UK: BY INNOVATION NOT IMITATION - TAKING THE NOVEL APPROACH. - Seemingly intractable situations may be unboxed by taking a novel approach.

by Robert Heller.
Last Updated: 31 Aug 2010

Seemingly intractable situations may be unboxed by taking a novel approach.

The Fleet Street price war can be called many names - but not, for sure, creative or innovative. Rupert Murdoch chose to use a blunt instrument to bring The Times to a respectable level of circulation. But did the Telegraph's Conrad Black have no alternative but to reply in kind?

The first answer is that, if Black was right to retaliate by imitation, he should have moved at once, the instant that Murdoch laid down the challenge to the Daily Telegraph. That way, the gap between the circulations wouldn't have narrowed to its present dangerous levels. With luck, the Telegraph might even have expanded well beyond the magic million, instead of falling perilously below that mark.

It's the age-old problem of the market leader assailed by a price-cutter: damned if you do, damned if you don't. Match the cuts, and your profit margins are slashed across the whole of a turnover which is by definition substantially higher than the attacker's. Turn the other cheek, and you lose market share until (like Black) you're forced to follow suit, and take a double hit. But are the options truly that limited?

Jakobowsky's Law states that 'there are always two possibilities' - and that's a minimum. For instance, as a Murdoch man points out, Black could have left the Daily Telegraph price intact, but slashed the Sunday paper in order to attack the Sunday Times profits which finance the vast losses on The Times. At 20p, with the newsagents' return protected, the latter is to all intents and purposes a freesheet: that actually could be called a novel approach to national newspapers.

Novel approaches - innovations - are what all top managers profess to want. Yet time and again they plump for imitations, 'me-toos', following the leader, and 'the way we do things round here'. When the so-called Seven Dwarfs (all major, well-financed companies) were trying to muscle in on IBM's mainframe profits, they all made the fatal error of mimicking the enemy in head-on engagement. Out of 310 wars and campaigns from the time of the ancient Greeks to the first world war, only six were won by frontal assaults: and the Seven Dwarfs duly dwindled away one by one. That lesson from the past might have appealed to a man of Black's historical leanings; attacking the Sunday Times would have been a classic flanking movement, going round the side. Would it have worked? Nobody can say for sure. The only certainty is that this and other possibilities needed thorough evaluation before plunging into costly trench warfare - especially since the military history also shows that you need a three-to-one advantage in strength to win by full-frontal assault.

Black is out-gunned by Murdoch in the UK, let alone worldwide. The solution to the Telegraph problem is therefore unlikely to lie 'inside the box', that is, within the established parameters. It is like the familiar teaser of connecting nine dots with a single line: you'll never solve it without going right outside the diagram. Professor Simon Majaro of Cranfield has a fascinating case which describes the results, first of being boxed in, and then of breaking out - the subject being a dredging company.

As happens with many businesses, this one had declined from prosperity to relative penury. Like Black's, its prices were being undercut by subsidised competition. The expensive tendering process (costing up to $500,000, with only a 10% success ratio) was thus becoming even more burdensome. Since the outcome of tendering was uncertain, the company couldn't plan ahead, and its costly capital equipment wasted months at sea instead of working. None of the senior managers could see a way out of the box.

A 'Strategy Search' weekend with Majaro, however, changed the top management's angle of vision. It became clear that all the problems were subsumed in the tender process. Was that itself a lock-in? The unlocking came from a most unlikely source: Majaro's chimney sweep, who arrived unbidden and successfully argued for preventive maintenance - regular sweeping before need. The analogy immediately suggested an escape from the tender impasse: long-term contracts for regular, preventive dredging.

That initial concept was the foundation for sweeping strategic change. It was widened by the now enthused strategists into broadly defined harbour maintenance, based on detailed knowledge and analysis of the world's ports and their needs. Unboxed, the company again started to grow and prosper. Differentiation, the only sure key to success in today's markets, had been achieved, not just by different, better ideas, but by a different approach to managing an apparently intractable situation.

Vive la difference, indeed. Behind any brilliantly successful commercial strategy lies a simple truth: genuine difference lifts you clear of the competition - hence Edward de Bono's word 'surpetition'. For example, Rover's Discovery (whose output has octupled since 1989) is a surpetitive product. There is nothing quite like it. What the Financial Times calls the vehicle's 'undoubted if mysterious appeal' is thus no mystery at all. But note that the inspiration - a down-market Range Rover - was backed by action.

The 30-month elapsed time between design and launch represented the sharpest possible departure from motor industry norms, as did the synchronous teamwork which achieved the impossible. That was clever, innovative management. Any fool can arrive at a situation where simple price-cutting represents a deadly threat, which only inspired creativity can repel with profit. Far better, as rugby forwards say, to get your retaliation - or rather your innovation - in first.

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