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Published: November 23, 2010
 / Winter 2010 / Issue 61

 
 

The Right to Win

The Basic Tension in Strategy

Business strategy, as we know it today, has a relatively short history. The word strategy was first applied in print to mainstream business in 1962, with the publication of Alfred Chandler’s book Strategy and Structure: Chapters in the History of the Industrial Enterprise (MIT Press). Since then, at least a dozen major trends and ideas have appeared under the rubric of business strategy, often in great conflict with one another, often drawing companies in very different directions. Despite their differences, all four schools of strategy represent attempts to resolve the same basic underlying problem: the tension between two conflicting business realities.

The first reality is that advantage is transient. Even the most formidable market position can be vulnerable to technological disruptions, upstart competition, shifting capital flows, new regulatory regimes, political changes, and other facets of a chaotic and unpredictable business environment. As William P. Barnett showed in The Red Queen among Organizations: How Competitiveness Evolves (Princeton University Press, 2008), this turbulence can never level off into stability; as companies copy and outdo one another’s proficiencies, the game of business continually becomes more challenging. Rapid economic growth in emerging markets has made advantage even more transient, bringing billions of people into the global economy, along with hundreds of energetic new business competitors.

One might assume that the answer is to become completely resilient, morphing to match the changing demands of the market. But companies can’t, because of the second reality: Corporate identity is slow to change. The innate qualities of an organization that distinguish it from all others — its operational processes, culture, relationships, and distinctive capabilities — are built up gradually, decision by decision, and continually reinforced through organizational practices and conversations. Very few companies have thoroughly reinvented themselves, and those that have managed it have typically had to force many people out, including top executives, and to replace them with new recruits chosen for a different set of attitudes and skills. Even when leaders recognize the need for change or know that the company’s survival is at stake, this identity is difficult to shift; if no deliberate effort is made to refresh it, it can stagnate to the point where it erodes advantage from within. As writers such as Jim Collins, Clayton Christensen, and Donald Sull have noted, it’s all too easy for established companies to fall prey to complacency and hubris (Collins), entrenched customer relationships and disruptive technologies (Christensen), or inertia (Sull).

Yet although the “stickiness” of a company’s identity is typically regarded as a weakness, it’s also a great source of strength. No company can survive long, let alone distinguish itself, without a rich body of capabilities and a resonant corporate culture. Indeed, the fundamental enabler of strategy — the source of competitive advantage — is a distinctive, coherent corporate identity. This is the quality that attracts customers, investors, employees, and suppliers. It is grounded in internal capabilities (that is, the things your company can do with distinction) and in market realities (that is, the games in which your company chooses to play).

The yin and yang of strategic fad and fashion — the movement of business leadership from one trend to another over the past 50 years — has often led companies to make incoherent and ineffective moves. The answer is not to keep adopting new theories in hopes of finding the right answer, but to develop your own capabilities-driven strategy: your own theory of coherence for your business. How do you capture value, now and in the future, for your chosen customers? What are your most important capabilities, and how do they fit together? How do you align them with your portfolio of products and services? The more clearly and strongly you make these choices, the better your chances of creating a corporate identity that gives you the right to win in the long run. Not surprisingly, each of the four basic schools of thought in Exhibit 1 (position, execution, adaptation, and concentration) has something significant to offer business strategists, so long as they are adopted in an appropriately balanced way.

 
 
 
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Resources

Introduction

  1. Paul Leinwand and Cesare Mainardi, The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Press, 2010).
  2. Paul Leinwand and Cesare Mainardi, “The Coherence Premium,” Harvard Business Review, June 2010.

A Landscape of Strategy Concepts

  1. Walter Kiechel, The Lords of Strategy: The Secret Intellectual History of the New Corporate World (Harvard Business Press, 2010).
  2. Walter Kiechel, “Seven Chapters of Strategic Wisdom,” s+b, Spring 2010.
  3. Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel, Strategy Safari: The Complete Guide through the Wilds of Strategic Management (2nd ed., FT Prentice Hall, 2009).

The Basic Tension in Strategy

  1. Alfred D. Chandler Jr., Strategy and Structure: Chapters in the History of the Industrial Enterprise (MIT Press, 1962).
  2. William P. Barnett, The Red Queen among Organizations: How Competitiveness Evolves (Princeton University Press, 2008).
  3. Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (HarperBusiness, 2000).
  4. Donald Sull, The Upside of Turbulence: Seizing Opportunity in an Uncertain World (HarperCollins, 2009).
  5. Jim Collins, How the Mighty Fall: And Why Some Companies Never Give In (HarperCollins, 2009).

The Value of Position

  1. H. Thomas Johnson and Robert S. Kaplan, Relevance Lost: The Rise and Fall of Management Accounting (Harvard Business School Press, 1987).
  2. Art Kleiner, “What Are the Measures That Matter?” s+b, First Quarter 2002 (re: Johnson and Kaplan).
  3. Walter Kiechel, “Seven Chapters of Strategic Wisdom” and The Lords of Strategy (re: Andrews, Ansoff, and Henderson).
  4. Kenneth Andrews, The Concept of Corporate Strategy, (3rd ed., Richard D. Irwin, 1987).
  5. Art Kleiner, The Age of Heretics: A History of the Radical Thinkers Who Reinvented Corporate Management (2nd ed., Jossey-Bass, 2008) (re: Henderson and the aftermath).
  6. Bruce Henderson, “The Development of Business Strategy,” in Carl W. Stern and Michael S. Deimler, eds., The Boston Consulting Group on Strategy: Classic Concepts and New Perspectives (Wiley, 2006).

Execution Strikes Back

  1. Art Kleiner, The Age of Heretics (re: Hayes, Abernathy, and Deming).
  2. Robert H. Hayes and William J. Abernathy, “Managing Our Way to Economic Decline,” Harvard Business Review, July/August 1980.
  3. Gary Hamel and C.K. Prahalad, Competing for the Future (Harvard Business School Press, 1994).
  4. Art Kleiner, “The Life’s Work of a Thought Leader” (interview with C.K. Prahalad), s+b, August 9, 2010.
  5. Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (HarperBusiness, 2003).
  6. Larry Bossidy and Ram Charan, Execution: The Discipline of Getting Things Done (with Charles Burck; 2002; rev. ed., Crown Business, 2009).
  7. Walter Kiechel, The Lords of Strategy (re: Stalk).

Michael Porter’s Advantage

  1. Walter Kiechel, The Lords of Strategy and “Seven Chapters of Strategic Wisdom” (re: Porter).
  2. Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (1980; rev. ed., Free Press, 1998).
  3. Michael E. Porter, “What Is Strategy?” Harvard Business Review, November/December 1996.
  4. Michael E. Porter, “The Five Competitive Forces That Shape Strategy,” Harvard Business Review, March/April 1979.
  5. W. Chan Kim and Renée Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (Harvard Business School Press, 2005).
  6. Henry Mintzberg, The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning, Plans, Planners (Free Press, 1994).
  7. Art Kleiner, The Age of Heretics, and Walter Kiechel, “Seven Chapters of Strategic Wisdom” (re: Peters).
  8. Thomas J. Peters and Robert H. Waterman Jr., In Search of Excellence: Lessons from America’s Best-Run Companies (Harper & Row, 1982).
  9. Chris Zook with James Allen, Profit from the Core: Growth Strategy in an Era of Turbulence (Harvard Business School Press, 2001); Profit from the Core: A Return to Growth in Turbulent Times (rev. ed., Harvard Business Press, 2010).
  10. Paul Leinwand and Cesare Mainardi, The Essential Advantage (re: Zook).
 
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