Welcome to the November 2010 edition of Strategic Innovation newsletter, a free monthly newsletter on leadership, strategy and innovation. Delivered on the first Tuesday of each month.

Back issues are archived for free downloading at www.DanielLockConsulting.com.

Tips for improving

• Keep a to-do list: OK so nothing new hear you say. Instead keep to-do book,separating your lists, but context (things you can only do at the office, or home, or when with a particular person.)

• Build in buffers: if something must be completed by a particular date, aim for it to be completed earlier, building in time for things to go wrong.

• Start early: If you get allocated a new project, begin earlier than you think you need to. Begin by collecting back ground information, or just creating space for it.

The secret of competitive advantage

Berkshire Hathaway started as a textile business making low end textiles - a commodity business that he eventually had to shut down. It's worthwhile to try and understand what was happening here.

The only way for this business to be competitive was through operational efficiency. But as Charlie Munger, Buffett's long time business partner, puts it, being operationally efficient wasn't going to make them any money.

"One day people came to Warren an said, "They've invented a loom that we think will do twice as much as our old ones." And Warren said, "Gee Ihope this doesn't work - because if it does, I'm going to close the Mill"

Why was Buffett so keen to close the Mill after a potential innovation like this was available?

Because none of the cost savings could be retained inside the company, all of them would go direct to the customer. In a commodity business none of the saving go direct to the owners. To maintain market share, they must lower prices continually.

Whereas Coke will always be able to take advantage of productivity improvements such as these. They are the furthermost thing from a commodity than anyone can imagine.

So a key learning here, helping to decide your business strategy, is asking the next most obvious question, "Who will get to keep the money from the productivity improvements?" if it is the customer, your in a commodity business and need to build a competitive advantage somehow,or what Warren and Charlie call the 'mote.'

So how do you build a mote for your company?

Start local, with what you do now and build out from there. Sam Walton of Wal-Mart, started by gaining a dominant position in the local town he was in, then in a cookie-cutter fashion went on to dominate one township after another.

Business in the end is about people. Real people buying and selling stuff they need and want. In order to do this businesses must have an intimate knowledge of local markets. Because consumer are ultimately fickle and if something is not to their liking they wont buy.

Examples of this abound Banking where, in a deregulated markets, overseas entrants were not able to take significant market share from the establishment here in Australia. With only one notable exception - HSBC the 'global local bank' - has any bank in the world successfully expanded beyond it's local market.

Here are three steps you can take to assess your competitive positioning of your business*:

1. Identify the markets you operate in, and the competitors.

2. Test if you have competitive advantage in these markets?

3. Analyse and understand the drivers of the competitive advantages (whether yours or the competition).

Make the necessary changes to get yourself into a competitive advantage,where your customers love you and you get to keep the money earned.

* from Competition Demystified, B. Greenwald, 2005.

Technique of the month: Seperate Strategy from Planning

The most important thing to do when engaging in strategic thinking is to separate strategy from planning. Planning is tactical; how you will implement your strategy. While important, is completely different to strategic thinking, and if confused will lead to no strategy at all.

Here are some examples to ensure you're having a strategic discussion.

Examples of tactical or planning level:

Time frames: yearly, monthly, daily time frames.
Risk: is limited, or easily quantifiable.
Resources: are departmental, or divisional

Examples of strategic thinking level:

Time frames: Long-term, multi-year.
Risk: High uncertainty
Resources: corporate, business wide.