One of the reasons the lighthouses were employed many years ago was to warn of danger. As necessary today as they were 200 years ago. In the era of satellite maps, GPS systems, channel buoys, and other technology the voters have the lighthouse has become superfluous. One of the things that I talked about a few days ago was that if you look at the Fortune 500, 497 of the first 500 companies in that Fortune 500 list no longer existed. The reason for that is often simple strategy misplace. When IBM ascertained the initial market for computers, they made a huge misstep. At the same time, they could’ve dominated the market they did not. They gave rise to competitors, and competitors ultimately dominated the market. IBM went from one of the largest computer manufacturers in the world to sell off their computer business.
Now I applaud IBM for recognizing that they were no longer dominant or even in a good market position. What worries me today is the strategy many companies are deploying: to do parts of the solution. Here’s the reality of doing parts. Eventually, somebody will replace you. Or worse, the parts thing you’re doing ultimately are not the good parts. And so companies form their strategies and begin the concept of competition. But they end up losing. And the reason that they lose is that they do not look at the big picture. They only look at what we can do a picture or, as I sometimes like to call it, looking out the postage-sized picture window to see what you can see. Not very much at all. I understand the business concepts around the total addressable market. Sometimes called TAM, it says nobody gets 100% of the market. If you do get 100% of the market, federal regulators are visiting your office.
The reality of strategy is you have to be careful. There is, sadly, for most companies, a difference between capabilities and market. And, of course, a difference between market size and addressable market. Companies often spend years refining a strategy to find out they were wrong way too late in the process. One of my favorite books is the blue ocean strategy. In the Blue Ocean strategy, they took a look at businesses they created; a blue was a noncompetitive ocean. They were not, by the way, claiming that the companies that created those blue oceans maintained a blue ocean forever. You’re only as good as you were when you closed yesterday at five in the world of business. Today somebody else is just as good as you. But the ability of an organization to create that blue ocean is the ultimate driver. Unfortunately, most companies get mired in the red ocean and seldom have time to look around and realize that sometimes the red ocean is right by the blue ocean. You need to stop and look for a moment.
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