14 Rules & Practices for Corporate Strategists
European Straights, 2020-05-14
I skipped a few items as I didn’t find them useful, sorry.
1/ Scale can be an asset rather than a liability
For company reinvention scale is a liability (need to move a large body fast).
Corporations are more agile than governments because they can fire people (operational effectiveness) and generate [and use!] profits.
During war-like situations like COVID corporations can establish martial law and implement hard decisions throughout the organization. [MK: I get it, but not necessarily agree as hard decisions don’t always lead to survival.]
2/ Theories can build a consensus within your organisation
Theories create a common language and a common way to frame problems.
Basis for good stories [MK: especially describing past decisions].
[MK: I guess this rule also applies to financial/operational models shared with the managers of the firm]
3/ Innovation is about doing
In 2020 innovation converges with strategy and has become common practice.
Execution eats innovation for breakfast.
4/ Understand your place in the value chain
Being in the middle is the most unsustainable place.
The options are moving closer to production or to the consumer.
Power (and margins) are not set in stone.
6/ You need a fixed point where there’s the most value
Reinventing the firm is about disassembling it, throwing away some pieces and rearranging the existing ones, mixing them with the new ones.
In the 1960’s the fixed point was the factory; in the 1980’s – the brand. 2010+ - individuals connected through networks.
7/ You need a foothold at two different points in your value chain
Being a leader in one value chain link is not enough (customer preferences, market shift, etc. will compete you away).
Having two different points create a grip on the chain, which becomes substantially more competitively defensible.
[MK: The second link has to reinforce the first one, but in itself doesn’t have to be profitable.]
8/ Work at both levels: the application and the platform
It may sound too 2010, but once you have a number of apps, you try to platformise them. (vs productising the platform)
Having a successful platform may lead to a new line of business (ex: AWS).
9/ Learn to reconcile scalability and defensibility
Scalability (and low assets) works well in good times.
In bad times firms have to compete on differentiated assets creating defensibility. Yes, a move towards an asset-heavy approach.
In bad times incumbents feel better as they already have assets.
10/ Don’t get trapped within old tradeoffs
Old tradeoffs (more broadly – declined strategic options) can and should be revisited.
11/ Change the positioning and then – the org chart, in this order
Consulting more or less has moved into management consulting from strategic consulting.
So the proposed solutions are managerial, not strategic.
However, it’s the wrong strategic positioning that kills good firms, not the management.
12/ Capital allocation can make or break you at repositioning
SBU [strategic business units] with individual P&Ls approach to capital allocation used to be very popular not too long ago.
This may lead to a blind spot of looking at ROIC (return on invested capital) for each SBU instead of a blended one for the entire firm.
Repositioning may mean some SBUs’ ROIC will forever be in the negative zone.
14/ The person in charge should be the next CEO candidate
Assign a CEO candidate to lead the transformation project.
Automatically gives them authority and power to change things, especially with the existing CEO being behind this person.