To capture the benefits of coherence, the authors advise the reader to take a series of deliberate steps “to reconsider your current strategy, overcome the conventional separation between outward-facing and inward-facing activities, and bring your organization into focus.” The Essential Advantage goes on to examine each of these steps in some depth, beginning with an exploration of external forces, and then shifting toward a consideration of internal resources and capabilities. Along the way, the authors set forth the notion of the “capabilities-driven portfolio,” which is evaluated on two dimensions, financial value (from attractive to unattractive) and strategic value (which considers the portfolio’s alignment with the organization’s capabilities system). The implication is that we should think of a portfolio of activities not merely in terms of growth and profit, but in terms of how they fit together and contribute to the overall performance of the company. The final section addresses the process of developing a strategy that is based on “what you do, not what you have,” and the organization design and people issues that accompany it.
For the practitioner who wishes to take concrete steps toward sound strategic decisions and ensure that they are aligned with the necessary resources, The Essential Advantage is a solid and practical book. It provides managers with a framework to follow, while always keeping in mind the question, Do we have the right to win?
Patterns of Success
Michael A. Cusumano, a veteran researcher at MIT, looks for patterns of lasting success in his latest book, Staying Power: Six Enduring Principles for Managing Strategy and Innovation in an Uncertain World. In it, he reviews the companies he has studied in depth during his career — first, Toyota and the broader Japanese auto industry in the late 1980s, and then Microsoft, Intel, and other information technology companies in the 1990s — to identify “the big ideas that create staying power and superior performance.” These are the principles that should have enormous value for managers in all industries. (See “The Enduring Principles of High-Tech Success,” by David K. Hurst, s+b, Autumn 2011.)
As the book’s title indicates, Cusumano is concerned with success over the long term. He writes, “I concluded that a handful of principles — I have chosen six — appear to have been essential to the effective management of strategy and innovation over long periods of time.” It’s worth noting his use of words like appear and I concluded, which admit subjective judgment, rather than claiming a measure of truth or scientific precision. Indeed, there’s no pretense of conducting quantitative analysis in this book; rather, it represents an effort to seek patterns from in-depth case studies.
The first two principles describe fundamentally different ways of thinking about strategy and business models. Platforms, not just products draws on the successes of Toyota and Microsoft to illustrate the power of a strategy that generates complementary products, builds positive feedback, and makes incumbents harder to dislodge. In both companies, global leadership was based on the ability to create platforms, not just stand-alone products. Services, not just products (or platforms), the second principle, stresses the importance of offering services as an effective way to avoid the commoditization of products. Not only do services add revenue, often at a higher profit margin, but they are also harder to replace.
The next four principles are all related to agility — to sensing and responding quickly and flexibly. Capabilities, not just strategy stresses the need to develop capabilities over time, rather than rely on any single strategic decision. Pull, not just push is associated with Japanese manufacturing methods, but, according to Cusumano, it goes far beyond that application. It pertains to product design, for example, because the ability to draw on customer preferences and ideas early in the process can confer an advantage. Scope, not just scale reminds us that in addition to the benefits of scale, which can lead to lower per-unit cost, successful companies seek out economies across activities such as research, product development, engineering, and more, sharing ideas and applying novel insights from one part of the company to others, allowing the whole to be greater than the sum of its parts and often more robust and better able to withstand downturns. Finally, flexibility, not just efficiency stresses the importance of pursuing efficiency while also remaining able to adapt to changes in the marketplace as well as seeking advantages of innovation.