Paul Leinwand and Cesare Mainardi
The Essential Advantage: How to Win with a Capabilities-Driven Strategy
(Harvard Business Review Press, 2011)
Michael A. Cusumano
Staying Power: Six Enduring Principles for Managing Strategy and Innovation in an Uncertain World
(Oxford University Press, 2010)
Richard P. Rumelt
Good Strategy, Bad Strategy: The Difference and Why It Matters
(Crown Business, 2011)
This year’s best business books on strategy are notable primarily for what they’re not. They’re not one more treatment of global strategy, with particular attention to the BRIC countries (Brazil, Russia, India, and China). They’re not about finding the next new thing, thriving in turbulent times, or some new technological frontier, like social media. Nor do they claim to reveal the secret of corporate success, guaranteeing breakthrough performance or market leadership if we follow this or that formula.
Instead, the best strategy books of the year emphasize basic principles that should never be far from the mind of the practitioner. Although they differ in scope and tone as well as perspective — two are written by academics and one by consultants — they converge on a handful of timeless themes. If each is a valuable addition to the strategy bookshelf, in combination they offer even more, helping to remind us of the most important questions in the discipline.
Premium on Coherence
The Essential Advantage: How to Win with a Capabilities-Driven Strategy, by Paul Leinwand and Cesare Mainardi, partners at Booz & Company (the publisher of this magazine), provides a solid overview of current strategic thinking. The two consultants open the book by introducing the intriguing concept of “the right to win.” (See “The Right to Win,” by Cesare Mainardi with Art Kleiner, s+b, Winter 2010.) At first glance, the phrase makes no sense: A company may have a right to compete, yes, but surely not a right to win. Success is earned; it’s not an entitlement. But that’s the point. The phrase forces us to ask: Does our strategy, along with the resources and capabilities that back it up, give us a reasonable chance of success? Are we just playing the game, or do we have what it takes to win?
When Leinwand and Mainardi write, “The essential advantage in business is coherence. Our insight is that simple,” they take their place in the line of strategic thought that stresses not a single part of the organization, but how all the parts work together — a notion sometimes called fit or alignment. Coherence, they say, means that a company must be focused and clear-minded about three elements: its market positioning (or “way to play”), its most distinctive capabilities, and its product and service portfolio. “In a coherent company,” they argue, “the right lineup of products and services naturally results from conscious choices about the capabilities needed for a deliberate way to play.”
The authors ground their argument by showing a correlation between recent financial performance and coherence in the consumer packaged goods industry, and claim that the same relationship holds true across industries, whether financial services, telecommunications, healthcare, or something else. They contend that a premium “accrues to any company that moves along the continuum to align its way to play, capabilities system, and product and service fit.” Perhaps so, yet even if there is a correlation, the direction of causality isn’t clear. Are coherent firms more successful than others, or do successful firms remain coherent? (One of the books the authors cite, Profit from the Core [Harvard Business School Press, 2001] by Chris Zook, a partner at Bain & Company, has the same problem: Are focused companies the most profitable, or do profitable firms remain focused while less-profitable ones feel compelled to diversify?) These questions, although fundamental in any empirical examination of company performance, remain unanswered.