Jujitsu is the martial art whereby you use your opponent’s strengths or your own (oft-perceived) weakness to your advantage.
Hmmm. Sounds like a technique entrepreneurs might want to apply to know where and how to carve out a specific market niche. Many would use it to figure out specific points of friction where your larger competitors struggle, and focus there to compete with them.
But that tactic works only for a competitive landscape that no longer exists.
Jujitsu remains a critical technique. But one lesson of explosive growth companies is that the zero-sum game between you and your larger opponent is no longer the game to play. The rules underlying that game and the competitive landscape it reflects have changed.
Let’s explore how and what it means to you.
A changed competitive world and what it means to you
Here’s something we all know: Industry boundaries are blurring.
Think of Tencent or Tesla—they’re hard to categorize. The former provides services from banking to media, and gaming to social media, while the latter produces cars as it builds energy storage capabilities for a variety of high-energy needs.
Our future is a world of “business ecosystems,” reflecting the bundling and unbundling of value chains and the blurring of industry boundaries.
As boundaries blur, companies who’ve long captured a disproportionate percentage of economic profit within traditional industries face off against companies they’d previously never viewed as competitors. Namely, you.
And here it gets interesting. The new questions become: What’s common to these ecosystems and to the explosive growth models that underlie them, and what role might you play to help orchestrate those ecosystems in a way that drives explosive growth for everyone, big and (still) small?
It’s the identification of “what is common” and the underlying lessons that forms the foundation of the new rules of our changed competitive world and, consequently, the pragmatic steps you can take to become one of those explosive growth companies.
Let’s see how.
3 steps to take as an early stage entrepreneur
1. Plant a flag on a “problem” to own—and own it.
Explosive growth has always come from identifying points of friction or market breakdown and orchestrating capabilities (skill sets, behavioral patterns, and technology assets) to overcome them.
A critical note: Planting a flag has little to do with the existing set of products and services that a firm currently offers. Recall that the majority of businesses are optimized for a world that no longer exists.
But don’t take my word for it. It’s evidenced by the topple rate—the rate at which companies fall from their once competitive position. Over 60 percent of companies on the S&P 500 in the past 15 years have gone bankrupt, been acquired, or fallen off the S&P ranking table, and the pace is accelerating.
Most large organizations look for growth for their existing products or services—an inside-out perspective driven by the question, How do we sell more of what we already have, just differently?
Figuring out what flag to plant requires starting from an outside-in perspective, working from the critical points of friction or market breakdown and what’s required to tackle those. Then, and only then, figure out what products and services are needed and, critically, who provides them (a preview of steps 2 and 3).
Here’s the reality and the beauty of the new models: You don’t need to offer all the products and services critical to protecting this flag, just those critical to unlocking a disproportionate amount of value that the flag represents. How? Well, that’s the point of the second step.
2. Clarify—and mobilize around—the new 20 percent.
Capabilities (skill sets, behavioral profiles, and technology assets) are the infrastructure of execution. No capabilities, no execution. No execution, no customers. No customers, no business. Pretty straightforward—until it’s not.
20 percent of any organization’s capabilities drives roughly 70 percent of the value it delivers. A changed competitive world requires a new 20 percent of capabilities critical to capture the 70 percent of new value.
The question becomes: What is that new 20 percent, and what do you do about it?
This is where and why large companies become so important to small companies, and critically, you to them. They likely don’t have the new 20 percent critical to capture the new 70 percent of value, nor is it easy for them to do so. But you can, which is where and why you become instrumental to the new business model (or how firms orchestrate their capabilities to deliver value).
Which takes us to the third step.
3. Orchestrate your ecosystem.
Orchestrating your ecosystem involves figuring out what is the “new 20 percent” not only of yours, but those of your partners, and figuring out how to harness—orchestrate—all of these capabilities to capture new sources of value in new ways.
Many people characterize business ecosystems as a set of partners to engage with. But there’s a more pragmatic definition that underlies explosive growth models: The orchestration of capabilities from different parties around the new sources of value to create.
This isn’t a partnership play. This is an embeddedness play—the orchestration of capabilities whereby everyone engaged shares risks and rewards together.
There’s a cult movie classic, “The Gods Must be Crazy,” with a line in it that I refer to often when working with both large and small organizations:
“Things that were yesterday unknown have today become a necessity.”
The key lesson for entrepreneurs is to become that necessity of the new 20 percent of capabilities critical to capture 85 percent of the economic value that makes up any and all business ecosystems.
Do you want explosive growth? Then focus on how to execute on this lesson around which the ecosystem will be orchestrated.
What’s in your new 20 percent?