Over the years, we’ve made strategy far more complicated than necessary. Smart people with advanced degrees and high salaries generate elaborate documents containing complex analysis, algorithms, heuristics, scenarios and projections which seldom yield competitive advantage. More than 50% of the 2010 Fortune 500 companies – each with elegant strategic plans – no longer exist. And literally 60-80% of megamergers – with strategies of impeccable depth, logic and financial wizardry – have been empirically shown to diminish stockholder value.
What’s Wrong?
First, strategies often wind up looking pretty much the same. It becomes difficult to distinguish oneself in a crowded marketplace. No amount of numbers, graphs, and jargon can stop many strategic plans turning out to be ordinary, with uninspiring results for customers and investors. Companies often find that, even if their strategic plan makes sense, their execution fails. Bureaucracy, organizational inertia, and resistance to change subvert or delay noble goals, even those representing genuine competitive opportunity.
It gets worse. Companies often find that their strategies have become obsolete “overnight.” The long-term strategies of the major music recording labels, for example, were based on known product (the compact disc), a known distribution chain, a known set of competitors, and a known “way of doing things.” Then came MP3 formats, P2P file sharing systems, and other web-based innovations.
Finding the Cutting Edge
Strategy is far from irrelevant. Effective strategy creates significant value. But in today’s fragmented, hyper-competitive, global economy, value creation follows new and different paths. Singly or combined, these new sources of value creation lead to sustained growth and returns, investor enthusiasm, and market “buzz.”
A cutting-edge Strategy:
Generates unique value: In crowded markets, where competitors are everywhere and customers are overwhelmed with choices, the most important strategic issue is uniqueness. A cutting-edge strategy demonstrates that the company is doing something special and different. It suggests best-of-breed and greatness. In the 1990s, Dell Computer’s build-to-order product customization and direct-to-customer sales channel were so unique that they restructured conventional value propositions and value chains, and in the process catapulted the company to a dominant role in the technology sector.
Provides Breakthrough Value
What do FedEx, DHL, UPS, CNN, FOX News, Al Jazeera, AIT International, Arise News, TVC Continental, NTA, and others have in common? They create news markets. With so many competitors vying for customers’ attention, significant value comes not from incremental improvements, but from marketplace breakthroughs. Once, customers didn’t ask for overnight delivery, cable news, or personal digital assistants. Smart companies initiated those and profited handsomely. Cutting-edge strategies demonstrate value by leading markets, which includes leading customers, not just by responding to their current desires.
Provides Startling Value
Increasingly, products and services have become “me too commodities. Companies with cutting-edge strategies create value by providing things that inspire excitement, intrigue, and joy via exceptional functionality, design, and execution.
Provides Personalized Value
Mass (as in mass production and mass marketing) is dead as a value –driver. Nowadays, it’s all about “market of one.” General Electric Power systems allows a purchaser of its turbine engines to build-to-order and follow the paths of the product’s construction, all online and while receiving one-to-one online and face-to-face consulting help from GE throughout the process. Customized products and services are increasingly the primary way that customers conclude that they are receiving true value.
Provides Turbo-speed Value
Whatever winning organizations do, they do very fast. They see competitive advantage in how ready they can capitalize on changes in technologies, customers, competitors, demographics, and capital markets. Or how dramatically they can shrink decisions and cycle times. Or how quickly they can disseminate information and knowledge throughout the organization, put together a team or alliance, implement a change, start an experiment or pilot, and get to market. Winners think about time the way most conventional companies think about costs. They do strategy “on the run.”
Provide Employee-driven Value
The traditional scenario of a few high-ranking executives and high-priced consultants determining strategy, then pushing it down for others to execute, is destructively anachronistic. Real value and its corollary, competitive advantage, accrue to organizations that fully invest in and capitalize on the talents of their people. Top management sets broad strategic priorities and directions, as well as clear values and culture. But within those parameters, cutting-edge strategy and accountability, a.k.a. value, bubbles up from anywhere. This is a quantum departure from conventional “empowerment” and “employee participation.”
All-hands-driven strategy is not one detailed grand plan, but rather an organizational template. Executives still define the fundamental direction and take on primary fiduciary responsibility. But employees are viewed as genuine partners, which means that they have immediate access to any information (including financials); training and development (talent is viewed as an appreciating asset); opportunity for self-control (taking full responsibility for initiatives and outcomes); and a healthy dose of outcome – and performance-based compensation (including profit-sharing and equity ownership).
A cutting-edge strategy is grounded in constant innovation and customer-centricity. What a cutting-edge strategy does is offer unique, breakthrough, startling, and customized value. How it does this is by collaborating “on the run”: all hands working together as strategic partners, obsessing on speed. When this process is ignited and fueled by top management, something wonderful happens. Strategy becomes an agile, market-centric collaborative process. It all becomes a lot of fun.
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