February 2024 - Peripheral Thinkers™ Newsletter
February 15, 2024
Aloha, Peripheral Thinkers™!
This month's newsletter is much different than previous months. I've attached a document I created in response to a McKinsey & Company report of their "10 Rules For Revenue Growth". I selected three of their rules and described how specific Peripheral Thinking™ skills apply to protecting each rule from disruption. I also offer recommendations for Peripheral Thinking™ skills to disrupt your competitors who use one or more of the rules.
I believe this is the longest of my newsletters. This document has a lot of meat, so chew slowly and thoroughly. Then could you tell me what you liked, didn't like, and didn't understand?
Thank you in advance for reading the newsletter and responding.
Let's get to it!
Paul
Using Peripheral Thinking™ Skills Strategies
For McKinsey & Company’s ’10 Rules for Revenue Growth.’
This document aims to help you understand the revenue growth rules and how to use Peripheral Thinking™ skills to secure your strategy from disruption. You’ll also learn how to disrupt these rules using Peripheral Thinking™ skills. McKinsey & Company lists their 10 Rules for Revenue Growth:
1. Put Competitive Advantage First. Start with a winning, scalable formula.
2. Make the Trend Your Friend. Prioritize profitable, fast-growing markets.
3. Don’t be a Laggard. Don’t just go with the flow—outgrow your peers.
4. Turbocharge Your Core. Focus on growth in your core industry.
5. Look Beyond the Core. Nurture growth in adjacent business areas.
6. Grow Where You Know. Focus where you have an ownership advantage.
7. Be a Local Hero. Commit to winning on the (geographical) home front.
8. Go Global. Expand Internationally if you have a transferable advantage.
9. Acquire Programmatically. Combine organic growth with acquisitions.
10. Shrink to grow. Ruthlessly prune your portfolio if you need to.
This newsletter addresses the three rules respondents to my LI post voted as their current strategies.
Please know that the application of Peripheral Thinking™ skills is science and art. Only a small percentage of business leaders are born with the innate skills found in the Peripheral Thinking™ skills model. I’ll spare you the 300-page report detailing beginner, intermediate, and advanced applications of the skills across multiple business scenarios. For this reason, and this article, our position is that your competitors do not understand the Peripheral Thinking™ skills you use to protect your strategy from disruption. Our position is the same for using Peripheral Thinking™ skills to disrupt competitors who rely on a given strategy/rule—competitors don’t have the Peripheral Thinking™ skills to defend against your disruption.
Rules For Revenue Growth
1. Put Competitive Advantage First. Start with a winning, scalable formula.
Starting with a winning and scalable formula is logical. You are only a few Google clicks away from studies and reports that outline winning and scalable business formulas for most industries. Consulting. Online. Retail. Manufacturing. The standard references are the Tata Group, Amazon, Walmart, and Tesla.
According to McKinsey & Company, “A high return on invested capital (ROIC) indicates a business model powered by a competitive advantage. Companies that generate stronger returns attract and deploy more capital, a virtuous cycle that enables them to grow faster and generate still higher returns.”
These organizations’ business models and growth strategies are readily available. While I used these as an easy reference to make a point, you must strip away their access to capital, size, and brand recognition to glean the lessons that apply to your business.
If you do not have a winning, scalable formula, use a different growth strategy while working to build your competitive advantage.
How to protect your strategy from disruption.
You have established your business formula that consistently wins and that you have scaled successfully to at least the next milestone. The greatest threat to companies that have achieved a competitive advantage is their reliance on that advantage. Getting to the top is one thing. Staying there is an entirely different thing.
Protecting your competitive advantage requires some seemingly uncompetitive activities—looking for new ways to win and scale. It’s counterintuitive to change a model that is working. To be clear, use the full force of your competitive advantage to capture maximum market share. Meanwhile, commit some of your resources to finding the next competitive advantage.
Two Peripheral Thinking™ skills support this approach to secure your ongoing competitive advantage.
The ‘Studying’ skill encourages curiosity for discovering new things and learning new skills. We all have some level of curiosity. Note this is different than a distraction. ‘Studying’ is a purposeful skill to expend your resources and grow other Peripheral Thinking™ skills. To strengthen your ‘Studying’ skill, seek new experiences to learn something you don’t know. Most anything will do. You don’t need to become an expert, but you do need to invest enough time, energy, and focus to capture new lessons.
The ’Drilling’ skill investigates things in a way that means the most is learned and discovered. Drilling is a sister skill to ‘Studying.’ The curiosity to learn drives ‘Studying.’ Tenacity and commitment to discovering unique insights drive the ‘Drilling’ skill. You strengthen your ‘Drilling’ skill by going deeper for longer. Insights are everywhere. They lay just beneath the point where most people stop digging. Succeed in finding this new insight once, and your tenacity for ‘Drilling’ compounds dramatically.
Developing and using the ‘Studying’ and ‘Drilling’ skills secures your competitive advantage by informing the changes to make before your competitors find an opening in your current strategy.
How to disrupt competitors that rely on this strategy
Disruption often comes from the least expected places. Innovative disruption rarely comes from the industry leader. Even more rare is innovative disruption from a mid-pack player in the industry. For non-Peripheral Thinkers™, using competitive advantage puts a target on their back.
Review McKinsey’s definition of a company with a solid competitive advantage above. In their report, McKinsey references a retailer that boasted 9% growth YOY due to their Competitive Advantage growth strategy. A solid trend… for a huge company.
For competitors who rely on or even tout their superior competitive advantage, you need only one gap to turn their strength into a weakness.
To find and exploit the gap, we use the Peripheral Thinking™ skill called ‘Visioning.’ Stay with me here. Visioning is not the same as the skills you use to create a vision statement or set a vision for your business. ‘Visioning’ is a skill that sees more than the details to gain a strategic (big picture) view of a subject or issue. It is a 30,000-foot view that intends to find your competitor’s weaknesses and new, better, unique paths to your destination.
Imagine flying high above an aircraft carrier. You can see where the ship has been by its wake. You can predict the ship’s course with some certainty based on its direction. You can see topographical features all around the ship. You know that the ship is enormous and multifaceted. Your goal is not to destroy it but to disrupt its course. To reach your objective before the aircraft carrier does. And before they know you are there.
To strengthen your ‘Visioning’ skill, zoom out of the day-to-day processes and gain a broader view of the market and your competitors. While you are at altitude, look at companies' paths in other industries. See patterns AND see outliers. This perspective will often present more options than you first realized. You’ve discovered your competitor’s gap and options for winning. Now…
Use your ‘Studying’ and ‘Drilling’ skills to inform which options to apply. You become the disruptor, not the disrupted.
4. Turbocharge Your Core. Focus on growth in your core industry.
Existing clients who comprise your largest segment—by revenue, industry, users, or activities—make up your ‘core.’ You can define and categorize them however you like. They are the core from which you will grow most of your business using this rule. Keeping them is critical because the cost ratio for acquiring new clients to keeping existing clients is 3:1. However, revenue growth is not attained by simply keeping your existing clients.
“Put simply, it is improbable that you can achieve strong growth if the core isn’t flourishing.” – McKinsey.
A flourishing core means clients use your solutions in increasing quantity and are willing to buy more of your solutions from you.
How to protect your strategy from disruption.
Making your ‘core’ happy and referenceable (aka ‘flourishing’) is the foundation of your growth strategy. Your competitors want to distract these clients to disrupt your growing relationship. Savvy competitors will invest in Fear, Uncertainty, and Doubt (FUD) campaigns to disrupt your client relationship. If your competitor gets even one, it is a bonus.
I believe you know what it takes to keep your core. Turbocharging your core goes beyond satisfaction. It involves creating reasons for your core clients to buy more from you. Products, services, and solutions that “surprise and delight” these critical clients.
Therefore, let’s focus on how to protect your strategy from competitive disruption.
‘Inventing’ is a Peripheral Thinking™ skill that includes exploring possibilities, making connections, and creating new things. You explore your periphery to collect new references, ideas, and proven solutions. These are possibilities you add to your Peripheral Resource Library™ (PRL). Using this content in your PRL, look for content with common traits and content with dissimilar content. Add spoken and unspoken client needs to your PRL. Then, connect these elements in different ways to uncover surprise and delight options. Assemble these options to create your new surprise and delight offering(s).
The ’Inventing’ skill is one of the more complex Peripheral Thinking™ skills to build and deploy. Here are three steps to build, grow, and strengthen your ‘Inventing’ skill.
1. Explore Possibilities
Schedule 15 minutes every day, at a minimum, weekly. Non-negotiable. Consistency is key! Dedicate this time to collecting possibilities for overcoming a challenge, setting a new goal, or up-leveling your service to your ‘core’ clients. You have limited time allotted, so remember you are exploring to collect, not evaluate, the possibilities.
2. Make Connections
Scan your mental, physical, relational, and PRL environment for connections. What ‘possibilities’ have you collected that are similar, dissimilar, or different? Imagine that you are assembling a 50-piece puzzle. Move the possibilities around to find where and how they connect to complete the puzzle. Make this a habit, not just an occasional activity, when your back is against the wall.
3. Creating
This is the secret sauce. It’s the culmination of exploring possibilities and making connections. Creating, by definition, is “causing (something) to happen as a result of one’s actions.” Take the connections you’ve made, even the completed puzzle, and manipulate them into different shapes, images, and configurations. In other words, create something new from the connected possibilities. A new approach. A new product. A new way to apply your existing product or approach. Your ‘creating’ success is limited only by your willingness to go bigger and make bolder choices.
The ’Inventing’ skill protects your Turbocharge Your Core strategy from disruption.
Before your competitors attempt to distract your clients with FUD, you preempt their tactic with new surprise-and-delight options. In this way, you are multiple steps ahead of any competitive disruption.
How to disrupt competitors that rely on this strategy.
Non-Peripheral Thinking™ competitors using the ‘turbocharging your core’ strategy often propose incremental solutions to their core clients. The worst of these raise their rates because of “interest” or the “cost of doing business.” These competitors are easy pickings, so I assume you have more sophisticated competitors. They add value to their core clients with offerings their clients have requested. The competitor presents these iterative improvements as ‘surprise and delight’ solutions, but I know the offering is reactive, not proactive.
You must have a superior offering—surprise and delight—to disrupt this strategy. If you don’t, then you can spread FUD. It is less practical and unimaginative. I recommend the ‘Deciphering’ and ‘Doing’ Peripheral Thinking™ skills.
The ‘Deciphering’ skill involves understanding, taking apart, and simplifying complex ideas and concepts. You may know intimately about your competitor’s solutions, but this skill is not for internal use. (At least not in this scenario.) The purpose is to simplify your competitor’s surprise-and-delight offering. Doing this demystifies and exposes your competitor’s offering as simple. Simple to explain and simple to replicate. Therefore, it is less likely to be a competitive advantage for clients.
The ‘Doing’ skill uses new knowledge to achieve a result that surprises and pleases. There is no achievement without action. Unapplied knowledge is only theory. Applied knowledge is wisdom. Uniquely applied wisdom is innovation! Do That!
The combination of ‘Deciphering’ and ‘Doing’ is a potent disruptor to Turbocharging Your Core.
6. Grow Where You Know. Focus where you have an ownership advantage.
Where you have an advantage, use it. Maximize your strength with the wisdom that an overplayed strength can become a weakness. For this growth strategy, McKinsey’s research shows that “…companies growing in a way that increases the similarity of their portfolios earn, on average, an additional one percentage point of Total Shareholder Return (TSR) per annum. Those that expand into new industries can expect an additional two percentage points if the new industry is similar to their core.”
Being the recognized owner of an asset (ownership advantage) allows you to generate optimal value from owning or operating the business. When the ownership advantage is recognized in adjacent industries, your recognition can lead to broader expansion without the proportional resource and investment expansion.
How to protect your strategy from disruption.
Similarly to the recommendations for protecting against disruption for the “Turbocharge Your Core” strategy, the ‘Inventing’ skill is used to protect your “Grow Where You Know” approach.
Use the ‘Studying’ skill (found under 1. Put Competitive Advantage First, protect your strategy from disruption) to feed new lessons and ideas into your ‘Inventing’ skill.
‘Studying’ adds insights to ‘Inventing’ skill’s “Explore Possibilities” and “Make Connections” activities.
To protect this strategy from disruption, you must maintain your curiosity to find new applications/markets for your solution while inventing new offerings for each market served. It is complicated to disrupt an ever-moving, ever-growing target.
How to disrupt competitors that rely on this strategy.
Peripheral Thinkers™ use one Peripheral Thinking™ skill and a competitive tactic from Sun Tzu’s Art of War to disrupt this strategy.
First, the skill. ‘Predicting’ is a Peripheral Thinking™ skill that interprets patterns and situations to predict future events and make decisions. ‘Predicting’ uses input from various resources over time to recognize patterns. Regardless of how long you have been in business or how few unique insights you have collected, you can accelerate the growth of your ‘Predicting’ skill by increasing the time you and your people spend collecting different perspectives, ideas, and lessons from the periphery. You know—the content in your Peripheral Resource Library.
Use this content to feed your ‘Predicting’ skill and anticipate what adjacent markets/industries your competitor will target. Test your predictive abilities by making inquiries in the target markets using content/messaging like your competitor’s. The market will tell you if and who is also pursuing business. The ‘Predicting’ skill helps you identify and confirm your competitor’s new target market. That is step one.
Step two starts by remembering that disruption often comes from the least expected source and at the least expected place. Now that you know where your competitor plans to grow, they will expect you to follow them to this new field of battle. If you are already in this market, use the ‘Inventing’ and ‘Studying’ skills to protect your position. If you are not in this new target market, you will disrupt your competitor’s protection plans with two investments.
1) Make a modest yet seemingly aggressive investment in pursuing business in the new market. Do this with overt marketing campaigns to the target market. Your goal is not to win the business but to pull your competitor’s commitment deeper into the new market.
2) When you see them assigning more resources to their pursuit, you execute your second investment—a targeted campaign to win your competitor’s existing clients in the primary market. Use your unique value and high personal attention to differentiate your offerings from your distracted competitor's ‘old and poorly supported’ offerings.
Two quotes from Sun Tzu’s Art of War epitomize this competitive tactic.
“Appear at points which the enemy must hasten to defend; march swiftly to places where you are not expected.”
“You can be sure of succeeding in your attacks if you only attack places that are undefended.”
You'll likely disrupt your competitor's growth by using your ‘Predicting’ skill and the combination of some competitive tactics.
Now What?
Progressive and innovative business leaders use Peripheral Thinking™ skills to outpace their competitors, protect their businesses, and find new paths to growth and innovation in any market environment.
Until next time, I’ll be looking for you in the Periphery!
p.s. If you are new or want a refresher, here’s an overview of Peripheral Thinking™ https://www.pauldanielsjr.com. Click and scroll down to “What is Peripheral Thinking™?”
Additional News
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