The Importance of Strategy and Pivoting

By

Barry Braunstein

March 18, 2016

Andy Grove’s famous maxim, “only the paranoid survive” is as relevant today (if not more so) than it was when he first coined the phrase back in the 70’s. It was the basis of a strategy that, among other things, led to Intel’s huge success by continually pushing the envelope of semiconductor design and manufacturing and often obsoleting their own products on regular basis.

The strategy fought against complacency by continually improving features and doubling the performance of their products on a regular basis while improving the price performance ratio. And when formidable competition arose, they pivoted to an entirely new architecture (the original x86 processor family), and the rest is history.

Strategy is a critical part of any business, and indeed any facet of that business; goals are important, but without a workable strategy (and successful implementation of that strategy), the goals are meaningless and can lead to the opposite effect – lower revenues, lower profitability, and lower employee morale. Product development is not immune to the effects of ineffective strategy.

Most product companies are in competitive markets, and the COGS of their product plays a critical role in profitability and overall success of the product. If their product design strategy/process doesn’t pay close attention to costs from the earliest stages of the design what can result is a product that works but with costs that exceed the target. At that point, pressure is usually applied to engineering and operations to find alternative parts and/or suppliers for the existing design, which usually yields limited results. The solution is not to hire better engineers, but to look at your engineering development strategy. By looking at COGS starting at the concept design stage and developing alternative concepts with different COGS. And, perhaps, bringing in outside consultants for a third party opinion.

Recognition of issues at a strategic level is hard – it’s much easier to blame the engineers for developing products that are too expensive, or to blame sales for the lack of growth (or a sales decline). The recognition that your strategy needs rework is particularly difficult during good times – companies get enamored with their own success, which often masks more fundamental underlying problems. It is the mark of the most successful companies who look beyond their immediate success or recognize the danger signs of a strategy that needs a change.

Earlier in my career, I worked for a company selling mission critical, million dollar+ customized hardware/software solutions for accelerating the semiconductor design process. We had significant market share, a successful sales organization, had been in business for a number of years, and had a client base that consisted of a mix of larger and smaller companies who relied on our solutions for their success. Over time our growth had slowed and the technology was starting to run out of steam, yet we understood had to continue to grow in order to survive. Rather than blaming the salesforce for lack of sales (this was the same salesforce that enjoyed success in the past), he recognized that we needed to pivot, so we acquired a startup company with a different technological approach (strategy), and poured resources into commercializing that product while keeping our existing business going.

That new product would ultimately cannibalize some of our existing business, but that was a conscious strategy. The net results were we got back on a growth track, and over time became the leader in the industry (against an already established competitor who hadn’t pivoted with their technology) within several years.

Successful companies are the ones who recognize the need for shifts in strategy at both a company and organizational level, and are willing to cannibalize and reinvent themselves in order to grow.

About the author

Barry is responsible for Acorn’s sales and business development activities in the eastern United States.