BOOK REVIEW. The art and craft of business strategy

It is understood that every company has a business strategy. It could be implicit or explicit. That said, having a strategy by itself never guarantees enduring success. The two books under review here look at two distinctively different aspects of business strategy which share some interesting parallels nevertheless.

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 ready-made recipe. Obviously, there is no single, one-size-fits-all solution. Each firm needs its own recipe. And that’s exactly what Paul Leinwand and Cesare R Mainardi probe in Strategy That Works: How Winning Companies Close the Strategy-to-Execution Gap, discussing how successful companies have made their strategy work.

The authors are from the consulting business of PWC. They have looked at 14 globally successful 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 14 companies, they have also looked at another half a dozen or so companies.

Leadership matters 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 capabilities 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 are 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 and so on.

The explanations are detailed and give us a glimpse into the 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.

Of course, 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.

Growth mantras The pursuit for growth leads firms to do things that may not always turn out right and often do not give the same return on investment that they expect. In this pursuit, companies often end up looking at inorganic options such as acquisitions, just to keep ‘growing’. The Edge Strategy talks about using existing resources and capabilities to find 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 — Alan Lewis and Dan McKone, partners and MD at L.E.K. Consulting LLC, both of them co-lead Edge Strategy consulting — 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. The authors talk about three ‘edges’ here. 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. This is the journey is of the customer. His/her interaction with the product or service does not stop after you have sold it to him. 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.

Margin moves 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, the US supermarket specialising in organic products. 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 on the ‘edge’. The authors have given some thought provoking examples of companies such as Apple, which added the App Store without any significant additional investment, but addressed the universe of its buyers.

The book also gives the authors’ 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 have comments on mergers and acquisitions and why most mergers and acquisitions fail.

Clearly, growth through acquisition is not a recommended option. There is the example of ICI which went from a near $10-billion market value company to extinction in 10 short years, thanks to one acquisition which pulled it down.

Strategy That Works also talks about the remarkable Danaher Corp, which constantly acquires companies that fits in with its capabilities and successfully turns them around. But it is the exception rather than the rule.

The two books are useful additions to an entrepreneurs reading list. Yes, they have picked up companies that are successful and given pointers from that. It is not a prescription for success, but pointers to enhance business strategy and keep you focused.

MEET THE AUTHORS

Paul Leinwand is a Principal at PwC’s consulting team, Strategy&. Cesare Mainardi is former CEO of Strategy&.

Alan Lewis is an MD & partner in L.E.K. Consulting’s Boston office. Dan McKone is an MD & partner at L.E.K. Consulting and a member of L.E.K.’s global leadership team.

The reviewer is a Chennai-based finance and business strategy consultant

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