Building Momentum

In Part 3 – Building Momentum – Section 5 – Staircases to Growth – the Authors emphasize that executives who want to develop Horizon 3 into core profit engines face two big problems: market uncertainty and gaps in their skills, assets and relationships.


They found that successful growers typically address these problems by taking not bold leaps, but a series of measured steps. Each step takes them a little closer to their ultimate goal, makes money in its own right, and adds capabilities that prepare them for further opportunities. When these growers look back on what they have achieved the Authors state that they see not a chaotic zigzag but a distinctive staircase pattern.


Their analysis found that virtually all successful staircases proceeded in four phases:


1.  Seeding the initial growth options.


2. Testing the business model.


3. Replicating and extending the business.


4. Managing for profitability.


The Authors then indicated that the staircase architecture is closing linked to the three horizons of growth. The first stage of the staircase, seeding growth options, is essentially Horizon 3.


The second stage, testing commercial viability, represents the challenging transition from Horizon 3 to Horizon 2.


The third stage, in which there is rapid replication and extension of the business concept is synonymous with Horizon 2.


The final stage of the staircase, managing for profitability, is consistent with guiding core business in Horizon 1.


The Authors then go on to describe in detail how to implement each stage.


In summary, the Authors believe that the staircase approach reflects how experienced entrepreneurs succeed in the real world, often despite fierce competition. The best a company can do under changing circumstances to manage risk and succeed is to build strong capabilities and secure strategic options while retaining as much flexibility as possible in a measured way.


In Part 3 – Building Momentum – Section 6 - Securing Advantage the Authors explain that successful growers secure advantage mainly by focusing on capabilities – the skills, assets, and relationships that companies assemble to build competitive businesses.


What counts in the end is the set of capabilities a company brings to bear in pursuing its growth opportunities. The company with the strongest bundle of distinct capabilities has the best chance of emerging as the winner. Long-term success is secured by assembling a difficult-to-imitate bundle of critical capabilities through the staircase approach.


The Authors lay out their definition of a capability platform that includes the following:


Operational Skills: IT Management, research and development, product design and low-cost manufacturing.


Privileged Assets: Distribution networks, brands, reputation, customer information, infrastructure and intellectual property.


Growth-Enabling Skills: Acquisition and post-merger management, financing and risk management and capital management.


Special Relationships: Customers, suppliers, partners, investors and government.


The Authors then explain what it takes to go from assembly capabilities to securing advantages through execution with examples of leading companies doing it at the time.


In summary, the Authors emphasize that although many companies become very good at strategic planning things go awry in the execution because of the capabilities assembled weren’t able to execute and secure sustainable growth.


In Part 3 – Building Momentum – Section 7 – Winning Through Execution – the Authors emphasize that it’s through active adapting the business model successful growers succeed in the execution phase.


What does this mean? The Authors state that good business builders are willing to move quickly, fixing as they go. A business model can never be more than a best guess, a work in progress with many ups and downs along the way. No matter how good it is, there will always be a gap between how a company thinks it should work and how it will have to work to succeed in the marketplace.


What turns a good model into a blockbuster business is the willingness to take a few more steps and adapt the model in response to market feedback. That is what must successful entrepreneurs do and why others fail to do.


This is what the Authors call “active adaptation.” Builders of successful growth initiatives do not have the luxury of time, they pursue adaptation by means of more, faster and better-targeted revisions. This skill, more than any other, is what makes the premier business builder stand out from the pack.


In summary, the Authors then go on and explain how to make the business model work in the marketplace. This includes building multiple staircases in parallel. Using several companies as examples they really reinforce this key step in the execution phase.