Harvard Business Review® FORETHOUGHT STRATEGY Strategic Insight in Three Circles by Joel E. Urbany and James H. DavisFORETHOUGHT STRATEGY Strategic Insight in Three Circles by Joel E. Urbany and James H. Davis, Although most executives can recite the trur ering are fulling customers’ needs. Even in {sm thet acompany mus build distinctcom- very mature industries customers dont articu- petitive advantage in order to grow and be late all their wants or problems in converss- profitable ver the long term, many have only tions with companies. They weren't banging the fuzziest idea what that really means, on Procter & Gamble’ door demanding inven ‘They're confused by the esoteric language of ton of the Swi, whose category now com strategy of they've gotten bogged dawn in the eibutes significantly tothe eompany’s double- technical details of analytical tools. digit sales growth in home care prects, We often encounter these executives in our Rather, the Swiffer emerged from P&G's care consulting work and in our classrooms We tell ll observation of the ehallenaes of household them to draw three circles Those cies, cleaning. Customers! unexpressed. problems placed in the proper relationship to one arr can offen become a source of relationship other, provide a good visual representation of — bulking and gronth opportunity. wat stategy—oth internal and extemal The thirdcirle represents the teams view of ‘means. Hundreds of leaders an future leaders how customers perceive the offerings of the have quickly absorbed strategy concepts by company’s competitors. using hissimpie tool ant have taken it backto thelr organizations, where it often becomes par of the decision making proces. Let’ assume that this exercise & being con- ducted by an executive team. The team should first think deeply about what customers value and why. For example, they might value speedy service because they want contol of helt ov time or they have other business of family obligations. (Exploring. deeper values can open managerial eyes and reveal new op- portunities for value creation) The fist circle thus represents the team's consensus viw of everything the most important customers of customer segments want or need. (Other see ments can be analyzed tet) Each area within the ctl strategy i portant, but A,B, and C are critical to building competitive advantage. The team should ask ‘questions about each. For Az How big and sus tainable are our advantages? Are they based on dtintve capabilities? For B: Are we delivering effectively inthe area of paity? For C: How can we counter our competitors advantages? ‘The team should form hypotheses about the company’s competitive advantages and test them by asking customers. The process can sel surprising insights sch as how much op- ‘The second circle represent the team’s view portunity fr growth exists in the whitespace of how customers perceive the company’s of (E). Another insight might be what value the fering. The extent to which the two cicles company oritscompetitorscreate that custom overap indicates how well the company’s of ers dont need (D, For G). Zeneca Ag ProductsCrees + Fone THouen STRATEGY dlscovered that one of is most important die, | tubutors would be willing to do more business Joel. Urbany (tryed) a James H, Davis With the firm only if Zeneca eliminated the (chvis3ldndedu) te profesor tthe Univesity of time-consuming promotional programs that 8 NoreDames Mendez Calege fuses mina managers thought were an esental part of For tieful-reectcle anaes, eal Jos Un their value proposition. But the biggest surse often that area A, Reprint FOIE envisioned as huge by the company, turns out To order, sce the next page tobe minuscule intheeyes tthe customer. oF call 860-988-0886 or 6177837500 ‘or goto wchbrreprints.ong,