Swotting up to find gaps in the market

Finding a space in the market that is unchallenged by competition is the Holy Grail of positioning strategy. Unfortunately these spaces – known as market gaps – are often illusive, and the benefits of finding one are often equally illusory. Although competition is a fact of life, it makes business difficult, contributing to an ever-downward pressure on prices, ever-rising costs (such as the funding of new product development and marketing), and an incessant need to outmanoeuvre and outsmart rivals.

In contrast, the benefits of finding a market gap – a small niche segment of a market that is unfettered by competition – are obvious: greater control over prices, lower costs, and improved profits. The identification of a market gap, combined with a dose of entrepreneurial spirit, is often all that is needed to launch a new business.

In 2006, Twitter founder Jack Dorsey combined short-form communication with social media, providing a service that no one else had spotted. Free to most users, revenue comes from firms who pay for promotional tweets and profiles: Twitter earned advertising revenues of $582 million in 2013.

Not all gaps are lucrative, however. The Amphicar, for instance, was an amphibious car produced in the 1960s for US consumers who wanted to drive on roads and rivers. It was a quirky novelty, but the market was too small to be profitable. This was also true for bottled water for pets – launched in the USA in 1994, Thirsty Cat! and Thirsty Dog! failed to entice pet owners.

Snapple, the manufacturer of healthy tea and juice drinks, is a firm that has successfully found a sustainable and profitable niche. A glance at the beverage counter of any supermarket reveals that dozens of brands compete for sales. Many firms have failed in this ultra-competitive market: for example, Pepsi tried to capture a non-existent market for morning cola with its short-lived, high-caffeine drink, AM.

Success for Snapple came from positioning the product as a unique brand – Snapple was one of the first firms to manufacture juices and drinks made completely from natural ingredients. Its founders ran a health store in Manhattan, and the firm used the slogan: “100% Natural”. Snapple targeted commuters, students, and lunch-time office workers with a new healthy “snack” drink, combining its Unique Selling Proposition (USP) with irreverent marketing and small bottles that were designed to be consumed in one sitting. Distribution was through small, inner-city stores where customers could “grab-and-go”. These tactics helped to secure a profitable and sustainable niche, distinguishing Snapple from its rivals in the 1980s and 1990s. In 1994 sales peaked at $674 million.

Unoccupied market territory can present major opportunities for firms, but the challenge lies in identifying which gaps are profitable and which are traps. During the 1990s, many firms became excited about the potential of the “green” market, across a whole range of goods. But this market has failed to materialize in any profitable way. This marks one of the potential pitfalls in identifying market gaps based on market research: consumers often have strong attitudes or opinions on trends or issues – such as ecology – that they are disinclined to consider when purchasing products, especially if they affect cost. Many market gaps, it seems, are tempting, but illusory.

Whether a firm is long established or in its start-up phase, a key strategic issue is its competitive advantage – the factor that gives it an edge over its competitors. The only way to establish, understand, and protect competitive advantage is to study the competition. Who is competing with the firm for its customers’ time and money? Do they sell competitive products or potential substitutes? What are their strengths and weaknesses? How are they perceived in the market?

For Ray Kroc, the US businessman behind the success of fast-food chain McDonalds, this reportedly involved inspecting competitors’ trash. But there is a range of more conventional tools to help firms to understand themselves, their markets, and their competition.

The most popular such tool is SWOT analysis. Created by US management consultant Albert Humphrey in 1966, it is used to identify internal strengths (S) and weaknesses (W), and to analyse external opportunities (O) and threats (T). Internal factors that can be considered as either strengths or weaknesses include: the experience and expertise of management; the skill of a workforce; product quality; the firm’s financial health; and the strength of its brand. External factors that might be opportunities or threats include market growth; new technologies; barriers to entering markets; overseas sales potential; and changing customer demographics and preferences. SWOT analysis is widely used by businesses of all types, and it is a staple of business management courses. It is a creative tool that allows managers to assess a firm’s current position, and to imagine possible future positions.

When well-executed, a SWOT analysis should inform strategic planning and decision-making. It allows a firm to identify what it does better than the competition (or vice versa), what changes it may need to make to minimize threats, and what opportunities may give the firm competitive advantage. The key to strategic fit is to make sure that the firm’s internal and external environments match: its internal strengths must be aligned with the external opportunities. Any internal weaknesses should be addressed so as to minimize the extent of external threat. When undertaking SWOT analysis, the views of staff and even customers can be included – it should provide an opportunity to solicit views from all stakeholders. The greater the number of views included, the deeper the analysis and the more useful the findings. However, there are limitations. While a firm may be able to judge its internal weaknesses and strengths accurately, projections about future events and trends (which will affect opportunities and threats) are always subject to error. Different stakeholders will also be privy to different levels of information about a firm’s activities, and therefore its current position. Balance is key; senior managers may have a full view of the firm, but their perspective needs to be informed by alternative views from all levels of the organization. As with all business tools, the factor that governs the success of SWOT analysis is whether or not it leads to action.

Think of founding principles to avoid losing focus

In 2001 the list of companies with the highest market caps was dominated by blue chips. General Electric, Microsoft, ExxonMobil, Walmart, and CitiGroup — all were businesses led by managers who were experts in efficiency and optimization and who grew their businesses by making them work better than they had previously.

Fast forward to the present, and the list looks strikingly different. Apple, Alphabet, Microsoft, Amazon, and Berkshire Hathaway now top the list, with Alibaba, Facebook, and Tencent close behind. They are for the most part young firms led by founders and their teams, bold leaders who continually prioritize new growth over efficiencies to their core businesses.

Many things have happened in the intervening years to contribute to this shift, but the signal is undeniable. The market now rewards the long-term vision and continual investment in new growth represented by these younger enterprises.

Large enterprises have been responding to these developments for some time, mainly by applying the methods of startups such as lean experimentation, design thinking, and agile development. While these tactics are necessary and useful, when used alone they serve merely as Band-Aids to the problem.

The change that enterprises need to undergo in order to regain their growth trajectories is more profound, and it must start at the very top. To generate new growth, CEOs must stop thinking of themselves as chief managers and start thinking of themselves as refounders.

Refounders are leaders who, despite not having started the company, think with the mindset of a founder. They do not focus their energies on incremental growth through endless optimization, but instead look to leverage their company’s assets to build new offerings, move into new markets, and create next-generation solutions.

Satya Nadella of Microsoft is a great example of a refounder. When Nadella took over the CEO role in 2014, he immediately began refocusing the company on growth. “If you don’t jump on the new,” he proclaimed, “you don’t survive.” Nadella challenged the company to see beyond its legacy products like Windows, invested heavily in new technologies like AI and SaaS, purchased LinkedIn to plug Microsoft services into the company’s social graph, and more. Through it all, he has emphasized the importance of long-term thinking, taking a test-and-learn approach, and obsessing over customer satisfaction, among other values. The market has rewarded Nadella’s moves and his mindset: Since he took the helm, the company’s share price has more than doubled, and in 2016, after years of stagnation, Microsoft regained its place on the top-five market cap list.

You don’t need to be Satya Nadella to be a refounder, though. We work with CEOs of large enterprises who are in the process of refounding their companies, and while coaching them on this process we’ve seen firsthand what works best for them. Based on these experiences, here are five actions that leaders can take to move from a manager mindset to a refounder one.

Shift Your Mindset

Strategists in mature businesses think in terms of total addressable markets (TAM), which allows them to size a potential business and plan accordingly; refounders think in terms of total addressable problems (TAP). They ask, How many people have a problem that this solution could address? Besides exposing existing markets, a TAP mindset uncovers potential opportunities before there’s a market for them.

For example, in the 1980s a standard TAM view of cell phones would have suggested a modest market consisting of mainly lawyers, business leaders, and doctors — after all, they were the demographic using the first generation of phones. A TAP view, by comparison — asking “Who has problems that a mobile phone could address?” — would have suggested larger potential markets, ranging from everyone trying to make ad hoc plans with friends to entire populations without landlines looking to get their first phone connections. A TAP worldview allows you to discover future markets instead of playing only in developed ones.

Don’t Seek Consensus

When it comes to decision making, big-to-bigger enterprises look to gain consensus as a way of minimizing the risk of failure; in contrast, refounders recognize that new opportunities lie outside of the realm of consensus. As Marc Andreessen, of venture capital firm Andreessen Horowitz, says, “If something is already consensus, then money will have already flooded in and the profit opportunity is gone.”

Knowing that, refounders seek, as Jeff Bezos says, to disagree and commit — acknowledge differences of opinion and move forward together anyway, recognizing they are making a bet on a conviction and may ultimately be wrong. Grounding decisions in evidence-based conviction allows them to move faster while arriving at potentially great ideas before the rest of the consensus-driven world.

Use eBay feedback as a PR opportunity

Whether you are a business trading on eBay, or turn to it to fulfil business supplies, eBay is a very useful place to turn to. The feedback function in particular is a good source of marketing.

Whenever you buy or sell a product, you get the opportunity to leave feedback about your experience. This feedback is available to view by others who investigate your profile to see if you are worth buying from.

When someone buys a product from you, take the time to leave a bit of feedback, whether or not they do it for you. This increases their trustworthiness profile and while they may not do the same for you, you have at least done all you can on your part to ensure a repeat customer.

The eBay feedback left for others page is a useful page to log who has bought from you. You can also use it, after a period of a few months, to send messages to those who appear there, as a follow up to see if they require a repeat purchase.

What kind of feedback should you leave for others? The “thanks for your purchase” remark is a slightly perfunctory one that people leave. But you can do better than that. After all, people can see the feedback you’ve left for others. That kind of remark merely suggests to others you are an average business seller, nothing special.

When leaving feedback for others who have bought from you, leave something more personable, such as “I appreciate your quick payment.” Why? That one character, “I”  instantly transforms your business from a faceless one to one with a more personal touch, and encourages repeat business, as well as attracts others to you.

Don’t seize on the chance of feedback to do some self promotion though. Leaving “Thank you for buying from myname.com” feedback for others who buy from you is an own goal, one that is self serving and actually puts people off from buying from you again.

Similarly, as a buyer, use the opportunity for feedback to thank your buyers with a personal message. “A* seller” kind of feedback isn’t enough, and merely presents you as “Can’t be bothered”.

But why should you leave good feedback for others when you have bought from them? Why should you bother?

The reason is that the feedback you leave for others and the feedback you receive are under scrutiny by others. Even people who may consider buying from you may check the feedback you leave for things you have purchased, to get an idea of your trustworthiness.

In conclusion, eBay feedback, both for your sales and purchases, is a chance to market and present yourself as a personable business who would make the extra effort. The feedback that you bother to give could tip the scales in your favour when it comes to potential future sales.

Creating Content that Converts

Content marketing is a powerful arm to add to your overall marketing strategy. It establishes you as an authority, it increases your revenue, and has high profit potential. Bill Gates talked about this way back in 1996, as the Internet was starting to come into its own.

Content is not, however, a magic bullet. It is not a rapid growth strategy, often taking months to grow into its potential. It does not guarantee you internet celebrity, or riches beyond your wildest dreams. (In the wrong hands, it can even harm your brand and put off potential customers.) Many businesses blog, or podcast, or post on social media for years and never see a dime in return for all their efforts. They might argue that they’ve built great brand equity, and that they’ve gained authority and credibility in their industry without selling out. Well, that might be true, but you can’t eat brand equity, and you sure as hell can’t pay a team with it.

Now, I’m the first to admit that everything would be awesome if I could just write and write and never have to think about whether it was actually going to generate money in return. Unfortunately, that’s called going broke — it’s not in my 10-year plan, and I’d take a guess that it’s not in yours either.

The only way to make content marketing pay off is to develop a complete ecosystem around your primary content platform (whether that’s your blog, podcast, or YouTube channel), instead of hoping it will just work by itself. Creating a complete system around your content leverages the resources that could help grow your business, instead of wasting them.

For now, understand that every business produces content, whether it’s intentional or not. Every business has at least one expert in it. And it’s that expertise that provides your business with its competitive edge. You must leverage this as the critical resource in your marketing, so let’s dive into how to do that.

To develop any successful marketing strategy, you need to have a clear picture of the goals in your business. This is particularly true of content marketing: sitting down to bang out anything that pops into your head is not a sensible way to approach it. You need to have a consistent strategy for the content you’re producing, so that your audience is engaged, comes to know and respect you as an authority, and will buy from you when the time is right. Let’s look at how to produce recurring content in a way that will help you achieve those goals and keep you motivated to keep producing on a regular basis.

What are the things you really, deeply care about in your business? What are you world class at, and how does that serve your customers? Maybe you believe you have the very best product in your niche and can defend that position. Maybe you go above and beyond for your customers in very tangible ways. Maybe innovation has allowed you to change your industry and is a critical part of how you function. Whatever it might be, brainstorm and explore the things that are most important to you and your business.

Then take a look at your customers: every customer group is different. If you are selling to a fashion niche, maybe your audience takes presentation and style extremely seriously, and want to know what famous stylish people are doing, or what trends they need to be aware of in the coming months. Maybe your audience is very focused on ethical sourcing and production, and want to see transparency and sustainability in the brands they support. What are your customers looking to you for insight about, and how do those topics overlap with the values you outlined above?

What do you want to be known as an industry authority for? A few years ago, Gary Keller and Jay Papasan wrote a book called The One Thing. The core idea of that book is to identify the one thing in your business that will make everything else easier or irrelevant… and the same goes for your content marketing. What is the one thing you can focus on becoming known for that will make it easier to develop, market and sell products that your audience will buy again and again?

Gary Vaynerchuk is known for his no-nonsense prioritization of hustle. You know if you work with him that things are absolutely going to get done. Tim Ferriss is known for his endless self-experimentation. You know if you work with him you’re going to get innovative, uncommon results. Warren Buffett is known for his slow, measured approach to investing. You know if you work with him that you’ll get steady returns over the long term. What is the one thing people should know about working with you?

The simplest way to become an authority on something is to say the same things about that topic over and over again. This is why people like Tony Robbins, Peter Drucker, Charlie Munger and Warren Buffet become superstars in their industries. Firstly, what they say works — it gets the results they claim. But secondly, they hammer on the same things over and over again. They communicate the same messages over the course of their entire careers, and create powerful positioning and profits as a result.

What is the format in which you produce your best content? People will often talk about how you need to tailor your content production to how your audience consumes it. I think it’s better to choose the format that you most enjoy working in, because if you like it, your audience will like it. For example: if you’re awesome at creating long-form blog posts (like Mark Manson or Tim Urban at Wait But Why) but are lacklustre with video, don’t try to wrangle together a YouTube channel. If you get a kick out of creating the content, it will show: it will engage your audience because it’s high energy, it will be focused, and it will address things they care about in a way that shows you care about it too.

But if you have to have five espressos and lock yourself in a distraction-free room for a day just to produce one video, the strain and negativity of that is going to come through. This creates a feedback loop: you don’t like doing it, so people don’t like consuming it, so it doesn’t perform. Don’t do stuff you hate. If you hate writing, do video. If you hate both, do podcasting. Just find the medium that works for you and run it.

What’s your quarterly plan? Last but definitely not least: make a specific plan for the immediate future. Develop content themes to go along with your ‘one thing’, and map out several topics within each theme to cover over the next three months. Pick four themes total, and three topics per theme. Write the headline for each of the 12 topics, assign a date to each one, and use that as your content framework. You can include any sales campaigns or announcements in this plan if you want to.

Simplified, here’s the overview of what should be in your quarterly plan: •​A clear statement of your ‘one thing’:

  • ​Four themes you want to rotate through ​
  • Three topics per theme, including key points to touch on for each ​
  • Headlines for each topic (I recommend brainstorming a few variations so you can pick the best one) •
  • Scheduled date of publication for each topic

Mapping your content out like this ensures that you can be strategic about your production: you can lead your audience to a certain action over time, you can educate them about a product before you’ve announced it, or you can just give them a complete, cohesive body of knowledge about the things that you all value. Whatever your goal, creating a plan in advance allows you to use your content to achieve it.

Making your business survive in a changing world

All businesses start from the same point: an idea. It is what happens to that idea that determines business success. According to Entrepreneur magazine, nearly half of all new start-ups fail within the first three years. Beating the odds at start-up is tough. First and foremost an idea, no matter how good, must be combined with entrepreneurial spirit, defined as the willingness to take risk. Without entrepreneurial spirit a great idea might never be pursued. Not all ideas are good ones though; it would be a foolish entrepreneur who rushed a product to market without careful thought, research, and detailed planning. Risk might be inherent in business enterprise, but successful entrepreneurs are those who are not only willing to take risks, but are also able to manage risk.

Having an idea is the first step – the next hurdle is finance. Some start-ups require very little capital, and a few require none at all. However, many require significant backing, and most will need to seek funding at some stage in the growth process. An entrepreneur must be able to convince financial backers that the concept is valid and that they have the skills and knowledge to turn the original concept into a successful business.

It follows that the idea must be profitable. Sometimes, an idea may look great on paper, but turn out to be uncommercial when put into practice. Determining whether an idea has potential requires a study of the competition and the relevant market. Who is competing for customers’ time and money? Are these competitors selling directly competitive products or possible substitutes? How are competitors perceived in the market? How big is the market? Most markets are increasingly global, crowded, and competitive. Few firms are lucky enough to find a profitable niche – to succeed, firms need to do something different in order to stand out in the market. The strategy for most firms is to differentiate; this means demonstrating to customers that they offer something that is not available from competitors – a Unique or Emotional Selling Proposition (USP or ESP).

Such attempts to stand out are everywhere. Every business, and at every stage of production, from raw-material extraction to after-sales service, tries to distinguish its products or services from all others. Walk into any bookshop, for instance, and you will see countless examples of books, often on the same topic, using design, style, and even size (large or small) to stand out from the competition.

Gaining an edge often depends on one of two things: being first into a new market niche, or being different from the competition. For example, in 1995 eBay was first into the online auction market, and has dominated it ever since. Similarly, Volvo was first to identify the opportunity for luxury bus sales in India, and has enjoyed healthy sales. In contrast, Facebook was by no means the first social network, but it is the most successful; its edge was having a better product.

Once a firm is established, the challenge shifts: the objective now is to maintain sales and grow in the short- and long-term.

Long-term business survival depends upon the firm constantly reinventing and adapting itself in order to remain ahead of the competition. In dynamic markets, which are growing and evolving all the time, the idea on which the firm was originally founded may become irrelevant over time, and competitors will almost certainly copy it. The ecosystem in which a business operates is rarely, if ever, static. Corporations exist in these ecosystems as living organisms that must adapt to survive. In their 2013 book, Reinventing Giants, Bill Fischer, Umberto Lago, and Fang Liu noted that the Chinese home appliances firm Haier had reinvented itself at least three times in the past 30 years. In contrast, Kodak, a US giant of the 20th century, was slow to react to the rise of digital photography, and went bankrupt.

Moreover, just as the enterprise must adapt, so too must the owner. Most businesses start small, and remain small. Few entrepreneurs are willing or know how to take the second step of employing people who are neither family nor previously known friends. This is the start of a move from entrepreneur to leader, and it requires a new set of skills, as new demands are placed on the business founders. Where once energy, ideas, and passion were enough, evolving businesses require the development of formal systems, procedures, and processes. In short, they require management. Founders must develop delegation, communication, and coordination skills, or they must employ people who have them.

As Larry Greiner described in his 1972 paper, “Evolution and Revolution as Organizations Grow”, as a business grows, the demands on it change. The Greiner Curve is a graphic that shows how the initial stages of growth rely on individual initiative, and that evolving ad-hoc business practice into sustainable and successful growth can only be achieved by experienced people and rigorous systems. Professional management, as opposed to entrepreneurial spirit, becomes essential to business evolution.

Some leaders, such as Bill Gates and Steve Jobs, for example, are able to make the transition from entrepreneurial founder to corporate leader. Many others, however, struggle to make the necessary changes; some try and fail, while others decide to remain small.

Determining how fast to grow is, therefore, a balance of the founder’s skills and desires. But in order to survive, the idea must be unique enough to define its own niche, and the individual or group behind it must demonstrate entrepreneurial spirit. They need the flexibility to adapt the idea – and themselves – as business and market pressures demand. Luck will play a part, but it is the balance of these factors that determines whether a small start-up becomes a giant.

Go beyond inner fears

Fear is a natural and universal human phenomenon, affecting top executives as much as anyone else. The majority of management literature is focused on helping leaders conquer their fears. The problem is that stifling fear doesn’t make it go away. In fact, failing to address it can lead to highly unproductive and dysfunctional behaviors.

Through our firm’s work with thousands of executives over 30 years, we have come to believe that unrecognized or unacknowledged core fears are almost always a root cause of professional distress and unattained potential. Yet those fears are not necessarily bad. We have met met many leaders who have chosen to understand and learn from their fears, turning them into fuel for performance. If you are willing to take a hard look at your fears and where they’re coming from, you can channel them productively. If, for example, deep down you’re afraid that you don’t measure up (a common executive fear), you can find ways to engage that desire to be your best without driving your team into the ground.

It may be that outside help is in order — an executive coach, a good therapist, supportive family and friends. But there is a lot of work leaders can, and should, do on their own.

Fear is a natural and universal human phenomenon, affecting top executives as much as anyone else. The majority of management literature is focused on helping leaders conquer their fears. The problem is that stifling fear doesn’t make it go away. In fact, failing to address it can lead to highly unproductive and dysfunctional behaviors.

Through our firm’s work with thousands of executives over 30 years, we have come to believe that unrecognized or unacknowledged core fears are almost always a root cause of professional distress and unattained potential. Yet those fears are not necessarily bad. We have met met many leaders who have chosen to understand and learn from their fears, turning them into fuel for performance. If you are willing to take a hard look at your fears and where they’re coming from, you can channel them productively. If, for example, deep down you’re afraid that you don’t measure up (a common executive fear), you can find ways to engage that desire to be your best without driving your team into the ground.

It may be that outside help is in order — an executive coach, a good therapist, supportive family and friends. But there is a lot of work leaders can, and should, do on their own. From our work, we’ve created a four-step process of rigorous self-reflection that countless executives have used to understand their fears and become better leaders.

  • Fear of being wrong. People harboring this fear are extremely focused on rules, ethics, standards, and “right vs. wrong.” They are deeply afraid of making a choice that will later prove to be “objectively” wrong. These perfectionists put a lot of pressure on themselves and their coworkers.
  • Fear of not being good enough. Those with this fear tend to be insecure, intensely focused on their image, and desperate to prove their worth. This may come at a cost to their authenticity, not to mention their capacity for joy. What’s more, because their core motivations relate to how they are seen by others, they tend to fudge facts.
  • Fear of missing out. This drives leaders to constantly seek new opportunities and experiences. The downside? It can scatter their attention and muddy their decisions. As they pursue multiple interests at once, they leave their teams frustrated and confused. Deep down, executives with this fear are afraid of being alone.
  • Fear of being victimized or taken advantage of. Those suffering from this fear push for truth and justice; they are afraid of being seen as weak. They feel the need to win every battle, and can be defensive and controlling.

Protecting oneself from the imagined consequences of these fears can be helpful — pushing you to work harder and achieve more. But there is also, often, a sizable cost.

The experience of Suzanne (not her real name, but indeed a real person), a highly successful strategy consultant we met 10 years into her career, illustrates both the costs of unacknowledged fear, and the benefits of reconciling it.

Suzanne was a shining example to her peers — a top-performer known for delivering solid results on every project she’d taken on. Nonetheless, she believed her career had stalled, and some feedback she’d received gave her a clue as to why. A 360-degree review revealed her team didn’t trust her. That hit Suzanne hard because she’d considered herself a good boss, which was very important to her. What’s more, her personal relationships were suffering. Eager to always make a good impression, she had become an expert in putting a positive spin on clearly questionable events. No wonder her team was wary. Those two revelations were sufficient motivation to take on the hard job of change.

What others didn’t see — and what Suzanne had to contend with — was her underlying anxiety that she might fail, and how that anxiety was crippling her emotionally. She suffered from the fear of not being good enough. While many admired her, they said she seemed more interested in her own image than anything else, and lacked the capacity to care about others. The truth was that she had failed to make true connections because she was overly committed to protecting her own reputation.

Step 1: Acknowledge the fear. As a high achiever, Suzanne cared deeply about how her colleagues saw her. True to her nature, she set about to rectify her behavior. Her first step was to understand and admit her fear — not an easy thing to do. After all, she had done a great job of covering it up for years. On the surface she was very polished and put together, and extremely smart and successful. But cracks were beginning to appear.

In the acknowledge phase, we suggest that people take a close look at their history and examine the choices they’ve made and the reasons behind those choices. In Suzanne’s self-examination, she reached back to the most meaningful times of her life, beginning with high school and onwards through college and her professional life. Looking at the activities she’d chosen, she realized she had not put much effort into pursuing her own interests but rather activities in which she was certain she could excel.

Desperate to project an image of excellence, she lost her sense of self along the way. Recognizing this was a real awakening for Suzanne. She needed to reconsider who she was and what she wanted. Only then would she be able to let her true self come through and make genuine connections.

Step 2: Interrogate the fear to better understand it. Suzanne had to critically assess her current reality and look at the costs of her fear. After learning her team didn’t trust her, she had to face the fact that by constantly comparing herself to others and trying to look good above all, she’d lost touch with what actually mattered to her and how her behavior affected others.

So she spent time considering what it would mean if she failed at something. Who would she be? What would happen if she took on a project that didn’t play to her strengths? What if she delivered B+ work? Her instinct told her that failure would leave her with nothing, so she had to acknowledge that instinct but move past it. Other people make mistakes and they move on. They didn’t walk around with a scarlet F on their chests. As Suzanne began to see how her unfounded fears were worsening her behavior, she began to understand she didn’t have to meet an unattainable ideal.

Step 3: Choose a different course of action. This is about deciding what to do next and making commitments —understanding what truly matters to you. Some questions to ask yourself:

  • If I objectively evaluate my actions and behavior right now, what would the evidence say that I’m committed to?
  • How does this differ from what I say I want?
  • Practically speaking, if my desires and actions are not fully aligned, what does that indicate?

Suzanne held honesty as one of her core values. But as she asked these questions, she realized her behavior didn’t always match up with it. Similarly, she cared about relationships with colleagues. But in her desire to impress, she’d become less trustworthy, which pushed people away. She made a conscious choice to work hard on aligning her values and behaviors more closely.

Step 4: Act on that choice — in a way that aligns with your values. The last step is to deliver on your commitments. For Suzanne, part of this was taking on projects that weren’t a slam dunk — challenging herself to learn from a place of uncertainty. She also made efforts to get in touch with what sheliked, rather than choose things that other people admired. One useful exercise she did was to walk through museums and identify paintings that she liked and why, without asking anyone else’s opinion. It sounds simple, but it was no easy task for Suzanne, accustomed as she was to pleasing others.

Suzanne’s arduous self-examination of her fears has turned her life around. It drove her to make positive changes, both personally and professionally. Ten years on, her career has taken off. She received a series of promotions, taking on bigger and more important projects.

She eventually went on to form her own successful firm, and is regarded as a highly effective and genuine leader. Her employees love her. In the last decade, she’s evolved her leadership style to the point where she is now known for being trustworthy and selfless.

When leaders are controlled by fear — or when they pretend it’s not there — they can be crippled by it and become powerless. None of us will ever be free from fear, and it’s unrealistic to expect that we can always put our fears in their place. But even when the stakes of admitting their fears feel high, leaders are always more effective when they are candid and do the hard work to right-size their fears.

What’s more, when executives open up about their fears, it makes them much more relatable and approachable as leaders. That will make any executive team far more cohesive and effective, and ultimately the business they run stronger and more successful.

m our work, we’ve created a four-step process of rigorous self-reflection that countless executives have used to understand their fears and become better leaders.

We’ll explain the process and how one leader used it to turn around her career. But before we do, here are the fears we’ve found that most commonly plague executives. (These fears are generally tied to personality types as defined by the Enneagram personality model; you can find a more complete discussion of the fears and personality types in our whitepaper on the topic.) They are:

  • Fear of being wrong. People harboring this fear are extremely focused on rules, ethics, standards, and “right vs. wrong.” They are deeply afraid of making a choice that will later prove to be “objectively” wrong. These perfectionists put a lot of pressure on themselves and their coworkers.
  • Fear of not being good enough. Those with this fear tend to be insecure, intensely focused on their image, and desperate to prove their worth. This may come at a cost to their authenticity, not to mention their capacity for joy. What’s more, because their core motivations relate to how they are seen by others, they tend to fudge facts.
  • Fear of missing out. This drives leaders to constantly seek new opportunities and experiences. The downside? It can scatter their attention and muddy their decisions. As they pursue multiple interests at once, they leave their teams frustrated and confused. Deep down, executives with this fear are afraid of being alone.
  • Fear of being victimized or taken advantage of. Those suffering from this fear push for truth and justice; they are afraid of being seen as weak. They feel the need to win every battle, and can be defensive and controlling.

Protecting oneself from the imagined consequences of these fears can be helpful — pushing you to work harder and achieve more. But there is also, often, a sizable cost.

The experience of Suzanne (not her real name, but indeed a real person), a highly successful strategy consultant we met 10 years into her career, illustrates both the costs of unacknowledged fear, and the benefits of reconciling it.

Suzanne was a shining example to her peers — a top-performer known for delivering solid results on every project she’d taken on. Nonetheless, she believed her career had stalled, and some feedback she’d received gave her a clue as to why. A 360-degree review revealed her team didn’t trust her. That hit Suzanne hard because she’d considered herself a good boss, which was very important to her. What’s more, her personal relationships were suffering. Eager to always make a good impression, she had become an expert in putting a positive spin on clearly questionable events. No wonder her team was wary. Those two revelations were sufficient motivation to take on the hard job of change.

What others didn’t see — and what Suzanne had to contend with — was her underlying anxiety that she might fail, and how that anxiety was crippling her emotionally. She suffered from the fear of not being good enough. While many admired her, they said she seemed more interested in her own image than anything else, and lacked the capacity to care about others. The truth was that she had failed to make true connections because she was overly committed to protecting her own reputation.

Step 1: Acknowledge the fear. As a high achiever, Suzanne cared deeply about how her colleagues saw her. True to her nature, she set about to rectify her behavior. Her first step was to understand and admit her fear — not an easy thing to do. After all, she had done a great job of covering it up for years. On the surface she was very polished and put together, and extremely smart and successful. But cracks were beginning to appear.

In the acknowledge phase, we suggest that people take a close look at their history and examine the choices they’ve made and the reasons behind those choices. In Suzanne’s self-examination, she reached back to the most meaningful times of her life, beginning with high school and onwards through college and her professional life. Looking at the activities she’d chosen, she realized she had not put much effort into pursuing her own interests but rather activities in which she was certain she could excel.

Desperate to project an image of excellence, she lost her sense of self along the way. Recognizing this was a real awakening for Suzanne. She needed to reconsider who she was and what she wanted. Only then would she be able to let her true self come through and make genuine connections.

Step 2: Interrogate the fear to better understand it. Suzanne had to critically assess her current reality and look at the costs of her fear. After learning her team didn’t trust her, she had to face the fact that by constantly comparing herself to others and trying to look good above all, she’d lost touch with what actually mattered to her and how her behavior affected others.

So she spent time considering what it would mean if she failed at something. Who would she be? What would happen if she took on a project that didn’t play to her strengths? What if she delivered B+ work? Her instinct told her that failure would leave her with nothing, so she had to acknowledge that instinct but move past it. Other people make mistakes and they move on. They didn’t walk around with a scarlet F on their chests. As Suzanne began to see how her unfounded fears were worsening her behavior, she began to understand she didn’t have to meet an unattainable ideal.

Step 3: Choose a different course of action. This is about deciding what to do next and making commitments —understanding what truly matters to you. Some questions to ask yourself:

  • If I objectively evaluate my actions and behavior right now, what would the evidence say that I’m committed to?
  • How does this differ from what I say I want?
  • Practically speaking, if my desires and actions are not fully aligned, what does that indicate?

Suzanne held honesty as one of her core values. But as she asked these questions, she realized her behavior didn’t always match up with it. Similarly, she cared about relationships with colleagues. But in her desire to impress, she’d become less trustworthy, which pushed people away. She made a conscious choice to work hard on aligning her values and behaviors more closely.

Step 4: Act on that choice — in a way that aligns with your values. The last step is to deliver on your commitments. For Suzanne, part of this was taking on projects that weren’t a slam dunk — challenging herself to learn from a place of uncertainty. She also made efforts to get in touch with what sheliked, rather than choose things that other people admired. One useful exercise she did was to walk through museums and identify paintings that she liked and why, without asking anyone else’s opinion. It sounds simple, but it was no easy task for Suzanne, accustomed as she was to pleasing others.

Suzanne’s arduous self-examination of her fears has turned her life around. It drove her to make positive changes, both personally and professionally. Ten years on, her career has taken off. She received a series of promotions, taking on bigger and more important projects.

She eventually went on to form her own successful firm, and is regarded as a highly effective and genuine leader. Her employees love her. In the last decade, she’s evolved her leadership style to the point where she is now known for being trustworthy and selfless.

When leaders are controlled by fear — or when they pretend it’s not there — they can be crippled by it and become powerless. None of us will ever be free from fear, and it’s unrealistic to expect that we can always put our fears in their place. But even when the stakes of admitting their fears feel high, leaders are always more effective when they are candid and do the hard work to right-size their fears.

What’s more, when executives open up about their fears, it makes them much more relatable and approachable as leaders. That will make any executive team far more cohesive and effective, and ultimately the business they run stronger and more successful.

How Innovation Really Works

Sales and marketing were once disciplines ruled by emotions. But somewhere along the way, we recognized that they were based on definable pipelines and applied technology to manage those pipelines. Today you can put a corporate dashboard in place to manage them and tweak the settings to try to boost your results.

What if we applied the same thinking to innovation? After all, innovation, like marketing and sales, is a pipeline. In one end go raw concepts and notions. Out the other end come actionable ideas that can move the business forward. With the right technology, could you manage this pipeline the way you manage a sales pipeline?

Research shows that you can.

Dylan Minor, assistant professorship at the Kellogg School of Management, has analyzed five years of data from 154 public companies covering over 3.5 million employees that have used an idea management system called Spigit. For the millions of employees of these companies, the idea management system functions a little like Facebook – people can post ideas, get votes, deliver or respond to feedback, and develop the ideas into innovations that make a difference to the company. The innovation teams at these companies use them to track and process all the ideas and whether the company committed to putting them into practice. Some companies use this software for process innovation; others develop new products; others seek efficiencies and cost savings.

Once you put innovation into a system like this, you can track everything. We know how many innovation challenges the companies are running, how many people are suggesting ideas, and how many ideas they suggest. We know how many people are participating in other ways – by voting or making comments, for example. And we also know how many of those ideas get through the endpoint of the challenge, which is where the company’s management determines which ideas to pursue further. Linear regression was used to analyze every potential measure the system includes over every 3-month time period when the system was active within the company.

But what was learned from analysis of all this data is that innovation is, indeed, a science. And surprisingly, the variables that make for a successful innovation program are independent of whether the company is seeking disruptive or incremental innovations. It doesn’t matter whether they’re asking for process or product innovation, what industry the company is in, or even, for the most part, whether the company is large or small.

The key variable that we identified across all the companies in the analysis is the ideation rate, which is defineed as the number of ideas approved by management divided by the total number of active users in the system. Higher ideation rates are correlated with growth and net income, most likely because companies with an innovation culture not only generate better ideas, but are organized and managed to act on them.

After reviewing dozens of variables that could potentially affect ideation,  four factors that drove the ideation rate were identified.

Scale – more participants. To succeed, an innovation program needs lots of participants. It’s the wisdom of the crowd: a large mass of participants will always out-ideate a small group of smart people. On average, companies generate one idea for every four participants in the system.

Frequency – more ideas. To get to a set of promising ideas whose implementation would make sense, you need to sift through a lot of candidates. To succeed, a company needs to create frequent idea challenges for its employees. These challenges reinforce a culture of innovation and generate more ideas going into the pipeline. While there is a great deal of variation based on the types of ideas and the companies reviewing them, on average, it takes five idea candidates to generate one idea that the company judges to be worth implementing.

Engagement – more people evaluating ideas. It’s not enough to get some people suggesting ideas. You need lots of other people figuring out whether those ideas are worth working on, or what it will take for them to become better. A successful idea management system is a ferment of commentary, with lots of feedback.

Diversity – more kinds of people contributing. You might think the most productive innovation system would be full of engineers or other problem-solvers. You’d be wrong. A successful system needs contributions from all over the organization, especially staff who are close to the front lines: sales staff, support workers, or people in close touch with the company’s manufacturing processes, for example.

When a program like this is working, it churns out actionable innovations at a steady and predictable pace. What’s that like?

One large industrial manufacturer has put an innovation management system to good use. The company has mastered frequency and scale: it has run 15 challenges in the last year with over 2,000 active participants. Hundreds of ideas have poured in, generating thousands of comments. In 12 months, the company selected over 50 ideas to implement.

For example, the company challenged its employees to find ways to serve customers better. Among the problems that surfaced was the difficulty of inspecting a particular aircraft part overnight. The inspection process typically took eight hours. The company’s customers – airlines – found this frustrating because sometimes planes land late and need to take off early.

As the service techs understood, the problem wasn’t actually the inspection. It was the process of threading the camera inside the aircraft part to inspect it. That took seven hours. The subsequent inspection took one.

An administrative assistant at the company who was familiar with the airlines’ complaints responded to the challenge. She had recently seen the Tom Cruise movie Minority Report. She posted an idea, wondering, “Why can’t we send a robotic spider into the part, like the ones in the movie?”

While a lot of people reviewing her suggestion found it silly, the company’s Chief Technology Officer was intrigued. He tried putting a miniature camera on a remote control set of robotic legs and walking it into the part. It worked. He then turned the secretary’s idea into a standard practice. Now the inspections takes 15% as much time as they used to, and the airlines are a lot happier.

A single idea like this is impossible to predict or optimize for – just like a single sale is impossible to predict. But when you treat ideas systematically with an appropriately designed system, you can manage the pipeline of those ideas. That pipeline engages the employees who best know how to solve the problems of the business, and generates a predictable stream of innovations. Those innovations drive the business forward. Our research shows how to generate that steady stream of ideas.

Once everyone is thinking about ideas – and imagining that their cool concept might actually move the company – you get the while company effectively engaged in innovation. And in the Internet era, with the pace of innovation always accelerating, understanding the science of innovation could make all the difference in your ability to compete.