What is it?
Driving Force is a concept created by Freedman and Tregoe that categorises companies into 7 different strategic types. Each of them have very different strategic DNA:
- Product/Service companies win by having a better mousetrap than competitors (e.g. Diageo)
- Customer companies provide broad solutions to narrow customer segments (e.g. Accenture)
- Technology companies apply their leading edge know-how to solve high value customer problems (e.g. Genentech)
- Sales companies leverage their unique sales channel (e.g. Amway)
- Capacity/Operations companies keep their expensive assets full (e.g. Cathay Pacific)
- Natural Resources companies focus on owning then extracting a raw material (e.g. Exxon)
- Profit/Return companies make strategic decisions based purely on financial returns (e.g. Berkshire Hathaway)
The premise of the Driving Force concept is that a company can only pick one of these Driving forces to be world class in. Just like in Olympic sports, the different training, mental regime and genetic talent that is required for each event requires specialisation. A high school athlete may excel in many areas, but to be the best in the world, you need to pick one event that you train for exclusively, with no trade-offs.
The value of the framework comes when you expand out the details of the DNA each driving force needs. You can then see why companies trying to pursue two driving forces will run into strategic trade-offs and fail in their Olympic event:
When is it useful?
Company analysis – understanding yourself. Prompt a discussion within your executive team – which one are you today? Are you moving from one to another? What does this mean for change management?
Competitive analysis – what are the driving forces of your competitors? A competitor with a technology driving force will react very differently to one with product/service driving force
Generating alternatives – Decide 3 different driving forces that are possible for you, then brief 3 separate teams to create a strategy for you anchored around that DNA
In the 1990s, IBM showed how a technology company could transition from a Product to a Customer Driving Force
- IBM had a Golden Age in the 1970s and 80s with their world-leading System/360 Mainframe business
- Unix and PC technology opened the door to vigorous new competitors and undermined the vertically integrated product “stack”
- Between 1991 and 1993, IBM lost $16 billion
- Company saw the opportunity to leverage salesforce and customer relationships
- In 1993 new CEO, Lou Gerstner arrives and makes a “big bet” on becoming a customer driving force company
What are the tough decisions he has to make?
- Create a new “Global Services” sales force to head up integrated solution sales to major customers; empower them to recommend competitors products if they created a better customer solution; make them more powerful internally than the product divisions
- Move focus from product and geographic P&Ls to key account P&L
- Rewrite IBM “middleware” software to work on all platforms
- Exit OS/2, applications software, DRAM, IBM Network
- Acquire companies to fill in gaps in solutions for customers
Driving Force is related to Treacy and Wierma’s Value Disciplines. They roughly correspond:
Value Discipline Driving Force
Product Leadership Products/Services; Technology
Customer Intimacy Customer; Sales Method
Operational Excellence Capacity/Operations; Natural Resources; Distribution