The Opportunity Paradox
Experimentation, iteration and improvisational change are all the rage in today’s dynamic business environments. But when evaluating new business opportunities, there’s a paradoxical tension between strategic focus and flexibility that can define or break your business.
Capturing new growth opportunities is fundamental to strategy, innovation and entrepreneurship. But how can managers best meet this challenge? With flexibility or focus? The answer, as it turns out, can be more complex and more crucial to a company’s success than previously thought. Our research on mature corporations, growing businesses and new ventures suggests a paradoxical tension between focus and flexibility that can define or break your business. In this article, we explore when and where to be focused and disciplined versus when to be flexible and opportunistic.
Experimentation is a familiar innovation tool, but some industry pundits suggest that planning rarely succeeds in dynamic environments; instead, they argue for a rapid cycle of experimentation and pivoting.1 Such an approach holds both intuitive and rational appeal in a world characterized by uncertainty, where the flow of opportunities is swift yet unpredictable, where market boundaries are shifting and where competitors are constantly changing. Given the new competitive environment that promotes change and flexibility, is the old strategic emphasis on focus less relevant? We argue it is not. In fact, we discovered in our interviews with a wide variety of managers that focus may be just as important as flexibility, and, counterintuitively, a company’s focus may even influence its flexibility and vice versa. (See “About the Research.”)
Opportunities Are Complex
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. Opportunity selection involves determining which customer problem to solve, whereas opportunity execution deals with solving the particular problem chosen.2 Most books, articles and thought leaders studying opportunities focus heavily on opportunity execution — how to create value by developing a solution for customers. But research suggests that most innovation efforts move so quickly to identify a solution that they have to cycle back to figure out what problem they are actually solving.3
We found that opportunity selection appears to matter as much as opportunity execution, the place where most companies spend their time. More importantly, how you approach opportunity selection (whether with flexibility or with focus) has a critical impact on how successful you are at opportunity execution.
1. E. Ries, “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” (New York: Crown Business, 2011).
2. C.B. Bingham, “Oscillating Improvisation: How Entrepreneurial Firms Create Success in Foreign Market Entries Over Time,” Strategic Entrepreneurship Journal 3, no. 4 (December 2009): 321-345.
3. C.B. Bingham, K.M. Eisenhardt and N.R. Furr, “What Makes a Process a Capability? Heuristics, Strategy, and Effective Capture of Opportunities,” Strategic Entrepreneurship Journal 1, no. 1-2 (November 2007): 27-47; and C.B. Bingham and K.M. Eisenhardt, “Rational Heuristics: The ‘Simple Rules’ That Strategists Learn From Process Experiences,” Strategic Management Journal 32, no.13 (December 2011): 1437-1464.
4. K.M. Eisenhardt, “Making Fast Strategic Decisions in High-Velocity Environments,” Academy of Management Journal 32, no. 3 (September 1989): 543-576; and A.V. Bhidé, “The Origin and Evolution of New Businesses” (New York: Oxford University Press, 2000).
5. E. Aronson, “The Theory of Cognitive Dissonance: A Current Perspective,” in “Advances in Experimental Social Psychology,” vol. 4, ed. L. Berkowitz (New York: Academic Press, 1969), 1-34; L. Ross and R.E. Nisbett, “The Person and the Situation: Perspectives of Social Psychology” (Philadelphia: Temple University Press, 1991); and K. Weick, “Sensemaking in Organizations” (London: Sage Publications, 1995).
6. Bingham, “Oscillating Improvisation.”
7. C.B. Bingham and J.P. Davis, “Learning Sequences: Their Existence, Effect, and Evolution,” Academy of Management Journal 55, no. 3 (June 2012): 611-641.