(Here is a review I wrote for Business Line, covering two books in the same review. I find it interesting that since Igor Ansoff and Michael Porter, the incremental additions are so few. All the new additions seem to be more driven by ‘line of best fit’. Take a large sample, narrow down the attributes and put a tag. Some of them are relevant, most are post facto observations.
These two books are interesting read. Edge is something that I believe every businessman consciously looks for but not many succeed. Edge strategy is full of nice examples. The other book on Making Strategy Work is slightly laboured, but again, the examples are worth reading. )
STRATEGY THAT WORKS EDGE STRATEGY
Paul Leinwant, Cesare Mainardi Alan Lewis & Dan McKone
With Art Kleiner
Both published by Harvard Business Review Press
It is understood that every company, has a business strategy. It could be implicit or explicit. However, having a strategy by itself never guarantees enduring success. In this fast paced competitive environment, where global boundaries are blurred, longevity and profitability are constantly under threat. The advent of “Big Data” makes it simpler for companies to slice and dice information to try and find that extra squeeze from the business.
Michael Porter gave us an enduring framework for analysis of Competitive Strategy. However, he does not give you a recipe. There is no solution for one hat fits all.
“STRATEGY THAT WORKS” talks about how succesful companies have made their strategy work. The authors are from the consulting business of PWC. They have looked at fourteen globally succesful companies and based on their studies and experience, prescribed a ‘path’ to success in helping companies fill the gap between Strategy and Execution. For a good strategy to succeed, execution is the key. The message has to spread across the organisation and there has to be unison in approach and action. Apart from the fourteen companies, they have also looked at another half a dozen or so companies.
The book talks about FIVE acts of leadership that help bring about success in execution of strategy. The first is ‘ commit to an identity’. An identity that focuses on strengths and capabilities. The second is the creation of a blueprint that helps scale the capabailities across business functions. The third is “Culture”. This is perhaps the most important attribute and brings about coherence of thought and action in any company. There is considerable space given to this aspect and a discussion on why culture cannot be an overnight fix. The last two is about cutting costs and being nimble enough to spot changes in the industry and adapt to it.
Under each head there are practical examples drawn from a marquee list of successful companies that include Apple, IKEA, Haier, Inditex, Lego, Qualcomm, Starbucks etc. The explanations are detailed and give us a glimpse in to minds of these great companies and what has made them successful. For these alone, it is worth getting hold of a copy and keeping it for regular reading. There is a lot of depth in the examples and the takeaways and credit to the authors for keeping it crisp and relevant.
This book is not a primer on strategy. It will be of value to those who are trying to evaluate options. Straightline growth cannot be a simple goal for a company. That, unfortunately becomes a mantra for many companies, who want to show a quarter on quarter top line growth. And when the pace slackens, companies get tired and get in to wrong spaces. A great company grows profitably, without losing its identity and culture.
“EDGE STRATEGY” is written by Alan Lewis and Dan McKone, partners and MD at L.E.K. Consulting LLC. Both of them colead Edge Strategy consulting.
Every company wants to grow. The pursuit for growth leads them to do things that may not always turn out right and often do not give the same Return on Investment that the business expects. In the pursuit for ‘growth’ companies often end up looking at inorganic options such as acquisitions, to keep ‘growing’. The Edge Strategy talks about using existing resources and capabilities to find new avenues to grow. And if this strategy can be applied, it should give an incremental ROI that is greater than the existing one.
The authors argue that most companies are ‘inward’ focused. On their capabilities and doing what they do. Rarely do companies look at the assets and capabilities they have created and find an ‘edge’ opportunity. They talk about three ‘edges’. One is the ‘product’ edge. This is providing more goods and services to the existing set of buyers. This is the most exploited by companies. The second one is the ‘journey’ edge. The journey is of the customer. His interaction with the product or service does not stop after you have sold. Can you fill this up? It could be an add on service needed for the product. This is also somewhat prevalent and has been used.
The third ‘edge’ is the ‘enterprise’ edge. Perhaps the one that has been least exploited, according to the authors. This is by using the power of existing assets and capabilities to provide an add on that can generate great ROI. They have given the example of Whole Foods Market. Starting as a grocer, it found its edge by adding ‘ready to eat’ foods. It had the infrastructure, the customers and a strong supply chain. It required only some marginal changes to exploit the phenomenal opportunity lying at the Edge.
The authors have give some thought provoking examples of companies like Apple, which added the App Store without any significant additional investment, but addressed the universe of its buyers.
The book also gives the authors’s pointers to using the Edge strategy, in a comprehensive process outline. The authors have emphasised their observations with ample real life examples that can set the grey cells buzzing.
This book is certainly of value to every business. The Edge gives a kicker to the bottomline, without taking on too much risk.
Both the books have comments on M&A and why most M&As fail. Clearly, growth through acquisition is not a recommended option. There is the example of ICI which went from a near ten billion market value company to extinction in ten short years, thanks to one acquisition which pulled it down. The first book also talks about the remarkable Danaher Corporation, which constantly acquires companies that fits in with its capabilities and successfully turns them around. However, they are the exception rather than the rule.
These two books are useful additions to an entrepreneurs reading list. Yes, they have picked up the companies that are successful and given pointers from that. It is not a prescription for success, but pointers to enhance your business strategy and keep you focused.
February 10, 2016.