Despite having only gained a lot of buzz recently, the “growth mindset” concept has been a part of conversations among innovators and leadership circles for many years. So, how exactly does this concept work and what role does it play in developing your overall business strategy? Whether you are starting a new business or venturing into a new industry, this is a crucial concept to become familiar with if you want to build a winning strategy.
What is Strategy?
Business leaders and marketing executives encounter the word “strategy” all the time. But what comprises an effective business strategy? And what does it take to formulate one?
Michael Porter has developed the Five Forces analysis framework in order to analyze the competition within your industry in order to develop the most effective strategy. This approach is most effective for businesses that are starting out in a new industry sector. According to Porter, competition does not only come from other businesses you are in direct competition with, it could come from any one of the five basic forces that operate within an industry.
Based on this analysis framework, here are those five basic forces at play here:
1. Threats of New Entry
This refers to how easily potential competitors can enter the market and threaten the position of your company within the industry. What is the initial cost of startup? Is the barrier to entry low or high? How can you scale your business? Is this market regulated? These are just a few of the things to consider when formulating your strategy using this analysis framework.
2. Threat of Substitution
When new entries penetrate your industry, you need to determine if there is a likelihood that your existing customers will choose them over your company. This will enable you to develop alternative strategies that will position your product or service as superior to theirs, and therefore avoid the risk of being replaced.
3. Bargaining power of buyers
Think about how your customers can influence the cost of your product or service. What value do you offer your customers that will keep them from switching to another business? Consider what benefits (and drawbacks) your existing buyers can gain by making a switch.
4. Bargaining power of suppliers
On the other hand, your suppliers can also directly influence the cost of your product or service. How unique is the product that they supply to you? How will losing them affect your bottom line? Do you have other possible suppliers? And will it cost your business a lot to switch to your alternatives? In most cases, you have no control if the supplier decides to ramp up their prices, so think about how it can affect your pricing strategy.
5. Competitive rivalries
Finally, your direct competitors will also affect your strategy. This is where you need to be crunching numbers. Think about how many competitors you have and how big they are. Look at the big picture and examine the quality and value that you offer versus the quality and value they offer. Are you able to distinguish your product or service from these competitors?
Using these factors, Michael Porter was able to develop a definition of strategy from the competition perspective. The ability to identify competition enables a business to formulate a unique set of activities in order to offer a unique mix of value to their target customers. Simply put, Porter believes that the only way to develop strategy is when you take into account the market and your competitors.
Based on the Five Forces above, Porter offers two schools of thoughts when it comes to strategy: 1) offer the same thing as your competitors but make it cheaper, and 2) offer something unique.
What is a Growth Mindset?
A growth mindset is another crucial element for building a formidable strategy for your business. With this mindset, leaders have the ability to transform a business from within. According to Stanford University psychology professor Carol Dweck, the main reason why a growth mindset is vital for a business or organization is that it promotes learning, new ideas, and development.
The problem is that some individuals or organizations tend to be complacent once their ideas catch on. They start to revel in their success, and they fail to expand on those ideas and maximize their potential. This is exactly why more companies are adopting a growth mindset. It encourages the belief that talents and skills can be developed through hard work, consistent effort, and input from others.
According to this Harvard Business Review article, many organizations have adopted the growth mindset in their mission statements in order to combat stagnation in their organization. After all, the best strategy is one wherein every member of your team feels empowered and committed to learn. This is possible when the growth mindset is embedded into the company culture.
Mindset Awareness, Openness to Change, and Empathy
So, what should your business take from the two concepts above – Michael Porter’s Five Forces framework model and the growth mindset? First off, you can build on what you already do in your business by maximizing opportunities and new trends. On the other hand, you must be open to change and exhibit empathy in order to see things from your customers’ perspective. This will enable you to offer true value to your target audience and position yourself as the best in the industry, while making your products or services as cheap as possible.
A growth mindset, however, is a journey. It is not just a mere declaration. Do not fall into the trap of a launch-and-leave approach; if this happens, then you won’t be able to reap its true benefits for your organization. There won’t be any real change and your strategy won’t thrive. A growth mindset must be open to change and adaptable based on the prevailing conditions in the market and your customers’ needs.
You can maximize its benefits through three actionable steps: 1) foster continuous learning, 2) leverage your learning tools, and 3) encourage helpful conversations within the organization. All of these three actionable steps must be implemented across the board. This means that this mindset must not only be possessed by leaders, but by every team member if you want to build an environment where innovation and success can co-exist.
