Last week the
Washington Business Journal
published an article highlighting FiscalNote’s planned acquisition of
CQ Roll Call,
in which the author insightfully observed “The deal is just the latest example of a young upstart buying a traditional — and often larger competitor – in the same space.” Indeed, the “small fish swallows big fish” metaphor is playing out with greater frequency today as traditional companies, under pressure to deliver earnings and growth, fail to make the necessary investments in technology and data to effectively expand, compete, and defend, leaving open important spaces in the market where startups can get a foothold and flourish.
Ironically, in the late 1990s I led a major technology investment at CQ Roll Call’s predecessor, Congressional Quarterly, which resulted in a very similar dynamic where CQ.com successfully addressed a major new unserved space in the market. Soon after, the outflanked competition faltered.
B2B startups are inherently nimbler and more innovative than traditional companies in taking advantage of market opportunities, especially if the opportunity requires products that are technology and data driven. And we are not talking about harnessing the level of cutting-edge innovation taking place in large B2C disruptors like Uber, Facebook and Netflix. In the B2B information industry, not known for the cutting-edge, innovation is relative to what’s currently trending in their markets.
Whether you’re a start-up seeking new spaces for a foothold in a B2B industry, or a traditional company committed to defending its “right to play” in growth markets, here are some of the best practices that have made our clients nimbler and more effective innovators in their market’s “White Spaces.”
Find your space
The first best practice is looking for this “White Space”. Honestly, most legacy strategic plans are inside-out thinking and reflect a limited and somewhat myopic view of a market. We see a lot of traditional strategic planning around bundling products, selling to existing customers or adjacent prospects or investing in new versions of legacy products. The new approach to strategic planning has a greater outside-in focus and begins with developing a comprehensive “market map” of all the players involved in a market ecosystem, understanding which companies are at the center of the ecosystem, and what existing needs and future wants are, is the essential ingredient to market efficiency and growth. Who are the disruptors in the market, and where will they invest?
FiscalNote clearly found a white space in tracking the actions and substance of legislation tracking, which relies heavily on well-structured data (Congress and government) that behaves in ways that, statistically speaking, is more or less predictable. None of CQ Roll Call’s rivals track legislation in a way that is as comprehensive or rich with multiple datasets, with an essential layer of human intelligence (reporting and editing) on top. But CQ Roll Call began to falter in 2009, when its new owner, The Economist, failed to continue investing in data-driven technology to keep CQ Roll Call at the head of the pack. Fiscal Note, a financial data analytics firm founded by a 26-year-old entrepreneur, seized upon this white space.
Another best practice is to base an organization’s strategy on market needs, and phrase them from the customers’ perspective. This means changing the “We can sell this product to a customer” to “Our future customer has this need, and we can help them.” Innovation strategies connect market needs with the company’s “right to play” and should be outcome-specific.
An outside-in approach to strategy and investment
Once strategy is formulated, it’s critical to understand the level of investment that is appropriate and available to realize the strategy. Building a plan that will achieve investor confidence and commitment cannot be underestimated – the market is rife with cases of traditional companies whose growth opportunities were missed because they were constrained by EBITDA or other investor priorities. I’m thinking Toys R Us, Borders, Kodak and Blockbuster as prominent examples, as compared to others that have had better success like the Washington Post’s recent turn-around, Apple’s comeback in the late 1990’s and Harley Davidson’s emergence from the brink of bankruptcy to a Fortune 500 success story.
Peter Drucker claims “Culture eats strategy for breakfast.” But without strategy there is no breakfast. We contend that strategies developed through outside-in market opportunity discovery and needs-based innovation (described above) are most effective when delivered within a culture of strong execution methodology and financial commitment to invest. In our view the two are inseparable, not a binary choice. We’ve often seen strategies come to fruition when executed in combination with great enterprise agile methods (read my blog about
). Larry Bossidy and Ram Charan focused their best-selling book “Execution” around this topic. Modern agile practices mixed with core execution methodology are the ingredients that make sure “great strategies get done.”
#WGSD – We Get Stuff Done.