My recent post, “Why Small Businesses Should Scrap Strategic Planning,” set off a barrage of conversations, mostly from entrepreneurs who agree. Big companies have to make all their strategic decisions at once during an annual strategic planning session because it is too difficult and costly to get their team together more frequently. Small companies get to take the opposite approach: They tackle strategic choices as they come.
Consider Zor Gorelov, the CEO of SpeechCycle, a company that transforms how phone and cable companies like Telstra, Cablevision, and Cox deliver customer service. Last week I got a chance to sit down with Zor in the SpeechCycle headquarters. Deep in Wall Street, next to a sunny window overlooking the Statue of Liberty, I asked him to lay out the strategy that’s driven such dramatic growth (SpeechCycle was recently recognized by Deloitte as a “Technology Fast 500”). He walked through five pivotal decisions that collectively compose a disruptive strategy that, so far at least, position them as the uncontestable leader in what they do.
1. The perfect exit: Before launching SpeechCycle, Zor, a 25-year-old Russian engineer, recognized that while Soviet-era hospitals could not afford even basic sheets, they still wanted cutting-edge IT systems to keep up with the West, so he started building them. He launched a software company and saved just enough to buy tickets and get out of the Soviet Union with his wife and young son.
2. The search for meaning: After a stint at Bell Labs and Microsoft, followed by launching and selling BuzzCompany.com, one of the first Internet messaging software companies, Zor became fascinated by how humans extract meaning from speech. This lead him to launch SpeechCycle with several cofounders to realize a simple insight: They could help large firms use software to listen to and understand their customers better. Because they focused early and intensely, they now have unparalleled expertise using proprietary “High Definition Statistical Natural Language Understanding” technology to understand certain types of conversations.
For example, they know the virtually infinite ways a customer might complain about a slow Internet connection. Do you? If you don’t, you might want to try SpeechCycle, which would enable you to have your phone system simply ask, “What is your problem?” while your competitors guide their customers through the torturous “Press 2 for an option you don’t want” process.
3. Borrowing a road: In their first days, Zor and his cofounders, who bootstrapped the company, figured their best target customers would be electronics firms like HP. They were desperate to win clients so they sat down with a list of 1,500 consumer electronics companies and started cold-calling to win their first customer, a second-tier printer manufacturer. It soon became clear they were barking up the wrong tree because most customers call their phone and cable service providers when they have a problem. You don’t call Linksys when your router is down, do you? You call your Internet service provider first. SpeechCycle now serves leading telecom service providers instead.
4. Use the cloud: On a high-stakes phone call with HP, their target client told them that HP is very unlikely to buy software from a small software company. They simply don’t do that. So years before “software as a service” or “the cloud” were known terms, SpeechCycle adopted that model.
5. Sell value: Early on it was difficult to get customers to take a leap and pay this relatively young, unknown company to do something they were not convinced yet was possible, so the SpeechCycle team pivoted their pricing plan, saying, “Only pay us when it works.” If a customer calls and cannot solve their problem through the automated SpeechCycle enabled system, if they hit “zero for an agent,” SpeechCycle does not get paid.
Now, somewhere at Harvard Business School, a professor is telling impressionable students that the way to create a strategy is to sit down, think, and then document a set of decisions like this. They might even call up SpeechCycle as an example, and argue the company’s strategy is disruptive because they focused on:
1. Getting better than others at extracting meaning from utterances
2. Serving service providers, not hardware makers
3. Moving early to the cloud
4. Creating a pricing plan that makes it easy for potential clients to sign on
And while this is true, it overlooks how innovative disrupters like SpeechCycle arrive at their strategy. They strategize immediately, as needed, not in November every year. They strategize in 10 minutes in the hallway, not over three days in a boardroom.
The key to outthinking your competition is to make smarter decisions at every turn. So the next time you make a decision, stop what you are doing and think for 10 minutes. Break your thought process apart into five steps. My book, Outthink the Competition, provides tools to manage these steps precisely, but here is a short version:
1. Imagine: What do you want to achieve? Real-life example: I am about to get on a phone call and want the others to hang up motivated and in action.
2. Dissect: What must be true? They have to (a) see we are making progress, (b) hear excitement in my voice, and (c) know what to do next.
3. Expand: Come up with 10 or more ways to achieve what must be true. I can list out all my achievements this week, I can put them in the right order, I can drink an espresso, etc.
4. Analyze: Choose the 1-3 ideas that will have the biggest impact and that are the easiest to do. I decide to list out my achievements and put them in an order that weaves a narrative of momentum.
5. Sell: Think about how to communicate your plan. Since the people on the phone are analytical, I will communicate my achievements with numbers (e.g., we had 2 new pitches, raised $3 million in new commitments, etc.).
Try it out–and if you have a breakthrough, tell us about it in the comments.
[Image: Flickr user Michael Broxton]