Break­through

First, breakthroughs typically arise when organizations set and pursue seemingly unattainable goals that competitors assume are not viable because no one else has accomplished them. Progressive Insurance, for example, established the ambitious objective of settling auto claims instantly at the time of reporting rather than taking the industry average of 42 days. This immediate response has proven extremely popular with customers and fueled Progressive's growth. With a massive database of claims processing experience, Progressive can now even advise clients on optimal repair facilities and offer to directly manage repairs, mitigating fraud risk and other issues. Customers love the superior service and Progressive is expanding rapidly as a result. Second, breakthroughs are closely linked to fulfilling future rather than historical customer needs. Aliant Corporation in Canada evolved from viewing itself as a provincial telephone provider to an electronic services integrator focused on delivering new solutions to its clients. While other telecoms struggle with industry upheaval, Aliant's revenues climb.

Third, breakthroughs fundamentally redefine the client value proposition, emphasizing customer relationships before cost reductions. USAA, which serves military officers and their families, established the ambitious goal of completing every client interaction in one phone call rather than requiring multiple contacts. By implementing sophisticated real-time system access for service agents, USAA strengthened customer bonds. And by directly strengthening customer relationships, USAA’s revenues now surge. Fourth, instead of incrementally improving existing activities, breakthrough companies target quantum leaps forward in process innovation. When American Standard underwent a private leveraged buyout, its new owners set a goal of slashing inventory and working capital needs. By introducing a make-to-order production system rather than stockpiling finished product inventory, working capital as a percentage of sales plunged from almost ten percent to around two percent over several years, saving hundreds of millions of dollars in interest expenses. This breakthrough stemmed from emphasizing next-generation business processes rather than refining outdated legacy operations.

Effective breakthrough leaders exhibit extraordinary personal capacity to grasp business details and make strategic decisions, having been in the trenches and knowing every facet intimately. This multitalented combination of architect’s structure passion and contractor’s execution skills allows them to coach, manage, and lead the initiative. Simultaneously heroic in chasing accomplishments yet humble enough to avoid ego obstacles, they remain engaged in ground details so frontline workers see a leader worth following, not a derailed effort.

Aligning senior management around a common strategy, the breakthrough leader gets hands-on, leaving no doubt that confidence backs actions taken. Setting high personal standards recognizes the marathon ahead while demanding as much from oneself as from others. Good partnerships with other leaders create inner circles to reinforce weaknesses. Rewarding milestones builds change momentum and recognizing contributions is essential. Local achievements get incorporated into the overall strategy through targets, involvement, and appropriate rewards.

Conventional thinking suggests that most breakthrough innovations come from small, entrepreneurial business units operating separately from mainstream company operations. However, while these units can develop innovative new products and services, they lack the scale and resources to drive an enterprise-wide transformation on their own. For a genuine breakthrough to occur, the entire organization must get behind integrating and executing on the new innovation. This "enterprise principle" runs counter to some popular management approaches like decentralization, autonomy and empowerment that give business units freedom to chart their own course. However, if each unit simply does its own thing, the company's ability to achieve a breakthrough disappears.

To illustrate, companies can be mapped on two axes: vertically, whether they pursue new innovations or optimize existing operations; and horizontally, whether new offerings are developed by a standalone unit or adopted across the entire enterprise. Conventional thinking suggests breakthroughs happen in the quadrant where innovative products/services are developed by a small autonomous unit. But while these units can create new offerings, they cannot transform the whole company. For an enterprise-wide breakthrough, the innovation must be pursued company-wide.

Before attempting to develop a breakthrough strategy, an organization must have the capacity to focus on executing a single core strategy for 3-5 years. Breakthroughs require time to deliver results, so organizations need management continuity to see the strategy through. Additionally, breakthrough strategies should align with an organization's identity, strengths and resources. As the sources note, "The key determinant of success in pursuing a breakthrough strategy is the ability to focus on a single strategy for three- to five-years or longer."

Breakthrough strategies can originate from any player in an industry, not just the market leaders. What matters most is having the insight to conceive of a breakthrough, the ambition to launch it, and the persistence to stick with it until it starts paying dividends. In considering potential strategies, organizations have four main options: Maintain the status quo Optimize existing performance Pursue incremental improvements Develop a breakthrough strategy Maintenance is rarely feasible long-term, as markets demand constant innovation. Incrementalism also has limits in many industries facing disruption. Breakthrough strategies become the best option when optimization and incrementalism cannot drive the level of change needed. As the sources explain, "In the majority of cases, markets will demand constant innovation. In these cases, optimization or incrementalism just won’t cut it."

Legacy bias, installed systems, existing distribution channels, corporate culture, fear of cannibalization, emphasis on short-term results, reluctance to leave the comfort zone, static leadership, day-to-day demands, business myopia, fear, and lack of staying power are factors that make it difficult for established companies to change business models even when facing clear marketplace changes. When a formula works, systems and processes become embedded, distribution gets entrenched, perspectives dominate culture, and leaders prioritize near-term success. Disrupting any of this is uncomfortable. However, market champions actively pursue innovation, often through development arrangements, venture capital, and strategic acquisitions.

Successful breakthroughs do not occur spontaneously, but rather require deliberate planning and execution. While the real world presents many variables, breakthroughs generally follow a pattern of getting attention, establishing an agenda, focusing resources, and acting. At their core is intentional business strategy. Companies aiming for a breakthrough should first pause less strategic activities and gather to define strategy. All discretionary work halts so people can contemplate core issues. No major resource decisions occur. Leaders analyze market knowledge and conduct self-assessments to determine strategic options, which they debate and explore through scenarios. This leads to an integrated strategy with specific, actionable objectives that all commit to, usually centered on one critical initiative.

With strategy defined, preparation engages the broader organization. Resources are obtained, staff trained, infrastructure built, and communication plans enacted so everyone understands the strategy. Detailed plans identify assignments so people know their roles. The goal is generating momentum around the new direction. Proper execution requires prioritizing the breakthrough above all else with strong program management. A leadership council drives alignment, while a strategy office and manager oversee efforts. Consultants play a minimal role - passionate, committed staff own execution. Doubters exit the team. The CEO extracts deliverable promises through one-on-one meetings. Metrics and milestones integrate with performance systems so the vision becomes identity, not a passing fad. Communication remains exhaustive so people internalize the shift.