensuing energy crisis.  The storm creating this flood had been discerned in the pattern of incomes and populations of key oil-producing countries, In particular, Iran, Iraq, and Venezuela, all had high oil reserves, large growing populations, and ambitious development goals.  Wack and Newland predicted that such countries would be strongly motivated to seek price increases.  They saw that price increases would, in turn,  make countries such as Saudi Arabia and Kuwait realize that oil in the ground might appreciate faster than the dollars it bought once it was pumped and sold. 

ACTION POINT:  What are the storms in your industry and their likely downstream floods?

Anticipation II

The most critical anticipations are about the behaviors of others...

The most critical anticipations are about the behaviors of others, especially rivals.  It is now clear that U.S. military plans for the invasion of Iraq in the spring of 2003 failed to anticipate the rise of a vigorous insurgency.  As the army's own assessments states: "The difficulty in Iraq in April and May 2003 for the Army, and the other Services, was that the transition to a new campaign was not well thought out, planned for, and prepared for before it began.  Additionally, the assumptions about the nature of post-Saddam Iraq on which the transition was planned proved to be largely incorrect."

At the same time, the Iraqi insurgency was, at least in part, initiated by Iraqi ex-military officers who anticipated the media coverage of U.S.  casualties would tilt U.S. public opinion in favor of withdrawal, as it had in Vietnam and, more recently, in Mogadishu.  Indeed, according to Bob Woodward, "Saddam had commissioned an Arabic translation of Black Hawk Down issued copies to his senior offices."  So, in a deeper sense, U.S. planners failed to anticipate the Iraqis' anticipations.

ACTION POINT:  Consider the behaviors of your competitors.