Diagnosing Challenges and Trends: Spotting Strategic Breakthrough Opportunities

Step 3 in the Guide to Achieving Strategic Breakthroughs Series

When I think about the best strategic comebacks in business, my thoughts always go back to the early 2000s when Nintendo, the household name in gaming, was getting beaten to pulp in the console wars. Up against new giants like Sony’s PlayStation and Microsoft’s Xbox, their new GameCube just wasn’t cutting it and their whole business direction was lost and confused. As a Ninentdo fan it hurt to see one of my favourite brands look like it was slowly becoming redundant. It seemed like every shot aimed at the competition was a miss. But then came the Wii in 2006 and consequently the Switch in 2016, and everything changed.

But what exactly happened? Nintendo switched gears from trying to win the graphics battle to focusing on innovation and user-friendliness. The new direction with the Wii and Switch were not meant just for gamers; they were devised for everyone. This move didn’t just save Nintendo; it opened up a whole new world in gaming which Nintendo remains a key player in.

This is a classic example of using a problem (or challenge) as a stepping stone to something big. It’s about finding out what’s not working and flipping it into a winning strategy — i.e. a strategic breakthrough.

In our last articles, we talked about the power of developing a fresh outlook and getting the right team together as the preparation steps in the strategic innovation journey. In this post, we dive into the third key step: diagnosing your challenges and turning them into opportunities.

The Real Deal About Diagnosing in Business

One of my all-time favourite thought leaders in the field of strategy, Richard Rumelt, talks about the importance of a ‘Diagnosis’ in his book ‘Good Strategy, Bad Strategy‘ explaining that it’s about getting to the heart of what’s holding your business back — the ‘crux’. Diagnosing means really understanding your current situation, spotting patterns, and deciding what matters most. In his follow up book “The Crux” Rumelt describes the idea further,

“The art of strategy is in defining a crux that can be mastered and in seeing or designing a way through it.”

The Diagnosis is the most important step in strategy development. Strategy is more than just setting goals, it’s about seeing the big picture and understanding your challenges before jumping into action. Many businesses miss this. They focus on goals like “grow by 20% each year” without really understanding their challenges. This often leads to vanilla strategies that don’t deliver. Rumelt strongly advises to not start with goals—rather, start by understanding the actual challenge.

Getting to the Heart of the Problem

It’s not enough to just identify challenges. You’ve got to find the main issue – the ‘crux’ of the problem. This is the issue that, if solved, can make other problems seem small or even disappear.

Diagnosing your business challenges sets the stage for everything that follows: your strategy, actions, and results. Often, big changes in business strategy happen because of a new way of looking at the company’s position or situation.

While traditional tools like SWOT and PESTLE analyses can help, they’re not adequate for getting to the heart of a problem. Real diagnosis means being willing to change your perspective, to look at challenges in new ways. It’s about understanding your challenge deeply and finding the key part you can actually solve. It’s also about seeing your data differently – sometimes, a fresh look can reveal new insights and opportunities. And the most important point is that it can’t be done alone. You need the best minds on the job.

For example, look at how Nintendo shifted gears with the Wii under Satoru Iwata’s leadership. They saw the saturated gaming market and decided not to join the high-tech race but to create a solution that was fundamentally different and accessible.

Our Breakthrough 360 workshop, specifically designed for strategic innovation adopts a comprehensive framework to transform your business challenges into opportunities. It involves gathering key stakeholders, identifying and focusing on the primary challenge hindering your business, collaboratively crafting effective solutions, and establishing a definitive action plan to drive meaningful change.

But, you might be asking, how do you actually make that perspective switch happen?

Identifying Opportunities

Taking a step back, bringing the best minds together and collaborating on identifying the current challenges and trends in each sector.

The Context Canvas, a critical tool in business strategy, is especially valuable in the early stages of strategic planning and design thinking. It aids organisations in mapping out external factors like market trends and competitive landscapes, and internal elements such as resources and processes. This tool is a cornerstone in the Breakthrough 360 framework in facilitating a comprehensive understanding of the business environment that is more effective than other traditional frameworks such as SWOT and PESTLE.

Leverage and Anticipation

After getting the lay of the land the next step involves identifying leverage points within a system where minor shifts can lead to significant changes. This requires looking for asymmetries—ways in which competitors differ—and utilising them for a competitive edge. Which trends and challenges within a specific area of the landscape can you zero in and leverage your strengths or your competitors weakness and blindspots?

It’s about applying intuition and expertise to anticipate responses and devise solutions. You analyse the challenge and your resources, and you try to think of ways to surmount the challenge and realise some of your ambitions. In each case, the aim is to identify a critical asymmetry that can be turned to one’s advantage.

We never move on to the next step in our workshop until these have been discussed and identified. This process is pivotal in developing a breakthrough strategy, where identifying leverage points within a system can lead to significant changes.

Nintendo’s Strategic Ingenuity

A prime example of successful diagnosis leading to strategic breakthroughs is Nintendo’s approach with the Wii. They aimed to widen the gaming market to include individuals who had never played video games. By emphasising accessibility and fun, the Wii, through its intuitive and innovative Wii Remote controller, appealed to a diverse range of users, including families, children, and older adults while competitors focused on the younger, hardcore gamer audience Nintendo was able to see an opening for carving out a whole new market for themselves to become leaders in.

Collect, Cluster, Concentrate

To gain a competitive advantage, it’s essential to bring together and couple skills and ideas that have not been previously combined. This process challenges existing paradigms and dares to envisage radically different futures. It requires a diversity of thought and the willingness to explore uncharted territories.

Design Thinking, when applied to breakthrough strategy, operates as a dynamic and iterative approach. It focuses on deep understanding, problem framing, and innovative ideation, employing a methodology of collecting and filtering out impractical ideas, leaving only the most viable ones.

In our Breakthrough 360 workshop, we utilise a process of re-framing challenges or solutions into “How Might We” questions, making them easily understandable and addressable. This three-step approach includes collecting, clustering, and then concentrating on a select few solutions through rigorous filtering by using voting to get alignment and buy-in as a whole team, allowing everyone to move on to solution design in unison. This approach is crucial for breakthrough development in strategic thinking, challenging existing paradigms and envisioning different futures.

A Problem-focused Mindset

Adopting a diagnosis-focused mindset is essential in validating, strengthening, or pivoting from the initial perspective that set the path towards innovation. Expert strategists not only enjoy digging into numbers, data and analysis, but they’re really good at spotting the critical challenges or opportunities that lie beyond the mechanics and come up with ways to handle them.

Satoru Iwata’s Visionary Approach

Under the innovative leadership of Satoru Iwata, Nintendo not only diagnosed their challenges but also excelled in designing innovative solutions that expanded the gaming market. Iwata’s vision focused on innovation and expanding the gaming market beyond traditional gamers, aiming to create an accessible and enjoyable experience for all demographics, this meant not only innovating the company’s business model but also innovating both their hardware and software to be able to cater to this new market.

Designing Your Strategy

Remember, to get ahead, you need to mix and match ideas and skills in new ways. This is about breaking away from the usual and dreaming up something different. It involves being open to new ideas and willing to leave the less important stuff behind.

To win in designing your strategy, you must effectively employ strategic planning skills, blending new ideas and perspectives. Complex challenges aren’t solved just by analysis or sticking to the usual frameworks. It’s a dynamic and ongoing process of diagnosing problems accurately as the foundation for strategic innovation that involves recognising the main issue to either validate your new assumption or insights or lead you to a whole new path of innovation.

At Nintendo, Iwata’s leadership was key. He saw that the future of gaming was about innovation and reaching new audiences, not just by crunching the same numbers and appealing to existing gamers.

Embrace this approach to transform challenges into opportunities for your business, and join us in the next article to learn how to transition smoothly from diagnosis to effective solution design.