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.