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Circle mapping your firm’s growth strategy

Vincent Bruni-Bossio *, Norman T. Sheehan, Chelsea R. Willness

Edwards School of Business, University of Saskatchewan, Saskatoon SK S7N 5A7, Canada

* Corresponding author E-mail addresses: [email protected]

(V. Bruni-Bossio), [email protected] (N.T. Sheehan), [email protected] (C.R. Willness)

KEYWORDS Growth strategy; Knowledge visualization; Value proposition; Customer segments; Resources and capabilities

Abstract This article offers an innovative graphical approach to facilitating an interactive discussion about identifying and assessing potential growth opportu- nities. Our approach, circle mapping, visually conceptualizes growth as occupying space, where market space is defined by a set of concentric circles. The circle presently occupied by the firm is defined by its current set of customers and the value proposition offered to them, while the outer concentric circles represent growth opportunities that are defined by new customers and value propositions. The process of circle mapping prompts leadership teams to formulate a growth strategy by visually mapping the value proposition for future customers in relation to the firm’s capacity to access the resources and capabilities needed to successfully occupy those spaces. The model allows leaders to conceptualize growth strategies, such as leveraging success in one circle to target consumers in another. It can also allow leaders to evaluate the rewards and risks associated with different growth oppor- tunities, while the visual aspect of the model assists with overcoming some common challenges of applying strategy frameworks to develop new strategies. By having leaders visually depict and justify where and why they want to grow, circle mapping helps firms conceptualize a profitable future and then confidently move toward that space. # 2017 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.

1. Visualizing growth strategies

Developing effective growth options for a firm is difficult due to the information overload associated with evaluating multiple options in

today’s competitive environment. Generating growth strategies involves simultaneously being aware of multiple environmental factors and trends, competitors, customer value propositions, government regulations, etc. The ability to inte- grate these into profitable strategy is a daunting task for many leaders (Eppler & Platts, 2009). In our experience, leaders struggle to assimilate the in- formation needed to generate growth options that successfully exploit the company’s resources and capabilities. This discussion is further complicated D

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as leaders are typically given large amounts of data derived from various strategy frameworks. We have witnessed leaders struggling to cope with information overload, watching them satisfice by only focusing on what they understand. This typically results in incremental improvements to the firm’s current strategy because it is easier to formulate and explain small changes than to conceptualize and explain how the firm’s resources and capabilities may be leveraged to generate growth in tomorrow’s markets.

To address the challenges of generating profitable growth options, we turned to the writings by Sun Tzu in The Art of War on occupying space. Unlike conventional military strategists, Sun Tzu avoided direct confrontation with enemies because such confrontations are often unpredictable and may result in potentially damaging losses. Instead, Sun Tzu promoted the idea of overtaking enemies by occupying the space around them through a series of small wins (Sun Tzu, 1910/2005). By combining Sun Tzu’s ideas with the literature on value propositions, we developed a conceptual growth-mapping tool called circle mapping. Growth in circle mapping is not about defeating competitors but rather identifying attractive spaces to occupy, where the space is defined in terms of new value propositions and/or new customers. While Sun Tzu speaks of tactically beating back the enemy to occupy geographical space, in business we speak of beating rivals to occupy the cognitive space of target customers. Circle mapping is a visual tool that simplifies the ideation process for senior management teams when thinking about future spaces so that they can develop effective growth options. Research shows that visual mapping tools lead to generation of higher-quality alternatives by mitigating the cognitive and social challenges faced by teams of senior leaders, as well as enhancing buy-in to the growth strategy that is ultimately selected (Eppler & Platts, 2009).

Currently, leaders and practitioners attempting to generate growth opportunities use several well- known, traditional strategic frameworks to analyze their firm’s external environment (e.g., Porter’s Five Forces (Porter, 2008), PESTEL (Aguilar, 1967)) and internal environment (e.g., resource-based view (Barney, 1991), value chain analysis (Porter, 1985)). While these existing frameworks are effec- tive for scanning the firm’s internal and external landscape, they can be enhanced by using a tool that helps to identify growth opportunities. A key strength of circle mapping is that it is a strategy development tool that builds on and complements tools like PESTEL, Porter’s Five Forces, VRIO, and

value chain analysis, which are strategy analysis frameworks.

By breaking down the analysis of the firm’s environment into smaller, manageable parts, tradi- tional strategy frameworks help leaders generate lists of relevant factors to consider when developing a strategy. These frameworks provide the data needed to develop effective strategies, but we argue this data needs to be placed in a visual tool to enable an effective discussion of growth options. As we later describe, when leaders use circle map- ping to draw concentric circles beyond the one they currently occupy, they are building and testing new growth strategies with their senior leadership team.

In the sections that follow, we briefly discuss the concept of growth through space and the need to link value propositions to the firm’s resources and capabilities to create an effective growth strategy. We then describe how circle mapping works and why it works in terms of leveraging key principles of strategy and space, and the benefits of using knowledge visualization to conceptually map the firm’s growth possibilities. Last, we offer steps for applying circle mapping and illustrate with a case example from practice. For each step, we also provide guiding questions to facilitate the leadership team’s progression through the circle mapping process.

2. Circle mapping origins

2.1. The principle of occupying space

The idea of occupying space can be traced to early Chinese military writings by Sun Tzu (1910/2005) in The Art of War. Sun Tzu advocates for winning through a series of small encounters with the overall goal of occupying space, rather than conquering the enemy through one decisive battle. Sun Tzu’s idea directly aligns with the Chinese game called Go. The objective of Go is to tactically place stones on the board with the purpose of occupying as much space as possible (Lai, 2004). In contrast, traditional Western thinking tends to view warfare and strategy like a chess game (Lai, 2004) in which the goal is to take out as many opponents as possible while moving forward. The idea of occupying space is a change in mindset for many senior management teams that typically follow a chess-like logic of attacking competitors head-on, rather than following the logic espoused by Sun Tzu and used in the game of Go.

We analogize Sun Tzu’s concept of fighting for geographic space that is occupied by enemy troops to businesses fighting for customers’ cognitive D

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space that is occupied by rival offerings. Both conceptions of space are fluid. The geographic space shifts as the enemy moves and repositions its troops, and the customers’ cognitive space shifts due to changes in technology and rivals’ actions. In business, firms enter consumers’ cognitive space by offering a value proposition that includes the attributes desired by consumers and must compete with rivals offering similar value propositions. Customers’ perceptions of the rival offerings ultimately shape their decisions about which offering they will purchase.

Sun Tzu’s concept of space empowers CEOs to move beyond the idea that growth strategy involves moving from the current situation to a defined future target, as shown in Figure 1A. We argue that successful strategies should include multiple pathways to growth, while recognizing that these opportunities can only occur if CEOs have a tool that encourages a discussion of a full range of options. Applying Sun Tzu’s ideas to business prompts leaders to view growth as a series of smaller conquests, following any number of pathways to occupy new customer spaces, as shown in Figure 1B, rather than assuming that a company should move straight to their future target (Figure 1A).

To illustrate the concept of growth using multiple pathways, we offer the example of 3twenty Modu- lar, a company that started in 2009 with the idea of building modular houses and offices out of used shipping containers. Offering modular construction allowed the company to compete on the basis of lower price, delivery speed, customization, porta- bility, and durability. The founders’ ultimate goal when they started the firm1 was to build residential units; however, they quickly discovered that the residential housing industry was too competitive so they focused instead on building work camps for the mining sector. The decision to supply modu- lar housing to the mining, oil, and gas industries was triggered by a customer looking for specific value proposition attributes (i.e., portable housing that is customizable, inexpensive, and durable).

In 2012, the company diversified its revenue stream when it started a rental division to lease office trailers and car washes at construction sites. Then, in 2013, 3twenty Modular won a major con- tract to create large-scale barracks for a Canadian military base, which expanded the size of the work camps it traditionally supplied to exploration camps

1 Based on statements by the founders (McCrea & Willoughby, 2017) in a public presentation about the origin and growth of their firm, as well as company information available on their website: https://www.3twenty.ca/

Figure 1A. Conventional approach to growth strategy

Figure 1B. Occupying new customer spaces

and mining sites. In 2014, the firm shifted to building modular office buildings, portable school classrooms, and smaller residential units such as cabins. By 2016, non-shipping container work accounted for 67% of sales with recurring revenue from over 100 rental office trailers and car washes. By early 2017, the company was poised to expand into full residential housing, thus realizing its origi- nal goal using multiple pathways. 3twenty Modular achieved its original goal only because it followed a process of growing through multiple customer spaces. If 3twenty Modular had focused solely on targeting the residential housing market space, the company most likely would have failed (Figure 2).

Circle mapping offers leaders the ability to map a series of concentric circles where each circle defines different sets of attributes that make up the value proposition of future customers. Since the concept of occupying space involves expanding out- ward in any direction, circle mapping offers new opportunities to compete against current and fu- ture competitors. The above example demonstrates that growth between circles typically progresses by the introduction of new offerings (e.g., modular housing led to demand for rentals and then a full- scale modular work camp). Consumers’ cognitive spaces can overlap, which creates opportunity for a value proposition that may appeal to another set of D

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Figure 2. Circle maps for 3twenty Modular

customers (e.g., the attributes of customization, durability, and low cost also appeal to buyers of modular offices and portable school classrooms). This raises the possibility of leveraging resources and capabilities to grow from one consumer space to another, which we discuss in Section 2.2.

2.2. Aligning resources and capabilities to deliver value propositions

To successfully deliver a value proposition, leaders must identify the attributes of a compelling value proposition that are specifically targeted at a size- able group of customers who desire them. Leaders must also ensure the firm has access to the requisite resources (e.g., property, equipment, people, financial) and capabilities (e.g., marketing, recruit- ing, negotiating) needed to deliver these attributes reliably. If any of these components are missing, the firm will either fail to deliver the value proposition or it will deliver a value proposition that is not relevant to the customer segment targeted. Align- ment is critical. For example, a firm can have resources and capabilities to deliver a value propo- sition, but not enough customers who are interested in the value proposition. Similarly, if a firm designs a value proposition for a group of customers that is interested but it lacks the resources and capabili- ties to deliver the value proposition, it will again fail in its strategy. Success is dependent on alignment between attributes of the value proposition for a customer group, as well as the firm possessing and mobilizing the necessary resources and capabilities.

Our approach draws on the value proposition literature that defines value propositions in terms

of the key attributes of a product or service that drive customer purchases (Lancaster, 1966; see also Kim & Mauborgne, 2005). The attributes of a value proposition can be functional (e.g., product quality) or emotional (e.g., prestige). Separating value propositions into their individual attributes is useful for assessing whether the firm can access the specific resources and capabilities needed to deliver each attribute of the new value proposition.

To understand how forecasting the attributes of future value propositions can assist leaders to stra- tegically allocate a firm’s future resources and capabilities for growth, consider the example of a customer who buys a car from a dealership rather than a private seller. Customers who prefer shop- ping at a dealership may do so because they value the interaction with the dealer’s sales staff, the ability to test drive the vehicle, and the potential to obtain financing, warranties, and service–— these are all attributes of the dealer’s customer value proposition. Understanding which of these attrib- utes this segment of customers values most will assist the dealership in understanding how to allocate its resources and capabilities. Is it advan- tageous for the dealer to invest more in training high-level sales staff, or should it provide different financing options? Customers who value the relationship with sales staff may be very different from customers who see financing as a critical part of the deal.

2.3. How circle mapping was developed

We developed circle mapping to meet specific business challenges around growth through a series of consulting engagements in for-profit, nonprofit, economic development, and public sector organiza- tions over a period of 5 years. It emerged because we discovered that conventional approaches to strategic analysis, which typically analyze the current state of the firm’s internal and external landscape, can be enhanced with a visual tool that can synthesize information for discussing growth opportunities. To examine its resonance and effec- tiveness, we used a case-based approach of creating meaning by listening to participants’ descriptions of their reality and observing their actions (Baxter & Jack, 2008; see also Lather, 1992). This provides practical, concrete knowledge that retains a nuanced depiction of a reality (Flyvbjerg, 2006).

In the initial stages of its refinement and testing, circle mapping received very positive feedback from senior managers and directors because it was visual, easy to understand, and promoted an in-depth discussion of growth opportunities. Managers also felt that conceptualizing growth by D

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289 Circle mapping your firm’s growth strategy

comparing future value propositions with needed resources and capabilities promoted an intuitive understanding of what was required to grow successfully. Through practice, we revised the framework to articulate the concentric logic to best elicit effective discussions for planning a growth strategy, and subsequently streamlined the identi- fiers of each circle (e.g., current customers, next customers, and future growth customers) to reflect this progression. Figure 3 shows the relationship between each circle and the progression.

3. Elements of circle mapping: The three circles

3.1. The first circle: Current customers

The process of circle mapping examines the feasi- bility of growth by delineating a set of concentric circles that are each defined by different value propositions. The first circle identifies the current customers as those the firm is already successfully targeting with its current value proposition using existing resources and capabilities. The mapping process requires that a firm articulate the specific attributes of a value proposition offered to the customers in this circle, and the current resources and capabilities used to deliver this value proposi- tion. Returning to the car dealership example, current customers would be those who prefer a value proposition that includes attributes such as interacting with a sales person, test driving the car, negotiating, consulting on financing options, and driving home with a new vehicle.

3.2. The second circle: Next customers

The circle mapping process then identifies the next customers as those who desire a value proposition similar to that being offered to the current customer

but with meaningful differences in the level and/or type of attributes. For the car dealership, this might include those customers who want to research vehicle options and prices online, but still prefer to test drive the car and speak with a sales person face-to-face. In assessing this circle, the dealership must assess whether it has the online capabilities to meet this demand and whether investing in these capabilities is worth the return these potential (next) customers might bring. In recent years, many car companies have tried to attract this type of customer with website capabilities that allow customization of vehicle orders with particular specifications and add-on features (e.g., Toyota’s build and price interface).

3.3. Outer circles: Future growth customers

Circle mapping identifies future growth customers as those desiring a value proposition that requires significant adaptation or addition to the firm’s current set of resources and capabilities in order to deliver this new customer value proposition. Entering this circle represents a significant investment in resources, but may also yield significant rewards. The car dealership may want to offer electric or hydrogen fuel cell cars, which include a value proposition that is related to, but different from, conventional fuel-powered vehicles. Movement to this circle would require updating the dealership’s parts and service capabilities, changes to marketing and communi- cations with customers, and potentially new salespeople who understand the product. The company may also need to provide after-purchase assistance beyond what is needed for a traditional car, or lobby the government to provide abundant vehicle charging/fueling stations and tax relief when purchasing electric/hydrogen vehicles. Again, the dealer would need to assess the risk and return

Figure 3. Circle maps of current, next, and future growth customers

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290 V. Bruni-Bossio et al.

of allocating resources and capabilities to this emerging customer segment.

4. Benefits of circle mapping

By asking leaders to conceptualize growth as occupying space, circle mapping promotes a strategic discussion of how to adapt a firm’s business to offer new value propositions to new target customers. Conventionally, a growth strategy to enter new markets involves offering new products to existing customers (i.e., market development) or new products to new customers (i.e., diversification) (Ansoff, 1965). Inherent in this type of growth strategy is the need to expand a firm’s core business to targe

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