The Driving Force of Your Business

Posted: June 1, 2009 in Powerful Ideas

This month I’m going to talk about the strategic concept of driving force. This idea came out of research conducted by Benjamin Tregoe and John Zimmerman in the 1970s and the work they subsequently did helping major corporations with strategy formulation and implementation. You can read about it in their book Top Management Strategy: What it is and how to make it work (New York: Simon & Schuster Inc., 1980). It’s not a recent concept, but it is still valid. I’ve started using it with my own strategy clients along with other approaches, such as Porter’s competitive strategy model, logical framework approach, and military strategy and operational planning processes.

The concept of driving force is fairly simple. Every organization, profit-based or not, has a fundamental driving force. As Tregoe and Zimmerman put it, the driving force is the “primary determiner of the scope of future products and markets.” One way to view the driving force is as the source of a company’s strength and competitive advantage. The driving force provides a framework for senior leadership to decide where and how to exercise market leadership. For instance, it makes no sense for a low-cost manufacturer or retailer to try to differentiate its products or services on a quality basis. People buy from them because they provide a low-cost alternative. Conversely, it makes no sense for a luxury goods manufacturer such as Mercedes to offer low-cost alternatives. They won’t do it well and they always run the risk of “watering down” their brand (that’s why they have diverse marques).

An organization can only have one driving force, and it is often challenging for senior executives to even identify what that driving force is, or what they would like it to be. One of the reasons for this is that it can involve coming to grips with a different view of the organization than what has been prevalent up to then. Another reason is that identifying a specific driving force implies making hard decisions about what to be and do, and how to go about doing it. Let’s look at the most common driving forces, with some examples of companies that instantiate them particularly well. The first two driving forces probably cover about 80 percent of situations.

Products/Services Offered: These organizations meet a basic and enduring need in the marketplace by offering a limited range of products or services. They seek to penetrate current demographic, geographic, or industrial markets as fully as possible before pursuing growth through the extension of markets or the creation of entirely new ones. Their main competitive advantage is the benefits that are built into their products or services and the resulting branding. Examples include: automobile makers, consumer products companies, training firms, Microsoft, public services such as police, fire, hospitals, and schools.

Markets/Needs Served: These organizations seek to offer a range of products or services to a limited market or segment. They build a powerful relationship with a clearly defined and often narrow group of customers or consumers who have common characteristics. They pursue growth and new business by offering an increasing number of products and services to their chosen segments. Their competitive advantage is built on the strength of their relationships and their brand. Examples include: Disney (kids’ entertainment), Gillette (men’s toiletries), TV sitcoms (aimed at particular demographics), consultants, and financial services.

Production Capability or Cost Advantage: These organizations build their success on producing or delivering goods or services cheaper than competitors. All key capabilities are related to production or operations processes, skills, and investment in equipment and related services. They compete primarily on the basis of price, and this drives everything else. Examples include: contract manufacturers, consumer goods makers with little product differentiation (e.g. soap, basic foodstuffs like sugar and milk), and some retailers (Walmart).

Technology: These organizations are built around a body of knowledge and/or a set of capabilities that enable it to develop new technologies or enhance existing ones. Key capabilities are R&D and innovation. Competitive advantage stems from the ability to innovate on a consistent basis. Examples include: many IT companies (some would include Microsoft), Apple, 3M, National Research Council, pharmaceuticals developers.

Method of Sale: These organizations determine their products or services, markets, and geographic scope on the basis of the capabilities and limitations of their primary method of sale. In other words, they sell what they can through their chosen method. All other capabilities, particularly method of distribution, will be developed to support this method. Their key competitive advantage is the convenience and choice they provide to buyers. Examples include: catalogue retailers, Amazon, Avon, eBay, the iTunes Store, and the iPhone App Store.

Method of Distribution: These organizations determine their products or services, customers, and geographic scope on the basis of those kinds of products or services and customers that can be handled through their established distribution channels. We could also say that these are companies or organizations that are driven by the needs of their operating networks. You know you are dealing with a distribution or network driven company when you have to adapt to them, rather than they adapting to you. Examples include: telecoms, cable companies, the post office, utilities, courier services, transit and other heavily invested transportation networks, McDonalds, and Tim Hortons.

There are a few other driving forces, such as return/profit (venture capital firms and conglomerates, GE and Berkshire Hathaway being the best examples), natural resources (oil, mining, etc.), operations capability (contracted services, such as IT, pay, audit), and size/growth (Passport Canada’s expansion to meet greatly increased demand for passports). However, these are the main ones.

The key point to get about this is that once an organization has a consensus as to what its driving force truly is, or what it should be, this then drives decisions about which markets to serve and what to offer. More importantly, it determines what markets won’t be served and which products or services won’t be offered, as well as how to do these things. Starbucks has realized that it was diluting its brand and the experience of its stores because they were becoming too common. They have since closed a large number of locations so as to maintain their up-scale image. They are clearly product/service driven. Conversely, Tim Hortons are clearly distribution driven, as they make a point to be ubiquitous. This is also McDonalds driving force. Founder Ray Kroc used to claim he was in the real estate business, not fast food. McDonalds has started to offer “designer” coffees, but that is simply to offer a reasonable alternative to the parents of the kids who dragged them there. Finally, the driving force also conditions the marketing strategies that will be implemented to carry out the vision. For instance, Walmart’s advertising is all about low prices, not convenience, selection, or quality, as that is not what they are primarily offering or what consumers want from them.

This article has been a bit longer than usual, because I wanted to introduce you to the power of driving force for your strategy and its implementation. I believe many organizations get their strategy wrong, or can’t implement on it, because they haven’t clued into what their driving force is, or they don’t have the proper capabilities in place to exploit this fundamental strength. Take the time to look at your own strategy and operations and to identify your driving force. Is this where you want to be? Are you fully exploiting your driving force or are you trying to be something that are not, or can’t be?

© 2010 Richard Martin. Reproduction and quotes permitted with proper attribution.

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