For A Corporate Strategy Which Question Is Often Asked

Crafting a robust corporate strategy is an intricate dance, a delicate balance between ambition and practicality. It's not merely about setting goals; it's about defining how those goals will be achieved, considering the ever-shifting landscape of the market, competitors, and internal capabilities. But amidst all the complex analyses and projections, there's a fundamental question that repeatedly surfaces, a cornerstone upon which all strategic decisions rest: "What business are we really in?"

This question, seemingly simple on the surface, delves into the very essence of the organization. It's not just about the products or services you currently offer; it’s about understanding the underlying needs you fulfill for your customers, the value you provide, and the broader ecosystem in which you operate. Ignoring this question can lead to strategic drift, missed opportunities, and ultimately, competitive disadvantage.

Why This Question Matters So Much

The question "What business are we really in?" isn't merely semantic; it's a strategic imperative for several critical reasons:

Avoiding Marketing Myopia: Harvard Business Review, in a landmark piece on avoiding marketing myopia, detailed the importance of this question. Theodore Levitt's "Marketing Myopia" highlighted the dangers of defining your business too narrowly. He used the example of railroads, which defined themselves as being in the "railroad business" rather than the "transportation business." This narrow focus blinded them to the rise of automobiles, airplanes, and trucks, ultimately leading to their decline. By understanding the broader customer need for transportation, railroads could have innovated and adapted to stay relevant.
Identifying Growth Opportunities: A clear understanding of your core business allows you to identify adjacent markets and new opportunities for growth. If a company defines itself solely by its current product line, it may miss out on innovative solutions that cater to the same underlying customer need. Thinking broadly enables the development of diverse product portfolios, creating a more resilient company.
Optimizing Resource Allocation: When you know what business you're truly in, you can better allocate resources to activities that support your core value proposition. It helps prioritize investments in areas that will drive sustainable competitive advantage, ensuring efficiency and profitability. This can mean streamlining operations, improving customer service, or focusing on research and development.
Enhancing Customer Focus: Understanding the fundamental customer need that your business fulfills allows you to tailor your products, services, and marketing efforts to better meet those needs. This leads to increased customer satisfaction, loyalty, and ultimately, a stronger brand reputation.
Adapting to Change: The business environment is constantly evolving. Technologies change, customer preferences shift, and new competitors emerge. A clear understanding of your core business allows you to adapt to these changes more effectively, ensuring long-term survival and success. For example, a company that sees itself in the "communication business" is better positioned to adapt to the shift from traditional phone lines to internet-based communication technologies.
Competitive Advantage: In today's saturated markets, understanding your true value proposition helps you differentiate yourself from the competition. By focusing on the unique benefits you offer customers, you can carve out a niche and build a sustainable competitive advantage. This might involve superior customer service, innovative product features, or a more efficient distribution network.

Unpacking the Question: Different Perspectives

The question "What business are we really in?" can be approached from various angles, each providing valuable insights:

The Customer Perspective: This perspective focuses on understanding the customer's needs, desires, and pain points. It asks, "What problem are we solving for our customers?" or "What value are we providing to our customers?" This requires thorough market research, customer feedback, and a deep understanding of the customer journey.
The Product/Service Perspective: This perspective looks at the core functionalities and benefits of the products or services offered. It asks, "What are the essential features that deliver value?" or "What are the strengths and weaknesses of our offerings?" This requires a technical understanding of the products or services and their capabilities.
The Competitor Perspective: This perspective analyzes the competitive landscape and identifies the key players in the industry. It asks, "Who are our main competitors?" or "What are their strengths and weaknesses?" This requires competitive intelligence gathering and a clear understanding of the market dynamics.
The Technological Perspective: This perspective considers the impact of technology on the business. It asks, "How is technology changing our industry?" or "What new technologies could disrupt our business?" This requires staying abreast of technological advancements and understanding their potential implications.
The Societal Perspective: This perspective considers the broader societal context in which the business operates. It asks, "What are the social and environmental impacts of our business?" or "How can we contribute to society?" This requires an understanding of social trends, ethical considerations, and sustainability issues.

Answering the Question: A Practical Approach

Answering the question "What business are we really in?" requires a structured and iterative process:

Step 1: Define Your Current Business: Start by clearly defining your current products, services, and target market. This provides a baseline for further analysis. Be specific about what you offer and who you serve.
Step 2: Analyze Customer Needs: Conduct thorough market research to understand your customers' needs, desires, and pain points. Use surveys, focus groups, interviews, and data analytics to gather insights. Identify the underlying needs that your products or services address.
Step 3: Identify Core Competencies: Determine the core competencies that differentiate you from your competitors. These are the unique skills, knowledge, and resources that give you a competitive advantage. Consider what you do better than anyone else.
Step 4: Explore Adjacent Markets: Identify potential opportunities to expand into adjacent markets that leverage your core competencies and address similar customer needs. Look for areas where you can offer new products or services to existing customers or target new customer segments.
Step 5: Envision the Future: Consider how your industry is likely to evolve in the future and how your business needs to adapt to stay relevant. Think about the impact of technology, changing customer preferences, and emerging competitors.
Step 6: Craft a Revised Definition: Based on your analysis, craft a revised definition of your business that reflects your true value proposition and potential for growth. This definition should be broad enough to encompass future opportunities but specific enough to guide strategic decision-making.
Step 7: Communicate and Implement: Communicate your revised definition to all stakeholders and ensure that it is integrated into your strategic planning process. Use the definition to guide resource allocation, product development, and marketing efforts.
Step 8: Revisit and Refine: The business environment is constantly changing, so it's important to revisit and refine your definition of your business on a regular basis. Conduct ongoing market research, monitor competitive trends, and adapt your strategy as needed.

Examples in Action

Let's examine a few examples of how companies have successfully (or unsuccessfully) answered the question "What business are we really in?":

Netflix: Initially, Netflix defined itself as a DVD rental service. However, they recognized that their customers were ultimately seeking entertainment. This broader understanding allowed them to transition to streaming services and become a dominant player in the online entertainment industry.
Amazon: Originally an online bookstore, Amazon recognized that its customers were seeking convenience and a wide selection of products. This understanding led them to expand into e-commerce, cloud computing, and various other businesses, becoming one of the world's largest companies.
Kodak: Kodak, once a dominant player in the photography industry, defined itself as being in the "film business." This narrow focus blinded them to the rise of digital photography, ultimately leading to their decline. Had they recognized that they were in the "image capture and sharing business," they might have been able to adapt and stay relevant.
Apple: Apple has always understood that they are in the "experience" business. They don't just sell computers and phones; they sell a seamless, user-friendly ecosystem that enhances people's lives. This focus on experience has been a key driver of their success.

Common Pitfalls to Avoid

While asking "What business are we really in?" is crucial, it's important to avoid common pitfalls:

Overly Broad Definition: Defining your business too broadly can lead to a lack of focus and a dilution of resources. It's important to strike a balance between being too narrow and being too broad.
Ignoring Customer Needs: Failing to understand your customers' needs can lead to irrelevant products and services. Customer feedback is essential for defining your business accurately.
Resisting Change: Clinging to an outdated definition of your business can prevent you from adapting to changing market conditions. Be willing to challenge your assumptions and evolve your strategy.
Lack of Communication: Failing to communicate your definition to all stakeholders can lead to confusion and misalignment. Ensure that everyone in the organization understands your true value proposition.

The Scientific Perspective

From a scientific perspective, understanding "What business are we really in?" is akin to defining the scope of a system within a complex environment. In systems theory, a system is a set of interacting or interdependent components forming an integrated whole. Defining the boundaries of the system (i.e., the business) is crucial for understanding its behavior and interactions with the environment.

Ecosystem Analysis: Businesses operate within ecosystems consisting of suppliers, customers, competitors, and regulatory bodies. Defining the business correctly requires understanding its role and interactions within this ecosystem. This involves analyzing the flow of resources, information, and value within the ecosystem.
Value Chain Analysis: Porter's value chain model provides a framework for analyzing the activities that create value for customers. Understanding which activities are central to the business's value proposition helps to define its core purpose. This involves identifying the primary and support activities that contribute to the delivery of products or services.
Resource-Based View: The resource-based view (RBV) of the firm emphasizes the importance of internal resources and capabilities in achieving competitive advantage. Defining the business requires identifying the unique resources and capabilities that are central to its success. This involves assessing the firm's tangible and intangible assets.

The Enduring Relevance

The question "What business are we really in?" is not a one-time exercise; it's an ongoing process of reflection and adaptation. In today's rapidly changing world, businesses must constantly re-evaluate their purpose and value proposition. By asking this fundamental question, organizations can stay ahead of the curve, innovate effectively, and achieve sustainable success.

Thinking critically about this question is crucial for executives, strategists, and entrepreneurs alike. It's not merely an academic exercise; it's a practical tool for navigating the complexities of the business world and making informed decisions that drive growth and profitability. It helps avoid strategic blunders like those made by the railroad industry by redefining themselves as more than just a "railroad business".

Ultimately, the ability to answer this question effectively is a key determinant of long-term survival and prosperity. It allows businesses to understand their customers better, allocate resources more efficiently, adapt to change more readily, and create a sustainable competitive advantage. Embrace the challenge, ask the question, and unlock the true potential of your organization.

Frequently Asked Questions (FAQ)

Q: Why is it important to define "What business are we really in?"?
- A: Defining your business helps avoid marketing myopia, identifies growth opportunities, optimizes resource allocation, enhances customer focus, adapts to change, and creates a competitive advantage.
Q: How often should we revisit the question "What business are we really in?"
- A: You should revisit it regularly, at least annually, or whenever there are significant changes in the market, technology, or customer preferences.
Q: What are some common mistakes to avoid when defining our business?
- A: Avoid overly broad definitions, ignoring customer needs, resisting change, and lack of communication.
Q: How can we involve employees in defining "What business are we really in?"
- A: Conduct workshops, surveys, and interviews to gather input from employees at all levels. Encourage open communication and collaboration.
Q: Is it possible for a company to be in multiple businesses?
- A: Yes, many companies operate in multiple businesses. However, it's important to have a clear understanding of the core value proposition for each business and how they relate to each other.

Conclusion

The question "What business are we really in?" is a powerful tool for shaping corporate strategy. It's a lens through which organizations can view themselves, their customers, and the world around them. By embracing this question and engaging in a thoughtful and iterative process of self-discovery, businesses can unlock their full potential and achieve lasting success in an ever-evolving world. Remember, the answer isn't static; it's a dynamic reflection of your evolving purpose and the value you bring to the world.