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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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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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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 target the needs of new customer segments (Zook & Allen, 2003). Circle mapping assists leaders with strategy formulation by visually prompting a discussion of the different pathways toward which resources and capabilities can be directed to deliver future value propositions. Below we outline how knowledge visualization is integral to overcoming cognitive blinders and other challenges faced by leaders when discussing strategy. We also provide an explanation for how aligning resources and capabilities to occupy a future space assists leaders engaged in the process of growth strategy formulation. The overall result is that circle mapping stimulates an interactive discussion about strategic options in terms of their desirability, feasibility, riskiness, and profitability.

4.1. Leveraging knowledge visualization with circle mapping

The strategy development process can be plagued by information overload (Eppler & Platts, 2009) as leaders must simultaneously assess their resources and capabilities, macro trends, rivals’ strategies, performance data, and more. Eppler and Platts (2009) identify three specific types of challenges that occur in the strategic planning process: cognitive challenges (i.e., how managers think about strategy), social challenges (i.e., the need to communicate and coordinate strategy in organizations that involve complex networks and perspectives), and emotional challenges (i.e., the struggle to motivate people at different levels and ensure engagement throughout the organization).

Ultimately, strategy tools need to provide decision-relevant information that can be “ sampled, retrieved, and integrated” (Oppenheimer & Kelso, 2015, p. 283). Knowledge visualization improves the effectiveness of strategy tools as it enhances

the ability to “ create, assess, reference or transfer insights, experiences, attitudes, values, expecta- tions, perspectives, opinions, and predictions” (Eppler & Burkhard, 2007, pp. 112— 113). Knowledge visualization assists with the creation of new and innovative ideas, and can be particularly useful in strategy because it enables recall, reconstruction, and application of information (Eppler & Burkhard, 2007).

Using knowledge visualization in a group process can be enhanced by using templates and sketches (Eppler, Hoffmann, & Bresciani, 2011; Suthers, 2001). Eppler and Platts (2009, pp. 44) demonstrate that visual representation of data is superior to verbal or written data for overcoming “ paralyses by analyses” and evaluation biases, and it can also increase participants’ creativity. This is supported by research showing that teams using a combination of visual sketches with other tools are particularly effective in achieving a higher level of objectivity and creativity (Eppler et al., 2011).

Circle mapping exemplifies knowledge visualiza- tion by integrating multiple levels of knowledge in a graphic–— essentially creating what Eppler and Platts (2009) describe as a conceptual map–— that enables complex transfers of nuanced information (Eppler & Burkhard, 2007). As a method of knowl- edge visualization, circle mapping mitigates the cognitive challenges of strategy by encouraging leaders to jointly create a visual articulation of their future strategy. Leaders use a discussion for- mat to both identify value propositions in each circle and the resources and capabilities needed to occupy each circle. This places leaders and their executive teams in the active role of developing the visual frame, which enhances creativity and buy-in across the team.

Circle mapping can also help to address social challenges, including divergent views, incomplete communication, and difficulty coordinating action steps (Eppler & Platts, 2009). By facilitating a discussion of possible future growth strategies, circle mapping provides a platform for fleshing out different perspectives and arriving at mutual understanding of both the future challenges and the possible strategies–— all of which are demonstrated benefits of conceptual maps (Eppler & Platts, 2009). For so-called emotional challenges or issues of employee engagement, circle mapping provides a more active platform for engaging multiple stakeholders in the strategy development process, and creates a visual representation of the strategy that is both informational and motivational (Eppler & Platts, 2009). D

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4.2. Strategic advantages of aligning strategy and space

Traditionally, the customer value proposition has been considered an exchange of value between a firm and its targeted customers for a price (Anderson & Narus, 1998). A company’s growth strategy involves developing compelling value propositions that are attractive to customer segments in future market spaces. The concept of circle mapping evolves this thinking to align with a service-dominant logic, where customers decide if they desire the offering (Vargo, Maglio, & Akaka, 2008). This changes a leader’s perspective from “Here is our product, will customers buy it?” to “What do our customers need and can we provide it?” In order to successfully develop compelling value propositions for a future market, circle map- ping combines customer centricity (Sheth, Sisodia, & Sharma, 2000) with a market-driven approach whereby companies define the space they are en- tering in terms of meeting the customers’ needs with the firm’s new value propositions (Gnecchi, 2009). A value proposition delivery system outlines the resources and capabilities needed to efficiently and effectively create value for customers (Vargo et al., 2008). Circle mapping expands on this by incorporating the notion of adapting resources and capabilities to meet the value expectations of the customers targeted within the new market space. This component answers a vital question: “Can we provide it?”

The process of circle mapping ensures that the decision to target future customers involves a strategic assessment by leaders of how well the firm can align or adapt resources and capabilities to meet the expectations of these future custom- ers. This requires forecasting both the future needs of customers and the future resources and capabili- ties of a firm to profitably meet those needs. The resource-based view (RBV) assesses the company’s resources and capabilities relative to those of current competitors to determine whether a competitive advantage exists (Barney, 1991). The RBV does not assess, however, whether the firm’s resources and capabilities would be successful in new market spaces (Priem & Butler, 2001). Circle mapping extends RBV by asking whether the firm’s current resources and capabilities can be leveraged to produce new value propositions to serve customers in new circles.

A common framework to identify growth opportunities using value propositions is Kim and Mauborgne’s (2005) Blue Ocean Strategy. The goal of Blue Ocean Strategy is to make the competition irrelevant by using visual tools, such as a strategy

canvas, as part of a four-step process to identify new or revised versions of products/services that can be introduced into markets where there are not any direct rivals. Circle mapping extends Blue Ocean Strategy in three ways:

1. Blue Ocean Strategy only focuses on competing where there are no competitors, while circle mapping allows managers to consider entering market spaces where there are competitors.

2. It addresses a critique by Kraaijenbrink (2012), who argues that Blue Ocean Strategy encourages managers to ‘swim too far’ and misjudge their firm’s strengths or weaknesses as represented by the current set of resources and capabilities. Circle mapping addresses this shortcoming by evaluating the ability of the firm’s resources and capabilities to deliver new value proposi- tions.

3. We have found that circle mapping is easier to explain and use with leaders than Blue Ocean’s four-step process.

By prompting the assessment of how a firm’s future resources and capabilities can be leveraged strate- gically over time to successfully deliver new value propositions, circle mapping provides a roadmap for growth. Firm resources, such as specialized knowledge, patents, and manufacturing plants, along with capabilities such as communications and marketing, can all be leveraged from one circle to focus on targeting new customers in the next circle. Circle mapping enables an intuitive compar- ison of the firm’s current situation with its future aspirations, which further promotes discussion of the various options for achieving long-term growth and the associated risks. The visual cost-benefit analysis demonstrates that the greater rewards associated with movement into the outer circles also come with the cost of committing more re- sources and capabilities. This discussion highlights the firm’s readiness for growth by reflecting on different strategic options and determining whether allocation of resources to a specific circle offers a strategic platform to compare the cost-benefit of each proposed growth option.

5. Circle mapping steps: How to use this tool

We outline a step-by-step approach to circle mapping using an example from a small consulting firm. Although the firm had developed a good D

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reputation for providing training and consulting services to local businesses and organizations, it wanted to significantly grow its revenues. Circle mapping was used by the firm’s leaders to create a growth strategy to increase revenues and profitability by selling a greater proportion of high-margin consulting services (see Figure 4). For each step below, we describe the circle mapping process and outline how circle mapping was applied to generate growth effectively in the consulting firm. We then provide guiding questions that leaders may use to facilitate a discussion through each step.

5.1. Step 1: Determine value propositions of different customer circles

The first step of circle mapping involves preparing the leadership team to think differently about strategic growth. Rather than using goals and targets to represent future growth and asking managers to achieve these, circle mapping offers a visual and spatial frame to ignite a discussion of growth options. To achieve this, the leadership team first needs to define the value propositions offered to current and future customers. In our consulting work, we have found that leaders are an ideal source to identify the value propositions and customers in the circles because, as experts, they can ask and answer significant questions: Who are the right customers to target and what attributes do these customers want? Once the current and future customers and their associated value propositions are identified, they should be placed onto the circle map. The future customers

and value propositions that are characterized by greater rewards (offering better returns with higher risk) should be placed in the outer circle(s). Each circle should also include a label. Since a firm’s leadership team has its own understanding of the industry in which it operates, it is best suited to assign meaningful labels to customer types that are relevant to their industry. Consumer data and industry experts can assist leaders in determining the attributes of value propositions for current customer groups while forecasting tools, such as a strategy canvas (Kim & Mauborgne, 2005) or stra- tegic value curve analysis (Sheehan & Bruni-Bossio, 2015) can assist with developing future value propositions (see Table 1 for questions that can guide the team through Step 1).

In our case example, during Step 1 of the process, the leaders of the consulting firm determined the value proposition (current and future) for customers in each circle and placed them according to their current and potential rewards. The circle map developed for the company included labeling each type of customer with a title that made sense to the leaders illustrating a progression of rewards (shown in Figure 4).

Figure 4. Circle maps for consulting firm

5.2. Step 2: Identify future resources and capabilities needed to deliver future value propositions

Step 1 concludes with a visual representation of the firm’s current and future value propositions and customers, and the team must now determine what is needed to deliver the value proposition to these customers and whether the firm is capable of delivering it. To do this, the firm’s leaders must discern whether the current resources and capabil- ities can be adapted to deliver the attributes of the new value proposition in an outer circle. This should also involve a discussion around feasibility and the trade-offs of targeting one circle over another. Using the circle map, the leadership team must co-create a visual outline that lists the key resources and capabilities needed for each circle, and assess whether they can feasibly adapt the resources and capabilities over time (see Table 2).

Returning to our case example, leaders of the consulting firm used the circle map as a guide during growth brainstorming discussions and generated a list of key resources (e.g., trainers, consultants, intellectual property) and capabilities (e.g., marketing, sales, proposal writing) needed to target each circle. When considering how to match resources and capabilities with customer types in the outer circles (e.g., national firms), a recruit- ment plan was devised to ensure the firm had access D

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Table 1. Example questions for circle mapping: Step 1

Questions

1. What customer(s) do you rely on most for revenue generation today?

2. What are the attributes of the value proposition demanded by these customers?

3. What label describes the common thread among these customers and value propositions?

4. What customer(s) would you want to target as the next step in the evolution of this business?

5. What are the attributes of the value proposition of this next customer?

6. What label describes the common thread among these customers and their value propositions?

7. Which customer(s) would you want to target as the long-term goal of this business?

8. What are the attributes of the value proposition of this future customer?

9. What label describes the common thread among these customers and their value propositions?

Sample Answers

Small organizations looking to grow revenues and enhance efficiencies

Tools, training, explanation, ‘handholding through the change process’

Not-for-profit organizations and small businesses

Larger organizations focused on growth or experiencing threats from new competitors

More sophisticated analysis, ongoing client relationships, state-of-the-art solutions

Economic development agencies and government- owned corporations

Large for-profit companies and government-owned corporations looking to enhance current success

State-of-the-art solutions, timely service, and high-level reporting

National and international corporations

Note: Sample answers are provided using the consulting firm in our case example to illustrate.

to people with the capabilities needed to serve the new target customers. This involved recruiting consultants and trainers with specialized expertise and writers with experience writing consulting project proposals for these larger customers. These individuals were recruited months before there were consulting engagements for them to work on. Since there was a considerable lag time in getting contracts, sales calls were targeted at future customers concurrently with networking for experienced professionals to ensure work would be available once customers were on board. At the same time, a new marketing strategy was imple- mented that involved creating sales brochures, contacts, and initiatives that could apply to winning projects from clients across multiple circles.

5.3. Step 3: Select the most favorable growth scenario

This step involves engaging the team in a discussion of the risks and rewards of each growth option (e.g., stay in the current circle, move to the next circle, or move to a circle further out). Rewards are determined using forecasting and other analytics, while risks represent the assessment by leaders of how much adaptation of resources and capabilities is needed along with the tangible and intangible costs of resource allocation. Staying in the current circle could be considered a low risk, low reward growth strategy. Successfully targeting a new

customer segment in the next circle requires successful alignment of resources and capabilities to deliver the attributes of that customer’s value proposition. Longer-term growth strategy includes assessing the true feasibility of targeting customers in outer circles against potential rewards. Leaders must assess if customers in a given circle add enough value to be targeted with future resources and capabilities. We recommend examining the risks and rewards of each circle as a standalone process in a brainstorming discussion. Once each circle (and the customer/value proposition and resources and capabilities within it) has been considered, the risk and reward analysis can be expanded by juxtaposing the allocation of resources and capabilities between circles. The concentric logic assists in this analysis because outer circles are potentially more risky, more costly, and more rewarding than those closer to the center (see Table 3).

In the case example, the consulting firm’s leaders compared possible combinations of customers in the future against the resources and capabilities needed to serve these customers. Discussion revealed that the best course of action was to continue serving nonprofit and small business clients (i.e., current customers) with limited resource allocation for the purpose of generating cash flow. Capital, time, and resources were then directed at occupying the space of economic development agencies and small corporations D

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294 V. Bruni-Bossio et al.

Table 2. Example questions for circle mapping: Step 2

Questions Sample Answers

1. For each circle, what resources and For not-for-profit organizations and small businesses capabilities are needed to deliver the value proposition? � Trainers and consultants with basic consulting skills and knowledge of

management tools

Economic development agencies and government-owned corpora- tions

� Experienced consultants with an MBA or other credentials, proposal writing skills, enhanced marketing knowledge

Create a new marketing campaign to reach these clients

National and international firms

� High-level marketing to these clients, consultants with national reputa- tions, and ability to build and maintain high-level relationships with clients

2. Does our firm have these resources and Non-profits and small businesses capabilities? � Yes, no need for additional resources or capabilities

Economic development agencies and government-owned corporations

� No, the firm needs to acquire and/or develop these National and international firms

� No, the firm needs to acquire and/or develop these 3. If not, what fi would our rm have to do to Simultaneously develop and execute a plan to do the following: acquire

� or develop these resources a. and continue to serve current customers

capabilities, and how long would this take? b. create marketing materials targeted at firms identified in the growth areas

c. perform business development in the growth areas and win contracts from firms in these areas

d. recruit consultants that support the expanded scope of clients

Note: Sample answers are provided using the consulting firm in our case example to illustrate.

(i.e., next customers), and winning contracts from government-owned corporations (i.e., future growth customers).

This process focused on leveraging success in the inner circles (small firms and economic agencies) to win consulting contracts from firms in the outer circles (national and international firms). Circle mapping assisted with the realization that once government-owned corporations were successfully targeted, the same consultants, trainers, and proposal writers could be used to target national and international firms. In other words, growth in the outer circles would not need to focus on recruitment, but rather on refinement of the processes used by the consultants, trainers, and proposal writers.

The successful implementation of a growth strategy in the consulting firm increased revenues

by 300% over a 3-year period. Many government- owned corporations had been successfully targeted and resources were already being deployed toward winning jobs from national and international firms. The consulting firm’s leaders agreed that circle mapping was beneficial as it allowed them to map a feasible path to profitable growth for two primary reasons. First, it helped them generate ideas and provided a path to access new opportunities, and second, it facilitated creativity in planning and developing the strategy. The leaders remarked about the simplicity of the mapping process and how it made it easier to conceptualize opportunities that they might not otherwise have considered. Perhaps most importantly, they felt it put them ‘in the driver’s seat’ in the strategic process versus reacting to their competitors passively. D

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295 Circle mapping your firm’s growth strategy

Table 3. Example questions for circle mapping: Step 3

Questions Sample Answers

1. What are the potential risks and rewards associated with each circle?

For not-for-profit organizations and small businesses

� Stagnation and inability to meet partners’ growth objectives Economic development agencies and government-owned corporations; national and international firms

� The biggest risk is the opportunity cost from the time and effort spent recruiting new consultants and developing relationships with growth area clients. Other threats include reputational risk if we win business but are unable to deliver what we promised to the clients.

� Rewards include more engaging projects, increased reputation of the firm, higher-value contracts, and revenue diversification.

2. Are there any circles that offer rewards that Yes, all of the outer circles: outweigh the risks? � Economic development agencies

� Government-owned corporations � National and international firms

3. Can we allocate resources and capabilities to Balance opportunities with recruitment: make sure new these circles while still ensuring we can serve our consultants are ready and available when the contracts are current customers? If so, how long will this take? won.

4. Which circle should we target as the next step Economic development agencies for growth?

5. Are there circles we want to prepare to occupy Leverage success with economic development agencies to in the future by starting to develop resources and pursue government-owned corporations, followed by national capabilities? and international firms.

Note: Sample answers are provided using the consulting firm in our case example to illustrate.

6. Potential obstacles in circle mapping

Circle mapping is a strategy visualization tool that facilitates a process for generating high-reward growth possibilities in the outer circles. The tool is appropriate for firms in all industries where customers have preferences beyond just paying the lowest price. If the battle for consumers is based solely on having a basic offering at the lowest price, then the tool is not applicable. However, if there is a significant set of customers who are willing to pay for a differentiated offering, then circle mapping is an appropriate tool to generate growth options. Firms that offer more than one value proposition are a special case. These types of firms need to prepare circle maps for each value proposition offered as the discussion of each value proposition will lead to generating different opportunities for growth.

Ambitious leaders are cautioned against attempting to grow too quickly or to occupy too many circles at the same time, either of which may

strain their firm’s resources and capabilities. Successful growth involves a tradeoff of scope and reach (Burgelman & Doz, 2001), sustaining the firm’s current performance while leveraging the resources and capabilities in new market spaces. Circle mapping can help identify the risks and opportunities involved in moving into new spaces, but leaders must avoid focusing only on opportunities while ignoring risks.

A limitation of circle mapping is its reliance on the amount and quality of data available to the senior management team regarding the potential of its resources and capabilities to produce new offerings, and preferences of consumers and rivals’ value propositions in the outer circles. Like all strategy formulation tools, circle mapping is only as effective as the assumptions that are brought to the table. The process must be accompanied by due diligence to ensure that assumptions about the target market, attributes of the customer value proposition, and the resources and capabilities needed to deliver the value proposition are well understood. Last, the firm must be able to fund the D

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growth initiatives and have the requisite organiza- tion structure and reporting systems to effectively implement them.

7. A new tool for development

Circle mapping assists leaders with the difficult task of generating and evaluating growth opportunities by combining Sun Tzu’s idea of occupying space with marketing and strategy literature on value propositions. Circle mapping engages knowledge visualization to mitigate cognitive challenges when formulating strategy by generating multiple potential pathways for growth. As a conceptual map, it mitigates social challenges by promoting multiple perspectives in the strategy, and it reduces emotional challenges by assisting with communication and information sharing.

By prompting leaders to think about growth as occupying space, circle mapping conceptualizes growth as aligning future value propositions with the firm’s future resources and capabilities. Circle mapping ignites strategy development by simplifying a long-term growth strategy into an intuitive diagram that leaders can use to generate strategic decisions about how to grow. 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 it.

Acknowledgment

The authors would like to thank Dr. Marjorie Delbaere and Ed Pas for their insights and suggestions.

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  • Circle mapping your firm’s growth strategy
    • 1. Visualizing growth strategies
    • 2. Circle mapping origins
    • 2.1. The principle of occupying space
    • 2.2. Aligning resources and capabilities to deliver value propositions
    • 2.3. How circle mapping was developed
    • 3. Elements of circle mapping: The three circles
    • 3.1. The first circle: Current customers
    • 3.2. The second circle: Next customers
    • 3.3. Outer circles: Future growth customers
    • 4. Benefits of circle mapping
    • 4.1. Leveraging knowledge visualization with circle mapping
    • 4.2. Strategic advantages of aligning strategy and space
    • 5. Circle mapping steps: How to use this tool
    • 5.1. Step 1: Determine value propositions of different customer circles
    • 5.2. Step 2: Identify future resources and capabilities needed to deliver future value propositions
    • 5.3. Step 3: Select the most favorable growth scenario
    • 6. Potential obstacles in circle mapping
    • 7. A new tool for development
    • References

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