The Pursuit of Good Business

The Pursuit of Good Business

By Thomas E. Ambler

"How's your business? Good?" What do we mean when we say "Business is Good"? Let's consider some possible meanings:

We are making good money.
Our business does good for others while doing well for us.
We use good business practices/principles that work.
We have a positive core ideology — good values.
Our core business is good — we are positioned at the right place for this moment in time.
Our marketspace provides many good opportunities for future growth.

Any of these would be interesting and worthwhile to consider. You probably want all of them to apply to your business. However, for obvious reasons of length we will limit our consideration to only one. Let's deal with just the last possibility and address the question, "how can you generate and recognize a really good market opportunity to grow your business?"

Before we launch into our discussion, let's set the stage by making some assumptions about you and your business. The first assumption is that you, in fact, have an existing business with a distinct culture — your Core Business. Secondly, you want your company to be far more than a mediocre business. You want it to be at least "good" and on its way to becoming "great." Thirdly, within the past year or so you have completed a strategic plan that includes three key elements:

Mission Statement that specifies both the future role and the core values you intend for your company to exercise within its business environment;
Goals that define both the qualitative criteria and supporting metrics your company must satisfy to consider itself a "great" success;
Strategies that designate the "course and direction" you intend to follow over the next several years regarding your core business, new opportunities, competencies, infrastructure, organizational development, financial and ownership issues and size.

(For further detail about these elements see Simplified Strategic Planning by Robert Bradford and Peter Duncan of the Center For Simplified Strategic Planning.) The existence of this plan implies that you have a good grasp of both your internal situation with its strengths and weaknesses and the external forces that impact your Core Business, particularly your customers and competitors.

The fourth assumption is that you want to engage in a never-ending rejuvenation process of proactively seeking, evaluating and committing to new market opportunities. If this had not been true through much of your past, you would have no Core Business, which is no more than the summation of all previously adopted Opportunities. You want a dynamically changing portfolio of new market opportunities that will assure that you will transform today's Core Business into the best Core Business available for you tomorrow, given the migration of value in the marketplace.

These are the Market Opportunities you want to pursue to the point where you can make a wise go/no go decision. The continual search for new Market Opportunities consists of two distinct phases as diagrammed in Figure 1 below — the Opportunity Idea Generation Phase and the Opportunity Development Phase.

In business literature there are a number of Opportunity Screening devices. Kuczmarski offers three screens for the three stages of new product development opportunities as follows:

Screen 1 — Selecting High-Potential Ideas
Screen 2 — Selecting High-Impact Concepts
Screen 3 — Optimizing the New Product Offering

Each of these screens contains excellent questions that deal with three areas of concern — Strategic, Consumer and Financial. (See Appendix 2A of Innovation — Leadership Strategies for the Competitive Edge, by Thomas D. Kuczmarski.)

You can find useful opportunity screens in other processes like the "R5 Decision Model" and the "Stage-Gate Process." However, you will have difficulty improving on the general-purpose Market Opportunity Screen (shown below as Figure 2) taken from our Simplified Strategic Planning process. Based on sound new product/market launch research by MSU Professor Frank Bacon, it can be used as the screen for go/no go decisions at all stages in the development of an opportunity.

This screen helps us make wise decisions about the contents of our Opportunity Portfolio once the idea for an Opportunity has been recognized and is in the Development Phase. As indicated in Figure 1, it is appropriately applied as the screening device for the "raw" idea and at each stage of the Development Phase. When used for the final launch decision, it should contain rigorous analysis and explanations that make it tantamount to a full Business Case.

So, once an opportunity begins to take structure in Phase 2, we know pretty well how to deal with it. The bigger question relates to Phase 1 "how do we generate ideas for 'good business' in the first place?"

Perhaps we can take cues from an unlikely combination of famous people, Pete Rose, Mark Twain and Thomas Edison. We want to be like Pete Rose who held a record for the most hits in baseball. How? By having the most times at bat. Opportunity ideas are times at bat. "Good" opportunity ideas are times at bat where we know we will see good pitches. We also want to be like Thomas Edison who said, "I am more of a sponge than an inventor. I absorb ideas from every source". I take half-matured schemes for mechanical development and make them practical. I am a sort of middleman between the long-haired and impractical inventor and the hard-headed business man who measures all things in terms of dollars and cents. My principal business is giving commercial value to the brilliant but misdirected ideas of others." He further states, "Many of life's failures are people who did not realize how close they were to success when they gave up."

We are even not against taking advantage of "the greatest of all inventors," who, according to Mark Twain, is not named Edison but rather "Accident." Of course we recognize that "Accidents" don't just happen in business innovation, anymore than the increased frequency of holes-in-one just happens to the likes of Lee Travino and Tiger Woods. Edison weighs in again with "I never did anything worth doing by accident, nor did any of my inventions come by accident; they came by work."

So, what's the message? Generation of "good" opportunity ideas requires positioning your organization with a systematic, common sense process that ferrets out possibilities, a culture that fosters a willingness to fail, a recruiting method that seeks curious, intelligent "sponges" and a work ethic that just won't stop.

The Simplified Strategic Planning process challenges organizations to view their universe of Market Opportunities in terms of the matrix shown in Figure 3. Your Current (Core) Business is the northwest quadrant of present products and services in present markets. Certainly, you have opportunities associated with growing your Core Business. You can further penetrate your existing customers or ones like them with the present or incrementally tweaked products and services. The non-core quadrants require more extreme "augmentation" activities to develop opportunities. Chances are that the big-time opportunities, the Big Hairy Audacious Goals (the BHAG's of Built to Last) exist in these riskier quadrants.

Used systematically, this matrix can be very helpful in generating new opportunity ideas. But wouldn't it be even more helpful if we could combine it with a general-purpose checklist of mind joggers and idea starters for Market Opportunities?

Every book on strategy deals with some subset of the multitude of factors and thought processes you should consider when you formulate your strategy. (For example, The Profit Zone by Adrian J. Slywotzky and David J. Morrison has gone part way toward a checklist for innovating business design with its chapter entitled "The Profit Zone Handbook.") Most of these same strategic considerations are equally appropriate for Opportunity Idea Generation. Fundamentally, a "good" opportunity is one that (a) fits with who you want to become as a company, (b) involves an attractive market and (c) takes advantage of a competitive opening.

One mechanism for generating opportunity ideas is the "Adjacency" approach, which is similar to the "Augmentation" appearing in Figure 3. This "Adjacency" approach is presented by Chris Zook of Bain & Company in his stimulating and useful book, Profit from the Core, Growth Strategy in an Era of Turbulence. It promotes the fundamental premise that successful market strategy starts with protecting the Core Business through seeking growth in Core Business adjacencies. For companies with a strong Core Business, that is a premise that is hard to debate. Protecting the Core Business is certainly consistent with the research findings in Built to Last, by Jim Collins and Jerry Porras. A Core Business that satisfies the "what can you be best in the world at" and "what are you deeply passionate about" criteria for greatness presented in Jim Collins' newer book, Good to Great, is especially worth protecting and leveraging for expansion.

The "Adjacency" methodology systematically explores all of the dimensions of doing business in markets related to your Core Business and prepares a map of possible growth opportunities as you move outward from the Core in each dimension. For a "picture worth a 1,000 words" see the generic Adjacency Map in Figure 5, taken from page 74 of Profit from the Core.

On this Map each of the generic end-points like "Next Generation" or "Support Services" begs for a separate brainstorming session to generate specific adjacency opportunity ideas for your particular business. The author suggests using the following sequence to identify specific adjacencies:

Identify the adjacencies you are already in and array the data on how you are doing there (e.g., market share, profitability, investment)
Identify the adjacencies the organization is considering or has rejected
Identify other known adjacencies, possibly requiring two or three strategic moves to get there
Identify adjacencies suggested by studying investment action of competitors
Identify adjacencies suggested by potential new competitors, often small companies
Identify future adjacencies due to technology or other developments

Recognizing that this process will likely generate a long list of possibilities, the author recommends use of the following preliminary screen, which is analogous to the Opportunity Rating exercise in Simplified Strategic Planning:

How much does this strengthen our Core Business franchise?
What are the chances of becoming a leader in the new segment or business?
Could this move have a defensive benefit, preempting or interdicting our present or future competitors?
Does this investment position our Core Business strategically for even stronger future adjacency, such as hedging against a major uncertainty or constituting one step in a well-defined sequence of strategic moves?
Can we be certain of superbly executing implementation?

Failure on two of these dimensions is normally cause for rejecting the adjacency. Among the remaining ones you would choose only the best prospects for further investigation.

The whole purpose for using the checklist and other systematic mechanisms in idea development is to trigger creativity. Creativity, in its essence, is simply new synthesis of old knowledge. Therefore, anyone charged with developing new opportunity ideas must do three things. First, they must become intimately familiar with and establish a deep, organic understanding of your Mission Statement, Goals and Strategies. Secondly, they must steep themselves in the information related to the external and internal situation that undergirds your Mission Statement, Goals and Strategies. Thirdly, they need to be in constant exploratory contact with customers. These steps will provide them with the raw material for creativity. Only then will they be able to utilize these idea generation techniques fruitfully. Remember Edison's quote, "Genius is one percent inspiration and ninety-nine percent perspiration."

Good Business is the worthwhile reward for following Edison's adage, "The three essentials to achieve anything worthwhile are, first, hard work; second, stick-to-itiveness; third, common sense." You have been exposed to a common sense approach to generating and screening "good" opportunities. You know you have "good" opportunities waiting to be discovered and developed. Is it now time for hard work and stick-to-itiveness? Bon voyage!

Tom Ambler is a consultant with Center for Simplified Strategic Planning, Inc.
He can be reached via e-mail at

For more, click here for a free subscription to Course and Direction.