Planning strategically for growth involves asking and answering three fundamental questions about your business: Where are we? Where do we want to go? and How are we going to get there? Thus far we have been primarily concerned with the first of these questions-where are we. We have looked at the five components of your business and raised questions to help you evaluate the relative strengths and weaknesses of these powerful engines. We have also examined the process of energy conversion and raised questions to help you determine how effectively your company generates, directs and utilizes the energies at its disposal to achieve maximum results in terms of productivity, profitability and revenue growth.
Now we come to the second basic planning question-where do we want to go. The answer to this question sets the direction for channeling corporate energies. It also plays a crucial role in determining how much energy is available for direction. The higher our goals, the greater the energy they release. Energy is released when we become aware of a greater unrealized possibility and make a firm decision to convert that possibility into a reality. Awareness of the opportunities available for growth is the first step toward achieving them.
In this chapter we will be focusing on opportunities that exist in the external environment for the growth of your company. In subsequent chapters, we will examine some of the potentials buried within your company that also represent untold opportunities for its growth.
According to common conception the true entrepreneur is one who has a vision of an opportunity which others do not see. It is that vision which inspires his thinking, excites his imagination, releases his energies and propels him into action. A vision of opportunity is the basis for all high achievement.
Steve Bedowitz and Robert Levin of AMRE had such a vision of the home improvements industry. Levin explained: "Steve and I saw that nobody had grown big in this industry. Most of the guys were salesmen or carpenters." Like Art Bartlett, founder of Century 21, in the real estate industry and Harry Patten in the land business, Bedowitz and Levin saw an opportunity in a fragmented industry composed of thousands of small mom-and-pop operators. In 1981 AMRE got its first license to sell siding under the Sears name in Austin, Texas. Steve then realized that "here is a vehicle that is easily expandable. The name Sears gave us the little extra that made it easier for us to expand across the country, so that's when the idea came to us to specialize in just a few products but take it national." The company quickly established operations throughout Texas and neighboring states and then expanded across the country.
Awareness of an opportunity is essential, but awareness alone is not enough. There must also be a compelling urge for achievement. That urge or determination to achieve releases our energies for effective action. As we said in the first chapter, you must really want it. Says Levin:
"The real difference, the reason why we made it was our goals. The typical business person's goal is to make enough money for themselves. Our goal on a continuing basis was not how much money could we make, but how big could we grow the company. There is a big difference. We both always wanted to build a big company and we set out to do it. From the beginning we have always set goals. Short term, long term. We've amazed ourselves at how close we've come to hitting them. Setting the long term goals and living with those is the real secret of any good organization. We still have aspirations, things we want to accomplish."
Nor are their goals limited to being the dominant force in the $5 billion dollar siding industry. Siding is only a small part of the $100 billion home improvements industry. And home improvements is really just one of the many fields in which they can express their organizational capabilities. As Bedowitz explained, "In essence, we are not a siding company. We are a direct consumer marketing company with many other potential fields for our growth. My goal is to be a Fortune 500 company by 1992."
THE TWIN KEYS
Back in the 1960s Fred Smith had a vision, which legend says he first described in a college essay. His vision was:
"to build a transportation company that would be to the automated, computerized, technologically-based industries of today what the railroads were to the industries of the late nineteenth century, what the truck lines were to the traditional manufacturers of the 30s and the 50s; that is, to be the primary artery of today's high value-added industries, the clipper ships of the computer age. My goal when I started the company was to create a totally unique transportation system that I felt was the total underpinning of the computer age. I mean it was a huge vision and it still is. It hasn't changed one iota."
In an industry dominated by giant UPS since 1907, Smith was able to see tremendous opportunity where others saw none, because he understood the significance of changes in life style. He saw that the pace of modern life was accelerating rapidly and that people were no longer satisfied with one week or even three day parcel delivery. By simply abridging that time to overnight, he founded an new multi-billion dollar industry.
For 16 years Smith's vision has guided the growth of Federal Express. That vision consists of two parts-a perception and an aspiration. He saw a possibility and he wanted to achieve it.
"I believe Federal Express will be far and away the largest transportation company in the world. Now we're probably number 8 or 9, but I don't have any question about the fact that we're going to be bigger than all of them. My unfulfilled aspirations are twofold: first, to do all over the world basically what we have done for the United States; and second, to make Federal Express a flawless organization in terms of the quality it produces."
Smith's perception has set the direction for the growth of Federal Express over the last 16 years and will continue to do so well into the next century. His determination to realize what he perceived as possible has been the catalyst which released and set in motion his energies and the energies of his people. That commitment continues to propel the company forward.
Smith's awareness and aspiration fixed the boundaries or limits on what the company could accomplish, but its actual achievements have depended on his ability to inspire others in the company to believe in and seek to fulfill his vision.
"I think that the most important thing that we have done here at Federal Express is to make sure that everybody in the company shares in the vision of this institution. The vast majority of people want to do something that they feel is important in their lives. One of their primary motivations is to be on a quest, to be on a mission."
The leader's vision determines what is possible, but his or her ability to generate acceptance of the vision in people at all levels of the company-to create a consensus of thought and enthusiastic support for action culminating in the wholesale release of collective energies-determines to what extent that vision will actually be realized.
The leader must have an awareness of opportunity and an aspiration to realize it. These two result in a commitment to pursue the opportunity. When that commitment is complete, it expresses as an infectious and overflowing enthusiasm. That enthusiasm releases the energy of the leader and sparks the imagination of key people in the company. When the leader succeeds in communicating the vision and in creating a commitment and consensus among others in favor of pursuing the opportunity, their enthusiasm and energies are also released and the whole company is propelled into action.
A perception of opportunity and a will to achieve it are the twin keys that unlock the powers of rapid growth. If the perception is narrow and circumscribed-if we fail to see that there are infinite opportunities within and around us-or if the aspiration is limited, if the goal we set is not high enough to keep us stretching, so will be our achievement.
HUNTING FOR TREASURE
In Alexander Dumas' The Count of Monte Cristo, a poor innocent sailor is thrown into prison where he is befriended by a learned priest who gives him the map to a fabulous treasure buried on a deserted island. After the priest's death, the sailor escapes from the prison, recovers the treasure and become one of the wealthiest men in the world.
We write with conviction about the opportunity for every company to grow rapidly and profitably, because every company has not one, but five treasures within its reach and available for exploitation-not on some far off island-but right in its own back yard. We referred to these treasures earlier as the five engines of a business. We have also sighted examples of companies in crisis which have successfully tapped these opportunities for growth, like Chrysler Corporation and C&J Industries did in the face of intense competition from Japan and SAS did in a stagnant commercial airline market.
What are these opportunities? Where do they come from? How can we identify them?
Life is continuously throwing up new opportunities in every industry for those who have the eyes to perceive them. It does not require a visionary's genius, just an open mind and a will to see. New opportunities are constantly emerging because society is continuously evolving, and the rate of social development is greater today than at any prior time in recorded history. Every change that occurs as part of this process has direct or indirect impact on virtually every aspect of social life and, therefore, on virtually every business as well.
Earlier we described the five engines as the essential components of a business, but they can also be viewed as the five basic social resources which each business draws upon in order to constitute itself and to grow-capital, technology, market, people and organization. Each significant change in society influences one or more of these five components, adding some new dimension to it or altering the way it functions. The effort to become aware of these changes and identify their significance generates a perception of new business opportunities. This perception is worth more than all the capital invested in a business, ten times more. For that perception creates capital and the fruits of capital-profits.
During the 19th century, capital was considered synonymous with business. The barons of industry in those days were known as capitalists. Countries with established capital markets and companies that could amass capital flourished. As the last century came to a close, a second engine-technology-became increasingly important. Rapid advances and revolutions in technology have been the most important engine of industrial development during the last eight decades. Even today they continue to be a powerful force for change, a prodigious generator of new opportunities.
But now more than any time in the past, there are many other social changes taking place which influence these five engines and generate new opportunities faster than we can perceive or respond to them. All the five engines are very actively producing fabulous treasures for those who see and seek them.
Ordinarily we view the changes taking place around us from the perspective of our present needs and activities. We take note of those with immediate and direct impact on what and where we are today. We ignore many important but apparently unrelated trends because we do not see how they will or could impact on the five social resources which constitute our business. If we really want to understand the full significance and potential of these changes, we must step out of our present context for a moment, cast off our mental set, and look freshly at what is really going on. Every development in society completely redraws the whole map of the future and creates new opportunities all around us.
It is worth the time and effort to try to understand the forces that create new opportunities-worth its weight in gold. Stop for a while and think about it. What social changes in the past have created new opportunities for companies in your industry? What further changes are taking place today which may generate new opportunities for your industry in the future?
Technological change was not always as warmly welcomed as it is today. When the windmill was first introduced in Holland centuries ago, the church considered it a sacrilege for anyone but God to direct the wind. The priests actually instructed their parishes not to use wind-milled grain. When the first British clock manufacturer tried marketing wall clocks in India 150 years ago, the company found it difficult to convince customers that the clocks really served a useful function. As a last resort, the company installed clocks free of charge in customers' homes for a one month trial. By the time they came back the next month to remove the clocks, most consumers were sold on the new device. In the late 1940s, a brilliant but unknown inventor named Chester Carlson developed an ingenious black box capable of reproducing the image of a printed page on plain paper-a process he called xerography. Carlson took his marvelous invention to more than 20 of the leading manufacturers in the U.S., companies like IBM, General Electric and RCA, and offered it for sale. Everywhere he was turned down because the companies did not see a market for the product. Finally a company named Haloid, forerunner of Xerox Corporation, decided to stake its future on a "chance".
Today the customer is far more ready and willing to accept new products and technologies, even if they are unorthodox and unusual, provided that they have some intrinsic value and utility. The number of new products and processes being developed is increasing exponentially. The time from invention in the laboratory to acceptance in the marketplace has shrunk from decades to months. These trends signify that more and better opportunities are being thrown up for grabs every year, every month, almost every day.
Listen Up, a high-end, audio-video retailer based in Denver, was one of the first in the country to recognize the potential of a new technology for home entertainment, the compact audio disc. At a time back in 1983 when CDs were not even available for sale in the U.S. market, the founders of Listen Up, Walt Stinson and Steve Weiner, flew to Japan to see the technology and carried back suitcases full of CDs to sell in their store. The new technology spurred the explosive growth of their business. Stinson can vividly recall the time between 1983 and 1986, when revenues rose from $6 million to $12 million. He suddenly found that "we had a tiger by the tail. We doubled our revenues in three years. We didn't mean for that to happen. That's too fast, I believe. It was too fast for us. But we got into something that we couldn't control. We grabbed the tiger by the tail and hung on." Stinson and Weiner saw an opportunity around the corner, which the large record and hi-fi chains failed to see. Then they actively sought out that opportunity and converted it into growth-and gold.
In virtually every industry, the rapid development of new technologies generates opportunities for new and improved services as well as new products. Computers are enabling companies to network directly with their customers and provide them with new services. Federal Express is installing terminals in their customers' facilities which enable customers to order and track parcel deliveries and even handle freight billing. Gartner Group is developing a system that will enable customers to get up-to-the-minute information on important changes in the computer industry by on-line time sharing and electronic mail. Expeditors International is providing customs clearance services for its customers via computer, and so on.
Think about your industry and your business? What are the technological developments that have created opportunities for new or improved products or services in your industry over the past decade? What technological developments are now emerging which represent new opportunities in the immediate future? What other developments are on the horizon which hold promise down the line?
STAYING IN STYLE
Technological development is still a very important engine of new opportunities, but it is not the sole source. Today both business and the consumer have been trained to understand and recognize the significance of technological changes and to welcome them with anticipation. But our society is not nearly as astute in grasping the significance of changes in other spheres of life.
One of the most sweeping social changes of the past quarter century is the increasing demand for speed, which Fred Smith capitalized on to build Federal Express. Companies in virtually every industry-from fast food and shoe repairing to containerized shipping and mold making- are discovering new implications and new opportunities arising from the increasing importance of speed.
"Healthy, wealthy and wise" goes the saying. Many companies have been wise enough to see an opportunity for great wealth in the American public's growing preoccupation with health and exercise. Reebok multiplied its revenues nearly 100-fold in four years, growing from $13 million in 1983 to $1.4 billion in 1987, by recognizing the significance of a life style change in its industry. Co-founder Paul Fireman explains:
"There was a social change going on which nobody had noticed. We realized that the aerobics craze was for real and that there was a huge untapped market of women seeking both comfort and style. The industry was only focusing on jogging shoes. It wasn't growing with the customer."11
Reebok's stylish recreational shoes have attracted some 20 million new customers, many of whom have purchased four or more pairs in different colors.
The phenomenon of the working woman is a social change with far-reaching implications for businesses in such varied fields as processed food, day care and garment manufacturing. Liz Claiborne Inc. recognized an opportunity resulting from the increasing number of working women and decided to specialize in designing stylish clothes for them. "We knew we wanted to clothe women in the work force," says co-founder and vice chairman Jerry Chazen. "We saw a niche where no pure player existed. What we didn't know was how many customers were out there."12 Over the last eight years Liz Claiborne's sales have grown at an average compounded annual rate of more than 40%, while earnings have soared tenfold.
Charles Lazarus saw a different opportunity arising out of the same social change. He realized that the busy working woman would like a place to shop for her children that was quick, easy and relative inexpensive. So he founded the Toys "R" Us chain of warehouse style stores, which offer a much wider range of playthings than traditional department stores. By 1988 the company was operating 350 stores with sales of over $3.1 billion.
What recent social or life style changes have generated new opportunities in your industry? What social trends could represent opportunities for you in the future?
Society is continuously generating new, more complex and efficient types of organization. The explosive growth of the fast food industry initiated by McDonald's in the mid 1950s was fueled by a new type of organization-the franchise restaurant chain. Since then franchising has stimulated the growth of an incredible variety of industries ranging from health clubs to home security.
Earlier we described how AMRE became a dominant force nationally in the long established home improvements industry, which previously had consisted primarily of local, mom and pop operations. When the company first proposed to extend its collaboration with Sears outside of Texas, Sears rejected the proposal on the grounds that a larger operation could not be effectively managed, as several past failures had proven. Yet AMRE persisted and given the chance, showed that it could succeed where others had failed.
AMRE accomplished its coup in just eight years by creating a highly centralized and efficiently run marketing operation to direct and coordinate the activity of local sales offices and warehouses throughout the country. Homeowners responding to AMRE's advertisements call into a central office, which qualifies each potential customer and then assigns them to a particular sales office. Every morning the manager of each branch office receives an electronic message listing the details of potential customers. The branch office then schedules two appointments that day for each sales person in the office.
Expeditors International and Patten Corporation saw similar opportunities in two other primarily mom and pop industries, freight forwarding and selling rural land. They tapped these opportunities by developing organizations that could operate efficiently on a larger scale. Minit International successfully took on an established shoe repair industry worldwide and rose to a globally dominant position in twenty years by introducing a new type of organization into the industry based on thousands of decentralized service units run by entrepreneurial managers and supported by central manufacturing, distribution, training and marketing facilities in each country.
Just-In-Time is an organizational development which is creating opportunities in a wide range of industries. Federal Express operates a Parts Bank in Memphis to stock products and replacement parts for large manufacturers and mail order catalog retailers. Many companies have reduced or eliminated their warehouses, utilizing the Fed Ex system to store and delivery their products from point to point for sale or use precisely when needed. Parts Bank customers can send replacement parts or products via Fed Ex for delivery by 10:30 am the next morning practically anywhere in the country.
A central part of Nedlloyd Line's strategic plan for the 1990s is a similar organizational strategy for providing just-in-time logistical services for large volume shippers. When American manufacturers ship their products to Europe, Nedlloyd will assume complete responsibility for bulk transport of products by ship, rail and truck on both sides of the Atlantic. They will then stock products for the shipper in Nedlloyd-operated warehouses and ship individual consignments to European customers as directed.
Organizational developments are also affecting the relationship between manufacturers and their vendors. There is a shake-down going on in American industry today. In order to stay competitive, many American manufacturers are reducing the number of vendors they work with quite drastically, but increasing the scope and extent of their dependence on those that pass muster. Companies like GE, McDonnell Douglas and Kodak are working with vendors of parts, components and tools to develop closer, more synergistic and long term relations. Critical suppliers are being included as part of the product development team and given input into product design at an early stage. Some major manufacturers are directly linking up their computer systems with those of vendors, so that communication of information and design specifications is greatly facilitated. Others are demanding guarantees from their vendors of on-time delivery and quality in return for guaranteed orders. Many vendors see these organizational developments as a threats. Others, like C & J Industries, welcome the changes and view them as opportunities.
CHANGES IN LAW AND POLITICS
Deregulation has been a mother of many business opportunities during the past decade. The survival and phenomenal growth of Federal Express was made possible by deregulation of the air cargo industry, which Smith campaigned for vigorously in the late 1970s. The proliferation of commuter airlines like Mesa, regional airlines like America Air West, and the doubling of airline passenger volume in five years were also a direct result of airline deregulation, which has been so successful that it is slated for introduction in Europe by the earlier 1990s. Deregulation of interstate trucking created the occasion for P.A.M. to enter a highly competitive business dominated by established giants and grow to $70 million in seven years. Deregulation in telecommunications gave birth to a litter of thriving Baby Bell companies.
Increased regulation can also stimulate new opportunities. The hazardous waste industry has expanded very rapidly in the 1980s due to the plethora of new legislation regulating the disposal of hazardous industrial wastes.
Political and economic events outside our country have a far greater impact than ever before. Most of us are conscious of external changes that threaten to force changes in the way we do business. But how many are equally aware of the external changes that could generate lucrative opportunities, if we take the effort to change our way of doing business before we are forced to by circumstances? How many companies have seriously considered what business opportunities could be generated for them out of Perestroika in the Soviet Union, the liberalization of the Eastern bloc, the cessation of hostilities between Iran and Iraq, the economic unification of the European Economic Community in 1992, the transfer of power in Hong Kong in 1997, the rapid development of future industrial giants like Brazil, China and India, etc.?
Traditionally, the American tool and die industry has catered almost exclusively to domestic manufacturers and always assumed its foreign competitors would do likewise. Now all the rules of international competition have changed and the devaluation of the dollar has opened up worldwide opportunities for U.S. toolmakers. Yet in a survey we conducted, very few said that they saw exports as an important opportunity for them. But a few companies in the industry are aggressively exploring foreign markets and meeting with considerably success. Last year Enpro Systems of Houston, a $9 million manufacturing and fabrication business, appointed its first international sales representative and committed $100,000 for marketing overseas. In less than twelve months the company has established worldwide agents for its industrial values and booked several million dollars in foreign orders.
Twenty years ago, even ten years ago, how many really foresaw the positive impact which the Pacific Rim would have on their own businesses today-on the quality, cost, and delivery time for manufactured products, on the demand for tools and components, on the price of consumer products, on foreign exchange rates and exports, on financial markets and investment opportunities, on foreign investments in U.S. companies, manufacturing facilities and real estate, etc.? The founders of Expeditors International did. They recognized that the growth of imports from the Pacific Rim countries meant more incoming airfreight. In their eyes that translated into a lucrative opportunity for freight forwarders and consolidators. Starting from scratch in 1979, Expeditors has grown to become the largest air freight forwarder from the Pacific Rim with revenues of over $147 million.
Think about the impact of changing legal and political conditions on the world around you and the potential for converting them into opportunities for the growth of your business.
Awareness is capital. Perception is profit. Newly emerging opportunities are like waves emerging out of the ocean. Companies that perceive and exploit an opportunity are like surfers taking the wave for a ride. It is all a question of timing and positioning. Figure 4 depicts a wave of opportunity and three companies in the industry. The company at the top perceived the wave just as it was rising out of the ocean, positioned itself properly, and was carried forward and upward by the momentum of the wave to 1000 times its original position, like Apple Computers, Federal Express, Liz Claiborne and Reebok, which saw before others the newly emerging opportunities in their industries and rode the wave on its crest to a 1,000 times their original size.
Figure 4. Wave of Opportunity
The company positioned in the middle was not the first to perceive the emerging opportunity, but was quick to follow the lead of the pioneer. This company has been carried upward to ten times its original size, like Ben & Jerry's in the gourmet ice cream market, Mesa Airlines, and hundreds of other companies which appear on the INC. list for a year or two.
The company at the bottom missed the boat and was left behind. Either it was too slow to perceive the opportunity or it failed to heed the advice of its customers or the example of its competitors, or it perceived the opportunity as a threat and chose to ignore it, hoping it would go away.
What are the opportunities now emerging in your industry as the result of developments in technology, life style, social attitude, organization, law or politics, devaluation of the dollar, etc.? Where is your company positioned on the wave of opportunities that have emerged in your industry? Is it a visionary and a pioneer? If not, does it at least respond quickly and adeptly to the example of the industry leaders? What are the national or international events which may create new opportunities for your company in the future?
Some companies may think that they are too small to be affected or benefitted by national or international developments. Then what about state and local developments? Some small companies may feel that they are fully dependent on their large industrial customers and have no destiny of their own. Then think about how these factors could generate opportunities for your customers and ask how you can also take advantage of the opportunities available to them.
There is no shortage of opportunity. As Lee Southard, President of Vipont Research put it: "There have always been more opportunities out there than there are people who can actually go after them and master them and make them work. What we need in this country is more people that can capitalize on opportunities, not more opportunities."
ARE YOU READY?
There are a number of things your company can and should do to foster the awareness and develop the perception of newly emerging opportunities.
ACTION PLAN FOR OPPORTUNITIES