An excellent example is Diaspora, an upstart company written about in the most recent issue of Bloomberg Business Week (Our Data, Ourselves, May 14-May 20, 2012). Diaspora seeks to be a Facebook alternative that lets users control their own data and, thus, have more privacy.

The timing was right for Diaspora. Bolstered by negative consumer sentiment regarding Facebook’s privacy policies, Diaspora easily attracted some investors. Bloomberg reported that Diaspora raised over $200,000 in funding, obtained at first from sources like the founders’ faculty advisor, then as a result of tweets by well known open internet advocates, and ultimately a story in the New York Times.

Bloomberg also reported that Diaspora signed up 600,000 users, a relatively small slice of the market when compared with Facebook. Google Plus soon debuted, with features similar to Diaspora. Like Diaspora, Plus did not attract anywhere near Facebook’s usage volume, even with Google’s mighty resources. According to what Bloomberg reported, Diaspora continued to struggle, and the stress of it all may have contributed to the suicide of one of the founders.

As Bloomberg reported, Diaspora has since added some experienced key people, and now works with a start-up accelerator, Y-Combinator, whose track record includes helping to launch several highly successful tech ventures. Bloomberg also reports that other start-ups are pursuing businesses related to Diaspora’s, and two of those ventures each have over $7 million in funding.

What is the lesson here?

According to my 25+ years researching business success and failure patterns, disrupting an incumbent requires moves down an evolutionary path. Merely recognizing marketplace dissatisfaction with some aspects of Facebook is not enough for a successful disruption by Diaspora. To address those marketplace concerns as a successful disrupter, a company must have the necessary strengths. This is the case regardless of whether the potential disrupter is a venture launched by inexperienced college students, or whether it’s an endeavor of a huge organization with enormous resources, like Google.

Either way, companies must go beyond identifying marketplace dissatisfaction, and must also have or ultimately develop the strengths needed to compete. This might entail starting in a niche and ultimately expanding to adjacent markets–like Facebook did by initially serving only students at Harvard, then expanding to other universities, and eventually to the general public. Or, it could involve starting with technology vastly different from the incumbent’s that may not be an obvious direct threat early on, but ultimately shifts the competitive landscape.

But, aiming to dethrone Facebook primarily by addressing current consumer dissatisfaction, and apparently intending a head-on challenge, without expecting to start with niches, and without evolving the strengths to draw consumers away from Facebook, is not an approach that generally disrupts a dominant incumbent. Instead, to become successful, Diaspora will have to evolve into its eventual competitive position in the marketplace.

Yet, Diaspora’s efforts are not in vain. The surviving founders made early progress and gained valuable experience. This can be built upon to ultimately evolve toward bigger goals. Those goals may call for building Diaspora into a stronger company, or they may involve the founders’ personal career plans. Either way, the early experiences of Diaspora can be part of the evolutionary path to future success.

Does this mean that companies are less ambitious? And, what is an ambitious growth strategy and when is it likely to succeed?

A look at dictionary definitions of the word ambitious can help. There are various definitions of ambitious. They involve attributes such as going after goals by being highly driven, or having intense desire, or pursuing something challenging. So, by definition, ambitious entails intense desire, drive or determination to reach goals–often goals that are not easy to attain. Taken literally, these definitions might suggest that ambitious means intense pursuit of the nearly impossible. Furthermore, to some people, this might even mean intense pursuit of goals so lofty that the process starts resembling the fictional Don Quixote chasing elusive windmills.

But, accountable results have value in business. So, rather than chasing unattainable windmills, many ambitious businesspeople would like their intense drive and desire put to use with the intent of producing accountable results. Too often, however, when business is ambitious, the emphasis upon challenging growth objectives overshadows any emphasis upon outcomes.

Yet, for ambitious growth strategies to succeed, companies must go beyond merely applying desire, drive, and determination in pursuit of challenging goals, and also concentrate upon achieving outcomes. This means companies must strategically harness their ambitions. To do so, they must be strategic about determining which ambitious goals fit their strengths and warrant pursuit. Sometimes, this entails cutting back in areas of lower potential, thus cutbacks do not necessarily mean a company is less ambitious. By pursuing goals that are appropriate for their strengths, companies can strategically harness their ambitions and achieve far more successful outcomes.

For example, both Apple and Avon are companies that exhibited ambition. But, Apple strategically harnessed those ambitions, while Avon did not. Steve Jobs and Apple were driven, and had great desire and determination to pursue challenging goals. They did it in ways that built upon their strengths, and thus, produced highly successful outcomes. In contrast, a recent article in Fortune (Avon: the Rise and Fall of a Beauty Icon, April 30 2012) describes Andrea Jung, Avon head now being replaced with a CEO hired from the outside, as having ambitious growth strategies for the company she led. But, unlike Apple’s, Avon’s ambitions did not come to fruition.

Pointing out that Andrea Jung lacked an operations background, the Fortune article attributes Avon’s lack of success to difficulty executing its ambitious strategies. But, Fortune also tells how Avon’s problems were due to Jung trying to take the company too far from its core. Based upon my 25+ years researching business success and failure patterns, Avon fits the pattern of pursuing a strategy that doesn’t fit its strengths, and as a result, cannot succeed. Avon also fits the pattern where the CEO’s strengths differ from the company’s strengths. Such a conflict of strengths often leads companies to stray from their strengths and falter. Straying from its strengths made Avon’s strategy tough to execute and kept Avon from strategically harnessing its ambitions into successful outcomes.

This should not be forgotten as Avon brings in an outsider as its new CEO. The new CEO is at a disadvantage in that she lacks direct sales experience, an area where Avon has been strong. Some outsiders can be blinded by their own past experiences and may easily find themselves ignoring their new employer’s strengths. Yet, Avon’s new CEO does have an advantage in that the press has called attention to her lack of direct sales experience, and that Avon has already been through a misplaced emphasis upon retail that ignored its strength in direct sales. As a result, Avon’s new CEO may be more attuned to paying attention to Avon’s strengths, possibly putting her in a better position than many outsiders to avoid, or at least mitigate, the conflict of strengths. Only if she keeps Avon’s growth strategies in line with and building on its strengths is success likely.

After all, building on strengths is how ambitious growth strategies succeed.

The article “Silicon Valley Cinderella” in the April 9, 2012 issue of Forbes, describes the success of Pejman Nozad. As Forbes explains, Nozad had “No MBA. No Ph.D. ‘No technical background whatsoever’ (his words). He’s never even worked in technology companies.” Yet, as Forbes reports, he is now a “VC investor with a net worth in the ballpark of $50 million.”

Does Nozad’s success imply that experience may not actually be that valuable?

As is typical when explaining business success patterns, we have to take a deeper look at how Pejman Nozad achieved such impressive results. Nozad may not have had experience in the strictest sense. But, define experience just a bit more broadly, and Nozad does, indeed, have it. And, his experience fits patterns associated with business success.

Nozad’s situation resembles success stories where someone starts in the mailroom and works their way up to tremendous heights. In a similar vein, rug salesman Nozad started in the “rug room” and worked his way up. Whether it’s the mail room or rug sales, both starting points involve providing a service to experienced players in a company or industry. Both are points to start without having specific skills in that industry. And, like starting in the mailroom, Nozad’s humble beginnings in the “rug room” brought opportunities for learning and for advancing to a more prominent role.

Nozad may not have been employed by a high tech company, but he had extensive interaction with and exposure to people who were, especially since Nozad was extremely strong at networking and connecting. As a supplier to the industry, Nozad learned about high tech from those he interacted with. Thus, Nozad was getting industry related experience and knowledge, although he did not obtain it the standard way. Yet with time, he essentially did have a form of industry experience that helped pave the way for his impressive success as a high tech investor.

So, what does rug salesman Nozad’s success in high tech tell us about the importance of experience?

It shows that experience is, indeed, valuable for success. But, exactly how the experience is obtained is far less important than whether it is obtained. And, although seeming like a possible counterexample, Nozad’s situation is essentially one more case where experience plays a valuable role in business success.

Thus, unlike the many companies that heavily embrace outsourcing, Lucas Oil is bringing more functions in-house. As I see it, what Lucas Oil is doing raises an important strategic question: wouldn’t it be more cost effective to outsource?

Like many strategic choices, this kind of business decision is not as obvious as conventional wisdom might make it seem. It’s true that outsourcing may reduce the cost of the outsourced function. But, on the other hand, outsourcing may weaken brand differentiation.

By bringing what seems non-core in-house, a company can have better control over those areas and use them to develop a differentiated brand. By not outsourcing, the cost of building a strong, differentiated brand may actually be reduced. Depending on the circumstances, those lower brand building costs may more than offset any cost advantage from outsourcing.

A glance at business history can remind us of the potential value in not outsourcing. Historically, many non-core functions were performed in-house by successful, growing companies.

How much to outsource can depend upon your business model. Some business models are based upon a bare bones organization where practically everything is outsourced, while other business models entail performing many more functions in house.

But, as with many aspects of business success, the key to successfully bringing more functions in-house is to do it selectively. A company should not try to assimilate so many non-core functions that it loses control, has great difficulty integrating them into the business and managing them, or spends so heavily on them that they essentially become unaffordable. And, unlike Lucas Oil, most companies need not buy a railroad, which Lucas did due to unique circumstances.

In some cases, seemingly non-core functions that are brought in-house may eventually become a specialized competency of the company. Depending upon how it ultimately develops, Lucas Oil’s motor sports programming may have some potential for this.

In summary, businesses should recognize that there can be advantages to not outsourcing certain functions. In selected areas that help differentiate the business, performing seemingly non-core functions in-house can be beneficial.

Time to think is important. This is especially the case in light of research discussed in newer books such as Thinking, Fast and Slow by Daniel Kahneman and Great by Choice by Jim Collins and Morton Hansen. Both books highlight the downside of deciding too fast. In addition, my own research finds that there are definite patterns of business success, so thinking through strategic choices plays a crucial role in making Winning Moves.

Furthermore, it’s true that many meetings don’t lend themselves to thinking. And, there are many unproductive meetings whose participants, including CEOs, might accomplish much more doing something else. It’s also true that time alone to think can be valuable.

But, the Wall Street Journal article misses a very important point: some meetings actually do offer the opportunity to think. So, although many meetings are not oriented toward thinking, we should not lose sight of the value of those that are.

Meetings with one or a small number of individuals who help question, clarify, and refine ideas can, in fact, be thinking meetings. These might be meetings with a coach, strategic advisor, or trusted colleague, for example. These kinds of meetings are not necessarily a complete substitute for time alone. But, they can be valuable thinking opportunities.

This is the case because thinking can be stimulated in a number of ways. Of course, time alone can foster thinking. Sometimes great thinking happens when the mind is relatively unoccupied–perhaps, while going for a walk. Reading the ideas of others can stimulate thinking. Writing can stimulate thinking, as the writer works to clarify what is said and to be more precise about what the writing means.

Additionally, however, non-solitary activities, such as discussing ideas with others, can also stimulate thinking. Much like writing does, certain types of conversations can help more clearly define what particular trains of thought mean. And, these conversations can take place in a meeting.

So, when articles like the one in the Wall Street Journal say the boss is in a meeting with little time to think, we shouldn’t forget that some meetings provide opportunities for thinking. Yes, many CEOs could use more time alone to think. But, the thinking value of meetings should not be overlooked.

In the Wall Street Journal article, Alaska Airlines CEO Bill Ayer offers a valuable piece of business wisdom. Ayer said “When you’re profitable you can think longer term. You can make investments more confidently in things. If the industry is continually kind of hand-to-mouth in terms of profits, you’re not going to see big investments.”

Ayer is pointing out that how profitable a company is may shape the firm’s strategic choices. As I see it, his statement has profound implications for any company, from the most profitable to the biggest struggler. I have been researching business success and failure patterns for 25+ years, and here are some of those implications, as I see it:

1. Making strategic choices that are good for the business delivers successful performance. These choices are driven by what’s good not just in the short term, but in the longer term as well. These choices reflect a business philosophy oriented toward building the business and being willing to invest in it. This doesn’t necessarily mean ignoring current profitability while pursuing the longer term, but it does mean not weakening the viability of the business merely to report short term profits.
2. Being profitable frees companies to make strategic choices that are good for the business. Profitable companies are freed from pressure to do something, no matter how ill-fitting, just to give the impression they are correcting their weak performance. Profitability helps companies resist the temptation to do what might not be good for the business, but brings short term profits, or worse yet, the illusion of anticipated profits. Thus, profitable companies can be selective about their strategic choices and do what is in the best interest of the business.
3. As described above, being profitable offers tremendous advantages. Yet, many profitable companies do not take full advantage of those advantages. Instead of making the wise strategic moves that profitability permits, they fall into a state of complacency. They essentially sit back, milk their current profits, and fail to evolve. This eventually leads to poor performance and pent-up need for change, as described in my November 2008 newsletter.
4. Companies that are struggling or are not profitable should strive for the kinds of strategic choices that are in the best interest of the business. This can be difficult. Financial pressures may muddy the waters and encourage less than optimal choices. To achieve successful performance, however, these companies must strive to make wise choices that lead to Winning Moves, rather making ill-conceived choices out of panic, as strugglers often do.

In summary, being profitable can put a company in a position to make better strategic choices. But, profitable companies have to use this advantage and make wise strategic choices, rather than being complacent in their current position of success. And, struggling companies should do whatever they can to make strategic choices that are good for the business. The right strategic choices lead to Winning Moves and business success.

Executives who decide fast are valued. Their quick decisions reflect a bias for action, which is common in business. For example, Meg Whitman, CEO of Hewlett Packard and former CEO of eBay, describes the importance of bias for action in her book, The Power of Many. Additionally, the best-selling book Blink by Malcom Gladwell makes a case for deciding fast. And, at a conference, Google CEO Larry Page said, “There are only companies that have good fast decisions. There are no companies that have good slow decisions.”

But, more recent information warns us not to decide too fast. For example, the book Thinking Fast and Slow by Daniel Kahneman distinguishes between system one (fast) versus system two (slow, deliberating) thinking, and points out that system one decisions are often wrong. Also relatively recently, the research described in Jim Collins’ newest best-selling book Great by Choice found that deciding and acting fast can kill a business.

On the other hand, not everyone agrees with the newer, go slower research. There are on-line posts that disagree with what Jim Collins’ Great by Choice says about the danger of deciding and acting fast. These posts might, for example, dispute Collins by citing Google CEO Larry Page’s comments about fast decisions, or might describe a poster’s own business experiences.

So…What does it all mean? Should business decisions be fast or slow?

Why Opposing Viewpoints Do Not Necessarily Conflict
To answer the fast versus slow question, we must delve deeper and take a closer look at the reasons behind what each side says. When looked at in context, we see that the two opposing viewpoints do not necessarily conflict since whether to go fast or slow depends upon the situation.

My 25+ years researching business success and failure patterns sheds insights into this. My research finds that businesses succeed when they build upon strengths, knowledge and expertise. Nasty debacles often result from moving at high speed into areas where the business lacks the strengths and know how to succeed. So, if the business does not yet have required know how, deciding and acting fast can be a killer. That’s why businesses that move too fast into new areas (e.g., new markets, new products, new lines of business) or that make major changes fast can be quite vulnerable to the dangers of speed, especially if the stakes are high. In situations like these, where the business may be venturing out of its element without the needed know how, fast decisions can do great damage.

But, much in business is relatively routine and backed by know-how. For these matters, fast decisions typically do not kill the business. In fact, for those routine matters, fast decisions can actually be beneficial since they keep things moving along in a timely manner. To keep things moving, and since too slow can also be a problem (even for some non-routine matters), executives who decide fast are valued and we see on-line posts that dispute the speed kills research finding. Furthermore, Google, and years earlier Wal-Mart, are examples of the specific kinds of situations where moving fast can be highly successful.

The book Thinking Fast and Slow appears to agree with my findings about when to decide fast. The book says fast intuitive decisions are often wrong when made in an irregular (i.e., non-routine) environment or when you have not yet learned the regularities. The book also tells how beneficial fast decisions are for something routine or essentially automatic, like walking or breathing. We wouldn’t want to slowly deliberate about how to take each step when we walk. And, our bodies have the know-how to let that happen fast.

Jim Collins’ Fast Can Kill Finding in Context
Based upon all this, Jim Collins’ fast can kill companies finding needs to be looked at in context. Jim Collins’ Great by Choice research that produced his fast can kill finding compared highly successful companies with their unsuccessful counterparts during uncertain times. In such times, companies may face pressure to make major changes. And, according to my research, serious failures–the kind that can kill the business–often occur when companies make major changes about which they lack know how, and when companies go into new areas they don’t understand. These can easily happen during uncertain times.

So, successful companies take steps to make sure they have the needed know how. This doesn’t mean going excessively slow, nor does it necessarily mean agonizing over every little decision. And, it doesn’t mean fast paced executives whose style is “driver” should start pondering every single decision in an “analytical” style that typifies many research scientists and academics.

But, it does mean that fast paced executives should avoid moving full speed ahead into areas the business does not understand. Doing so can greatly harm a business, according to my research. My research finds that business success generally comes from a gradual, evolutionary approach. So, there is value in testing, experimenting, paying attention to data and patterns, watching what works and what doesn’t, and making small bets. Thus, as I see it, the more crucial lesson from Collins’ findings should be: strive to determine which decisions can be fast versus which ones should be slow.

Google CEO Larry Page’s Fast Decisions Comment in Context
Furthermore, Google CEO Larry Page’s comments about fast decisions must be put in context. His comments were made at a Zeitgeist conference where both Larry Page and Google Chairman Eric Schmidt jointly addressed the audience. During that session, we were told that Google values analytics in its decision making. Since analytics are a tool to help make better decisions, Google’s belief in analytics tells us something. It suggests a willingness to make tradeoffs between speed and getting things right, although Google strives for both.

Thus, since Google emphasizes analytics, despite what Page said about fast decisions, the message emanating from that conference is: decide fast, but not so fast that you proceed blindly. This philosophy can help protect Google from the dangers of deciding too fast–dangers that showed up in Jim Collins’ Great by Choice research, as well as in my research.

In summary, a business must adjust its mix of fast versus slow so its moves are based on its strengths, knowledge, and expertise. This means fast paced executives must slow down and become more deliberate in their decisions when moving into new areas where the company has little know how, or when making major changes. In these situations, speed can kill. Yet, fast can be beneficial in certain cases, particularly for more routine matters. So, pay attention to when to decide fast and when to decide slow. And, you’ll improve the quality of your decisions, so you can make those Winning Moves.

All of these high profile U-turns involved attempts at undoing the consequences of a major shift in business direction. And, these “Oops” reversals clearly fit the patterns I identified in my 25+ years of researching business success and failure, studying the moves that companies make. By paying more attention to the patterns, the three strategic reversal companies most likely could have prevented their major strategic missteps, the subsequent U-turns, and the devastating consequences.

All three reversal companies in the “Oops” article seemed to lose sight of the following key principles that emerged from my study of business success and failure patterns:

• Building on strengths is crucial for success, so avoid throwing away the business that’s based on those strengths–except in rare circumstances.
• Don’t be too quick to think that your circumstances are a rare exception to the above–most of the time they are not, so take a good hard look at your situation if you are inclined to think they are.
• Success in new areas generally requires a series of evolutionary steps, so do not expect rapid success when you quickly make major shifts into new areas–unless you have already gone through those steps.
• Violating the above can be costly, and depending upon the circumstances, it may be difficult to regain what you threw away.

Principles like this are ever so important when considering a major change in direction. Yet, when business conditions get tough, it can sometimes be tempting to think the above principles do not apply. It can be tempting to pursue radically different markets or to make other major changes. But, if you want to do so, do not ignore the patterns. Those patterns are very powerful. And, the three companies that needed “oops” strategic reversals are good examples of what happens when the patterns are ignored.

So pay attention to the patterns. Put more effort into assessing your situation beforehand when considering major shifts. Identify where your company can take, or has already taken, those gradual evolutionary steps. And, you’ll be on the road to making Winning Moves that do not require costly strategic reversals.

My method of studying a large number of moves differs from the approach used by many other researchers. Yet, my findings are often confirmed by and/or are consistent with the findings of prominent researchers in academia and in industry. For example, much of the research in Jim Collins’ current best-selling book Great by Choice, co-authored with Morten Hansen, confirms the patterns that I identified and have been discussing here on my website over the last several years. Additionally, work on adjacencies by Zook ties in with my findings. So does work in academia, such as research at the University of Virginia.

The extensive and ongoing nature of my research into business success patterns led to the development of an overall framework, put together by examining a number of diverse, but highly interrelated pieces. By understanding these interrelationships, my research not only identifies the patterns, but it also does a great deal to explain them. Similarly, my work has offered explanations of the findings of other prominent researchers. And, when other prominent researchers seem to disagree with one another, my framework can sometimes offer insights showing why their studies do not actually conflict if you more deeply understand their findings.

To recap, the Winning Moves patterns are powerful, recurring, look at both success and failure, have received some outside validation, can offer meaningful explanations, and are a very valuable tool when companies are making strategic choices. That’s why this website is created around a philosophy based upon the Power of Patterns. And, as I discuss companies and current business news in this blog, in my newsletters, and in my reports, I illustrate how applying these patterns brings superior results. For example, in my
previous blog post, I discussed how Macy’s success with Black Friday entails Winning Moves that adhere to the patterns. But, I’ll also share examples of other situations where ignoring the patterns leads to failure.

Finally, it is important to remember that, while these patterns are so integral to business success, the patterns are not necessarily obvious to everyone, especially in light of business practices that have been widely accepted relatively recently, but may not be based on these patterns. In fact, several of these patterns are still unclear to many. So, the patterns are often misunderstood and misused. As the understanding of these patterns becomes more widespread, there is greater potential for them to be used effectively. The patterns are not a magic bullet. But, once you see how powerful these patterns are, you’ll know why they are so essential for business success.

Businesses succeed when they build on their strengths. Knowledge contributing to the understanding of the dynamics of the business is an important component of strengths. Formal market research studies are one source of knowledge, but they are hardly the only source. That’s why my March 2010 newsletter titled “Should Starbucks Do Market Research? Yes, But…” stresses the importance of paying attention to less formal sources of knowledge as well. Basically, knowledge can come from various sources ranging from extensive experience, to formal research methodology, to simply paying attention to what works and what does not.

Macy’s approach to Black Friday is an excellent approach to building knowledge. It incorporates a stepwise, evolutionary approach, which my research–and increasingly the research of others–finds associated with business success. It makes the effort to look for indications of what works and what doesn’t. And, what works is applied more broadly to the business.

Even back when opening at midnight for Black Friday was still rare, there were indications that it was very successful for the few who did so. In fact, I can personally attest to the fact that when the Premium Outlet Mall in Aurora, located on the far periphery of suburban Chicago, was one of the rare places opening at midnight for Black Friday, traffic on Interstate 88 approaching the mall was virtually at a standstill. Traffic backed up, not only on the exit ramp near the mall, but for a good part of the way to the previous exit, located four miles east, as shoppers approached the mall around midnight. Thus, Premium Outlets seemed to be doing well as an early adopter of midnight opening for Black Friday.

In the aftermath of the early adopters’ success, Macy’s tested its midnight opening for Black Friday. The Wall Street Journal article described what Macy’s did. Macy’s ran the midnight openings test last year in just six locations. Those midnight openings were both successful and informative. Then, after these early indications of success, Macy’s took its knowledge building a step further. It held a November 16 sale, so it could see what promotions worked best. In its knowledge gathering, Macy’s not only looked at which products were selling, but also at who was shopping. With this information from its pre-Thanksgiving sale, as well as with what it learned from last year’s six location test and from staying open 24 hours right before Christmas last year, Macy’s determined what promotions to run on Black Friday and who to target. As a result, Macy’s did very well on Black Friday.

Based upon my research into Winning Moves, what are the lessons from Macy’s Black Friday? Paying attention to what works and what does not, and applying what works in ways that fit your business is a Winning Move. The way Macy’s used this to target the teen market is also a Winning Move. Taking a stepwise, evolutionary approach, like Macy’s did, is a Winning Move. And, Winning Moves are what drive business success.