Companies

‘The clearer you are, the easier to execute strategy’

NS Vageesh Mumbai | Updated on January 24, 2018

PROF DAVID COLLIS, Thomas Henry Carroll Ford Foundation Adjunct Professor of Business Administration, Harvard Business School



Prof David Collis, Thomas Henry Carroll Ford Foundation Adjunct Professor of Business Administration, Harvard Business School, was in Mumbai recently to teach a course on strategy. Author of a well-received recent book on international strategy, Prof Collis says he wrote it to serve not only as a textbook for students but also as a practical guide for executives who face dilemmas in global strategy. He emphasises the importance of a clearly-articulated strategy that is succinct and can be understood by the lowest level operators in an organisation. Edited excerpts:

How does your book on international strategy help a business executive?

All multinational companies will have to address four fundamental questions: 1. What is the product offering and how is it going to vary across countries given the variety in cultures and market conditions? 2. What countries should we be competing in and what should the footprint look like? 3. Where do you locate your activities? Should your plants be set up in India or China or may be Vietnam? 4. How do you organise the structure – geographically with country heads or through a global product structure?

This book helps answer these questions and build a coherent strategy to add value.

You have written an article on the need for companies to formulate a strategy that they can explain in 35 words. How do they go about it?

At some level, it may be a bit tongue-in-cheek, but I do believe that companies should be able to deconstruct their strategy and be able to communicate it clearly to people lower down the hierarchy so that the front line employees can understand and act upon it.

I will give you the example of a low cost airline – the Southwest Airlines in the US. They are low price – so they have to be low cost. How do you get there?

One of the things they focus on is quick turnaround time. Since many costs are fixed, the more they utilise the planes, the lower the costs for Southwest Airlines. They are able to turnaround in around 15 minutes versus say 45 minutes for others. In addition, for the short-haul flights (typically one-hour flights) a saving of 20-30 minutes is a great competitive advantage.

They do this by some simple rules – no meals, no assigned seats, no bags, no hub and spoke model. It is the classical back and forth shuttle.

All these things enable them to turnaround quickly and low costs allow them to charge a lower price – and this they must communicate to their front line employees. Take their gate agent — the lowest front line employee in the organisation. Suppose it is 4’o clock on Thursday afternoon and he is supposed to let a plane get off at 4.30, but five passengers on a late incoming flight are due to board. What would you do? Do you let the plane go or do you hold the plane and keep it until the five passengers come on?

Now if these people understand the strategy of low cost and quick turnaround, then they are going to let the plane go. The fact is that it is a point-to-point shuttle and will be back in an hour and half. That is the value of having a crisp strategy communicated effectively. The front line employee can make the decision that you as a CEO will want them to make. Execution requires that you capture it succinctly, communicate it effectively, so that one can act on it. You know, when people discover that I am a Professor of Strategy at HBS at a cocktail party, they sidle up to me and I can tell by the way they ask the question that they think they know the answer. They will tell me, ‘Oh David, you are a professor of strategy. Tell me, is it better to have a good strategy poorly executed or an OK strategy really well executed?’ They think execution is everything.

I tell them the two are not mutually exclusive. I say to them — the clearer you are about a strategy, the easier it is to execute them. Then, everyone understands their role in the organisation and how they contribute to achieving the goal.

Can a newspaper, for instance, decide it will only serve a certain category of customers?

India is an interesting market. I am given to understand that readership is still rising here even as it declines elsewhere. However, yes, ultimately you do have to choose. It does not mean that you do not serve other people. Let me go back to the Southwest Airlines example. It was not designed for business executives. But it does not mean that if you showed up in a suit, they’ll throw you off the plane.

Back to the newspaper business – yes, newspapers have a different positioning. There is a reference to this in the Yes Minister comedy show – where different newspapers in UK cater to different readers.

You have to do this, otherwise everyone is competing head to head and doing the same thing. The epitome of strategy is really having no competition, because you know who your customer is and serve a particular customer base really well with a value proposition that is different from your competitors. In the UK for instance, the Guardian newspaper, as a leading liberal voice, is talking about building communities of online readers. If you go to their homepage, you’ll see a link to a dating site! They are trying to build a community of like-minded individuals. So if you want to date some one, you’ll probably have a lot more in common if you both like the Guardian.

Published on July 07, 2015

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