Where's the First Place to Look for New Growth Opportunities? Exploiting Hidden Successes
"No other area," wrote Peter F. Drucker, "offers richer opportunities for successful innovation than the unexpected success."
He viewed the unexpected success as a product or service embedded within the business that was not recognized immediately for its true value. According to Drucker, successful innovators are conservatives. They have to be. They are not risk-focused; they are opportunity-focused.
Drucker's genius was to state the obvious. In much of his work he showed again and again the two biggest obstacles to obtaining an opportunity focus were excessive concern with problems and the intimidating factor of fear.
Problems obscured attention to opportunities, because as long as the emphasis was on the comfortable retreat to regular routines and the concern was with daily crises, necessary change was postponed and even abandoned.
Drucker among others stressed the need for focusing on both innovation and exploitation of successes – at the same time. This article discusses just one of the many tactics Drucker developed for systematically discovering opportunities for growth.
The unexpected success is usually treated as a nuisance. Nobody is looking for it; nobody wants to be bothered by it; nobody is assigned to seriously look at the possibilities of exploiting the unexpected success.
A simple (but true) example explains better than any theoretical discussion how organizations of all kinds and sizes fail to recognize the potential of an unexpected success.
This example involves a colleague of ours. During the summer months, he purchases food at a seasonal market that specializes in a variety of prepared meals. Their soups are truly unique, and extremely nutritious.
For the past 15 years, he purchased about 75 soups at the season's end to last through the fall and winter months. He freezes the soups in his basement freezer.
The owners of the market were happy. They found the special soup order a little inconvenient but profitable.
From their point of view, they were just keeping a good customer happy and satisfied.
It was a standing joke—whenever he shopped at the market, he was identified as the fellow who purchased all those soups for the winter.
He was usually introduced to other customers and friends of the market owners as "the guy we were telling you about, the one who buys all those soups and freezes them."
People couldn’t help roll their eyes when hearing the introduction—followed by a manufactured “haha.” It seemed insane.
Then, the son of the owner of the market graduated from a top business school and entered the family business. He was well versed in the teachings of Peter F. Drucker.
It should be mentioned—indeed, emphasized—the owner’s son was knowledgeable about Drucker's principles and practices because our colleague gave him several Drucker books as a Christmas gift when he was 16 years old. This wasn’t something he learned in business school.
He remembered Drucker saying, "Look for opportunity in the unexpected success."
So, what did he do after his first year working at the market? You guessed it!
He began promoting and labeling soups (and many other items) as freezable for the winter.
Now, the market does an impressive amount of business selling frozen soups and other food items. Sales are reported to have dramatically increased—mostly to existing customers purchasing freezable items.
Simple? Yes! But not easy to do. Why?
Typically, there isn’t a formal system for identifying the unexpected success or a mechanism to assign the required resources for capitalizing upon it.
Are you "sweeping your unexpected successes under the rug," or are you systematically attempting to identify unexpected successes and purposely exploiting them?
Management must look at every unexpected success with the following four questions: (1) What would it mean to us if we exploited it? (2) Where could it lead us? (3) What would we have to do to convert it into an opportunity? (4) How do we go about it?
This means, first, management needs to set aside specific time in which to discuss unexpected successes; and secondly, an individual or team should always be assigned to analyze an unexpected successes and to think through how they could be exploited.
A Useful Digression
Let's face it: The typical business meeting is concerned with the care and feeding of problems; unexpected successes are usually ignored.
As Drucker said:
Resources to produce results, must be allocated to opportunities rather than to problems…Needless to say, one cannot shrug off all problems, but they can and should be minimized.
Problems have to be dealt with, but when crises receive all the attention, congratulations (and promotions) are usually reserved for those who prevented problem(s) from getting worse.
Essentially Drucker viewed the concept of profit maximization to be meaningless. He emphasized the "maximization of opportunities" as one of the major jobs of management; exploit the opportunities and profits will take care of themselves.
Sloan's Insight About Leadership and the Job of The Executive
Alfred Sloan—long-time president, chairman, and CEO of General Motors—was quick to realize that many executives prefer to "put out fires" rather than focus on opportunities.
Many of the "fires" they so superbly extinguish usually can be traced to problems they've created. This keeps them busy but not necessarily productive, that is, focused on opportunity maximization.
Drucker, in Adventures of a Bystander, tells the following story:
Decisions on people usually provoked heated debate in the GM executive committee. Once, the whole GM committee seemed to be agreed on one candidate for president of an operating division, who had handled this crisis superbly, solved that problem beautifully and quenched yonder fire with great aplomb.
Mr. Sloan, finally, broke in. “A very impressive record your Mr. Smith has,” he said, “but do explain to me how he gets into all these crises he then so brilliantly surmounts?” Nothing more was ever heard of Mr. Smith.
Needed: Opportunity Meetings
People see what is presented to them; what is not presented tends to be overlooked.
Said Drucker: "Most meetings discuss problems—especially in the areas where performance falls below expectations—which means that managers tend not to see the opportunities. They're simply not being presented with them.”
Drucker said again and again: "Of course, problems have to be paid attention to, taken seriously, and tackled... But if they are the only things being discussed, opportunities will die of neglect.”
Many organizations now have two meetings. One meeting to discuss and solve problems. Another meeting to identify and focus on opportunities.
The opportunity meeting is the ideal venue to force focus on identifying and capitalizing on unexpected or unseen successes. Meetings can be structured around this objective.
Take-home message: You should be integrating the “opportunity meeting” into your management practices. It's a practical way to make "opportunity maximization" part of your organization's DNA.
An Unforgettable Drucker Example of Exploiting an Unexpected Success
A constant background theme in much of Drucker's business writings was the importance of detecting and exploiting an unexpected success.
A good example is Cadillac back in the 1930s.
During the Great Depression, Cadillac could not sell its high-priced cars. Indeed, it was about to be liquidated. Yes, liquidated.
The only question, according to Drucker, in his book Adventures of a Bystander, was whether it would be abandoned altogether or if the nameplate should be kept alive.
Most of GM's senior executives wanted to cut their losses and abandon Cadillac from their product line.
Nicholas Dreystadt, a virtually unknown middle manager for Cadillac, intensely analyzed Cadillac's sales figures.
He analyzed who was buying Cadillacs and why they were buying them.
"It was then that Nicholas Dreystadt—whom none of the members had ever met—gate crashed the meeting of the executive committee, pleaded to be given 10 minutes, and presented a [marketing] plan for making Cadillac profitable again within 18 months."
Dreystadt wanted to "position" Cadillac against other status items rather than against other automobiles. Mink coats, jewelry, skiing vacations, and other prestigious items were Cadillac's real competition.
More importantly, by disaggregating customer data, Dreystadt discovered a "neglected" market segment: wealthy blacks.
Dreystad's numbers astonishingly revealed black entertainers, black lawyers, black realtors, black doctors and the like were buying Cadillacs.
According to Drucker:
It was company policy not to sell Cadillacs to blacks… The Cadillac salesmen aimed at the "white prestige market.”
But the wealthy blacks wanted a Cadillac so badly, they were willing to pay a substantial premium to a white man to front for them in buying one…
Dreystadt investigated this unexpected phenomenon and found a Cadillac was the only success symbol the affluent black could buy in the 1930s; they had no access to good housing, to luxury resorts, or to any other of the outward signs of worldly success.
And so Dreystadt, in the depths of the Great Depression, aggressively pursued and developed this neglected market segment—and soon enough sold enough cars to break even, and then eventually made Cadillac into a big moneymaker.
What Are The Implications Of This Story?
First, without a Nick Dreystadt or a formalized marketing planning system, no one even looks at the areas where a company has done better than expected.
Second, under-marketing occurs when an unexpected success goes unnoticed.
Third, unless properly disaggregated/formatted at the right level of detail, sales and profit figures will not show the unexpected success.
Finally, the central point of our narrative: Before making an abandonment decision, analyze the market/customer data in an attempt to discover unexpected successes that could be exploited.
Everything we've discussed in this article should be a continuing process, not a once-a-year exercise. It should involve all those whose jobs have a significant impact on the fortunes of the company.
In addition to opportunity meetings and other important practices, all strategic growth options should be formally evaluated via a rigorous strategic/marketing planning process.