New research looks at the strategies executives use in capturing new growth opportunities.
“Opportunities are more complex than people recognize. Few managers recognize that there are two components to capturing a new business opportunity: opportunity selection and opportunity execution.”
That’s according to Christopher B. Bingham (Kenan-Flagler Business School), Nathan R. Furr (Marriott School of Management) and Kathleen M. Eisenhardt (Stanford University), writing in the Fall 2014 issue of MIT Sloan Management Review. Their article, “The Opportunity Paradox,” looks at what they call the paradoxical tension between strategic focus and flexibility.
Among their findings:
- “We found that opportunity selection appears to matter as much as opportunity execution, the place where most companies spend their time.”
- “We observed that managers and entrepreneurs tend to fall into two groups that we label opportunists and strategists. The opportunists relied on a less scripted and more flexible approach to opportunity selection. . . . Strategists followed a different pattern. . . rather than taking advantage of unforeseen emergent opportunities, strategists were more disciplined.”
- “Longer-term success partly depends on sequencing opportunities for learning.”
“Sequencing opportunities” is the key concept. The authors write: “Sustained business success appears to depend not just on capturing one opportunity but also on stringing multiple opportunities together.”
Business people who classified as strategists and who were more disciplined in opportunity selection “also paid attention to how their opportunities were sequenced,” the research found.
Overall, the authors discovered that, “creating a sequence for opportunity capture permits leaders to bring the present and future together in a way that facilitates team alignment and channels the energy and attention of geographically dispersed employees and managers. This helps organizations get into a rhythm and move forward in a synchronized fashion. Sequencing therefore provides an order for opportunity selection (that is, where organizations are now, where they want to go and the path to get there) that serves as a counterpoint to the more freewheeling manner of selecting opportunities based on emergent customer demand.”
To select opportunities, the authors provide a few rules of thumb for the start of the process: “Resist jumping at the first potential opportunity or customer,” they write. “Showing restraint may not be easy when cash is limited and the opportunity appears to be reasonable. Nevertheless, it’s important to focus on the longer term rather than the shorter term.”
The authors also provide questions to guide the decision-making: “What does the right opportunity look like, and how will it set you up for future opportunities? Remember the lessons on sequencing: Try to see if there is an internal sequence to a series of opportunities. Will one opportunity position you for another one? Will this opportunity help you learn about another one? Will it give you the legitimacy to capture future customers?”
For more on how to capture market opportunities, read the full article.