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This month's article is.....

Don't Let Analysis Kill Your Creativity

Developing a business strategy relies on creativity and idea generation far more than it is driven by analysis.

Sometimes the idea is created in a eureka moment. Paul Allen and Bill Gates, who had been - mostly unsuccessfully - developing software for minicomputers, saw the cover of the latest edition of Popular Electronics, which showed a new, smaller computer that could fit on a desktop. They immediately realized that the future of computing was the PC and that they should focus their software development on these smaller, desktop machines. They called the makers of the PC and, within a few weeks, had written software for the machine and started a new company, Microsoft.

Other times the idea emerges more gradually. Fred Smith, for example, combined his post-graduate business studies, his general observation that most activities were becoming more automated and his experience as a charter pilot to develop the idea of an overnight parcel delivery service using a hub and spoke distribution model. Smith then joined the marines and it was only after he left the armed services that he pursued his idea with earnest, and created FedEx.

In both these stories, as in most business development successes, the idea emerges from individuals or small groups who have a strong desire to change the world in some way, and who are able to combine their expertise and experience in a particular niche with an insightful understanding of the broader changes driving the markets in which they operate.

Unfortunately, most of the academic research within business strategy has focused on analytical methods and tools, rather than how to create new business ideas or how to recognize and exploit your organization's unique experience and expertise. Contemporary models of business strategy begin with economic analyses, and strategy's leading authority is Michael Porter who, in the 1980s, produced two highly influential books, Competitive Strategy and Competitive Advantage, both of which are focused on analytical rather than creative processes to drive strategy development.

Don't get me wrong; a certain level of analysis is essential for business strategies to succeed. But without a much bigger focus on the quantity and quality of your ideas, you will simply end up with a greater understanding of your current market position, rather than a compelling basis for driving new profitable growth for your business.

The table below compares analytical approaches with creative approaches to strategy. Which do you tend to follow?   

Analytical Approaches

Creative Approaches

Focus on analysis of markets and performance

Focus on new ideas

Desktop assessments

Real-life experience

Follower

Leader

Problem solving

Innovation

What's happening?

What if?

Dealing with the past

Focused on the future

Financial proof before action

Action before financial proof

Forecasts and long-term plans

Rapid learning action plans

Strategy teams staffed with analytical experts

Ad hoc strategy teams staffed with a mix of 'thinkers' and 'doers'

Analytical vs. Creative Approaches To Strategy

 

One of the critical differences between analytical and creative approaches is, under an analytical approach, the need to obtain financial 'proof' before taking any action. I have sat in endless meetings where a manager comes to an internal forum to ask for some initial funds for an idea, only to be faced by a group of people with no real understanding of the idea being discussed. The group then attempts to dissect the idea, criticize it and find as many reasons as possible not to do it. 

One of the initial questions this group will ask is "Can you show me your business plan and financial forecasts?" The meeting will then quickly descend into a detailed examination of the financials, rather than the quality of the idea itself. And if the initial financials are not deemed strong enough, even if the idea has real merit and could, if properly pursued, create significant growth, it will be dropped, often forever.

A few years ago I was working with a retailer that was looking for new growth ideas. One of the ideas suggested was to target a new group of customers through a non-retail channel. The potential prize was huge - up to 50% top-line growth. There was one problem, however: the initial financial modeling suggested that the profit margins would be only half of the existing retail business.

For that reason - and that reason alone - the idea had been dropped. It took a proactive and persistent commercial manager nearly a full year of negotiation with the executive directors to show that, if certain changes were made, the profitability could increase and he was finally able to get some support to turn the idea into action - albeit at a relatively slow pace.

How would these internal forums have dealt with the initial ideas of Sergey Brin and Larry Page, the founders of Google? The answer, we can safely assume, is not very well. Brin and Page would have been given short shrift by these risk-averse groups as it took them a couple of years or so before they had identified how they could turn their search engine technology into a money-making business. For Brin and Page, as for most innovators, the idea is developed first and the business model second.

The bottom line

Until your business escapes the trap of seeking financial proof before taking initial action, and finds ways to create new ideas and develop and nurture them in a way that doesn't threaten your ongoing activities, you will always face a dearth of radical growth options and miss out on new, compelling innovations to drive your strategy forward.



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Stuart Cross
Morgan Cross Consulting
Tel: +44(0)1636-526111
www.morgancross.co.uk
www.crosswiresblog.com

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