strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business

 
 

Best Business Books 2003: Strategy

Slywotzky and Wise also argue that hidden liabilities prevent firms from identifying and seizing attractive growth opportunities. Everyone who works in a large firm will recognize the list of 12 hidden liabilities: corporate mind-set, culture and history, leadership and commitment, organizational structure, skills and capabilities, measurements and incentive systems, budgeting and resource allocation processes, information systems, brand/authority, customer readiness, investor resistance, and distribution channels/alliances. The authors assert that because two or three liabilities acting together are usually fatal to a growth initiative, the liabilities must be identified, mapped, and even quantified so that middle managers can navigate around them and senior managers can create an organizational system more conducive to growth. Addressing these organizational inhibitors can jump-start growth at most companies.

Despite these strengths, we have two major concerns about How to Grow When Markets Don’t. First, Slywotzky and Wise significantly overstate the importance of demand innovation. For example, in their discussion of Cardinal Health, the leading pharmaceutical distributor in the U.S., the authors ignore the Treacy-like growth in the core business that Cardinal generated from its extraordinary operational excellence. Similarly, the authors cite as successes several demand innovations, such as Deere’s entry into the landscape distribution business, even though it’s far too early to tell if they will in fact accelerate profitable growth. So reader beware. Demand innovation is one attractive growth strategy; it’s certainly not the only effective growth strategy and may not even be the most important.

Our other major concern is that one of Slywotzky and Wise’s principal concepts, “hidden assets,” seems to us to be seriously misleading. Their point that some of the competencies that can be leveraged for growth aren’t necessarily “core” may be theoretically correct. But to suggest that a company build on its hidden assets is to give it license to do anything. The correct point, of course, is that profitable growth requires more than the discovery of unmet customer needs: Profits also require superior business economics. As Christensen and Raynor emphasize, the superior economics can be grounded in a disruptive technology. Or, as C.K. Prahalad and Gary Hamel argued more than a decade ago in their Harvard Business Review article “The Core Competence of the Corporation,” established firms can generate superior economics by building on their core competencies — i.e., on their most important assets. While the assets that are leveraged may be “hidden,” the reality is that profitable growth most often results from building on a business’s greatest strengths, which are apparent to all. Cardinal Health illustrates the point. Cardinal’s demand innovations in managing pharmaceuticals in hospitals were extremely profitable precisely because they built on the core of Cardinal’s competitive advantage: its competencies in managing physical distribution. Cardinal’s more recent attempts to build businesses that support pharmaceutical manufacturers (like dosage formulation or clinical support) — attempts that make less use of its core competencies in drug distribution — have, at least to date, been less successful in creating superior returns for investors. When looking for profitable growth, a company is much better advised to look for disruptive technologies or to leverage its core competencies than to focus on its hidden assets. “Hidden assets” may be good marketing for Slywotzky and Wise because the phrase is conceptually distinctive; as advice to companies, however, it’s seriously flawed.

The New Proposition
None of these three books tries to offer a comprehensive strategy of growth in the way that Michael Porter’s seminal work definitively laid out strategy as sustained superior profitability. Yet if we suppose that the measure of an effective strategy — its value proposition — is that it accelerates growth, the three books together offer us many of the elements of the strategy. Christensen and Raynor help us understand the fundamental industry dynamic and exploitation of advantaged disruptive technologies. Slywotzky and Wise provide a powerful way to think about identifying and exploiting unmet customer needs. Treacy helps established companies build on their core. And all offer complementary advice on the organizational changes required to implement the strategy.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close