A Simple Strategy Question: What Business Are We In?

By: Phil Gibbs, Principal with The Disruption Lab

Every executive must continually answer the question, “What business are we in?” It seems like a rather simple question–one that surely was answered when the original business plan was drafted. For many companies a well-crafted mission statement is a means of communicating the answer to its many constituents. And, every year corporate executives retreat for an annual strategy and planning session where the answer is debated and perhaps refined.

So, Ford and Nissan are in the car business, right? And Community Health, Tenet and HCA are in the hospital business? SunTrust, Wells Fargo and Pinnacle are in the banking business? Sears, Walmart and Amazon are in the retail sales business? And Nokia is in the mobile phone business—wait, are they still around?

Maybe it is not such a simple question. Both Ford and Nissan have announced that they are in the mobility business, which is a dramatically different business than building, selling and maintaining cars. Interestingly, Community Health, Tenet and HCA are in very similar situations to the former car  companies. In fact, there are great similarities between hospital rooms and cars. Driven by technology, demand for both will be decreasing significantly over the next few years. And SunTrust, Wells Fargo and Pinnacle are facing similar declines—fintech is making the traditional bank, like cars and hospital rooms, a relic of the past.

Sears, Walmart and Amazon are a story to themselves. Sears has remained focused on being in the business of retails sales. In fact, Sears was the “Amazon” of its day, with their stores and catalog disrupting small merchants across the country. Unfortunately, Sears is in Chapter 11 bankruptcy. Walmart came along and disrupted Sears but has had to make a major push into online retail to try to avoid being disrupted itself by Amazon.

Amazon was initially in the business on online book selling. Then the business expanded to online selling of virtually everything. Support for cloud computing has become a major line of business. The Amazon portfolio of businesses continues to grow. And thrive. So what business is Amazon in?

Before answering, or attempting to answer, that question, let’s don’t forget Nokia. This summer on our annual Executive Innovation Program we had the opportunity to visit the former Nokia headquarter in Helsinki, Finland. Most of us know Nokia as a former world leader in cell phones. But Nokia’s story began over 150 years ago when the answer to the question, “What business are we in?” would have been the paper mill business. Over the years the answers would include rubber boots and tires, cable, mobile phones, and telecommunications infrastructure equipment. And to add to the complexity, if you lost track of one of the world’s iconic research labs, Bell Labs, you may be surprised to know that they are now owned by Nokia.

The Nokia website puts what I believe is an appropriate positive spin on the company’s history, “Few companies have Nokia’s storied capacity for transforming, developing new technologies and adapting to shifts in market conditions.” The real Nokia story is not it’s well documented failure, but the fact that it is still standing and innovating as a global company after over 150 years.

Nokia’s answer to the question, “What business are we in?”, clearly seems to be invention and transformation. Amazon’s brief history points to the business of experimentation and doubling down on what works. Nissan’s answer could be described as understanding the job to be done—mobility—and adapting.

As the pace of change continues to accelerate and the life cycles of successful businesses become shorter and shorter, a company that defines itself by a static product or service is at great risk. In the past, capital intensive industries had some protection, but technology is rapidly eroding that advantage—ask the car companies and hospital companies.

So, the answer to the question, “What business are we in?”, perhaps is simpler than it first appeared. Every organization today must be in the business of continually innovating new businesses to replace existing businesses that will inevitably be disrupted. While the answer is fairly simple, it does reflect a real shift in how organizations function.

Large organizations have been focused on executing existing businesses with relatively long life cycles, while devoting little attention to starting and validating new businesses—generally seen the purview of entrepreneurs and startups. The new reality suggests that large organizations must shift the balance, devoting more resources to continually creating new businesses that have relatively short life cycles.

What business are you in?

Phil is the founding Principal of The Disruption Lab, where he focuses on disruptive innovation and corporate growth. For over a decade, he led Executive Learning, one of the country’s leading firms supporting continual improvement (sustaining and efficiency innovation), particularly in healthcare, and including work with industry leader HCA and the Institute for Healthcare Improvement (IHI).

His entrepreneurial experience includes co-founding multiple companies, including E|SPACES and LifeFilez. In addition to his startup experience, Phil has served as a principal in an early-stage investment firm and worked in/consulted with multiple large organizations, including the Oak Ridge National Laboratory early in his career. His interest in innovation began with his doctoral research at The Ohio State University focused on understanding how organizations achieve both high productivity and high innovation.


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