Be Unrealistic: The Only Path To Breakthrough Success

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Robert Wolcott, September 2nd, 2015

 

http://www.forbes.com/sites/kellogg/2015/09/02/be-unrealistic-the-only-path-to-breakthrough-success/

When was the last time your CEO told you your plans were too realistic?

Business leaders often seek realistic plans with clear paths to success. Problem is, plans that make sense within the status quo won’t change the game. Only plans that seem unreasonable today have any hope of transformative growth in the future.

Startups transform industries by pursuing what look at the outset like horribly unrealistic visions. Ideas that were once inconceivable — distributed energy, 3D printing and peer-to-peer lending to name a few — are now realities redrawing entire industries.

In the context of accelerating and diversifying change, corporations must define and pursue unrealistic plans, as talent and capital transform competition across markets. That means looking beyond the constraints of the present and reaching for opportunities outside the spectrum of what’s reasonable. Those that don’t will die slow deaths. At best, they’ll be relegated to overpaying for growth through M&A after new market leaders are on to new horizons.

But established enterprises can’t just throw out their cash-generating core businesses and become unencumbered startups. How can corporations identify and pursue plans that will surely be rejected by traditionally minded executives and investors? As I advise business leaders at the Kellogg School of Management, here are four guideposts for the journey.

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1. To envision the future, disregard the present.

Visions are of the future, not the present. As the fall of Lehman Brothers and rise of Uber attest, the future isn’t an extrapolation of the past. Don’t define your company’s prospects based on who you are today, but on what customers might demand in the future. If you don’t, you’re likely to be dangerously wrong.

A classic example: In the 1970s, Xerox invented the personal computer revolution at its Palo Alto Research Center (PARC). Instead of profiting from this new world, Xerox tabled it — rationalizing that it was in the business of copiers, not computers, and that the business PC marketplace didn’t exist. That vision, of course, was brutally wrong. Xerox spent decades trying to catch up.

2. Ask yourself, what if?

Build your visions around your customers’ future perspectives. Base them on trends, forces and weak signals visible at present. That includes asking the hard, “what if” questions. For example, what if technology suddenly makes your company’s offering obsolete? What if a startup solves a problem you’ve yet to address? What if a new product emerges that changes your customers’ needs or expectations?

Next, explore how your company might play into these visions and build a relevant portfolio of options.

That’s precisely how Mike Johnson led Castrol’s long-term vision from 2007 to 2013. In 2009, the then-CEO asked his team, “How will Castrol make money when no one needs lubricants?” Johnson knew that new technologies would eventually obviate the need for engine lubrication in many situations. (Electric vehicles, for instance, require no engine lubrication.) So he created a strategic innovation arm, Castrol innoVentures, to invest, experiment and pilot new businesses that leveraged the Castrol brand and capabilities. Today, that innovation group continues to build Castrol’s future beyond lubricants.

3. Start with realistic first steps.

Outline steps you can take in the near term to prepare for what’s plausible in the future. That includes positioning your business to capitalize on technological advancements still on the horizon.

When Reid Hastings founded Netflix in 1997, he already had an audacious vision to offer videos online. At the time, technology and bandwidth weren’t up to the task. Rather than give up, Hastings started offering DVD rental business through the mail, a model that worked at that time. (Ever wonder why a snail-mail DVD rental company would call itself “Netflix”?) As bandwidth and consumer technology improved, Netflix was ready to lead in on-demand video.

4. Divide and conquer.

Smart companies recognize they must invest for the present and future. If your company is big enough to have a strong position in the world today, it should be strong enough to spend modest resources on creating the world as it could be.

Ensure you have a strong team extending and defending your core businesses, but also equip people with sufficient money and mandate to build bold futures. Most of your company’s resources should be focused on optimizing core businesses. But if your best people are focused only on the core, eventually you won’t have a company.

Too often, corporations kill early-stage projects because they’re “too small to matter.” That can be a mistake, as McDonald’s has proven. In 2006, the fast food giant spun out its own venture, Chipotle, to focus on its core business. By August of 2015, Chipotle had become McDonald’s nemesis, with a market capitalization exceeding $20 billion.

As you make bold, thoughtful bets on the future, many core business leaders and market analysts will question why your company is wasting resources on anything other than being the best at what it already does.  It will be a constant effort for senior leadership to make the case for creating unrealistic futures, but as Jeff Immelt, CEO of GE, commented to me, “I’m the long money.”  If there’s no long money in your company, then there’s no future, either.

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