“Strategic direction is more important today. It's about providing a framework for managers to navigate through the fog of complex chokes. No company can avoid this."

– C.K. Prahalad –

PoS Sept 2012 | Can you say what your strategy is?

In the HBR article by that title David Collis and Michael Rukstad propose that a short statement ensures clarity and employee alignment. Objective, scope, and advantage are its three components.

Objective: Strategy must have a specific end in mind. Maximising shareholder value, achieving leadership, etc. are too general.    Edward Jones, the fourth largest US brokerage firm, stated their goal thus: “Grow to 17,000 financial advisers by 2012 (from about 10,000 in 2008)”. They did not outline financial or market share goals. They believed larger number of financial advisers would extend reach and yield those results. Objective should be specific, measurable, and time bound.

Scope: Scope describes customers the firm will target, products or services it will offer, and geographies they will operate in. It defines the boundaries outside which the firm will not play. Clarity on scope encourages employees to innovate within and avoid wasteful effort and investment outside.

Advantage: Strategy must build competitive advantage for the firm by creating compelling value for customers. Articulating why customers will buy requires managers to examine strategy from the customer’s point of view. It encourages them to ask how the firm’s activities deliver superior value to chosen customers. The firm must choose the set of activities that serve target customers better than competitors, and shun other segments that demand incompatible activities.

The authors cite the strategy statement of Edward Jones, a US brokerage firm: “Grow to 17,000 financial advisers by 2012 – from about 10,000 today (2008) – by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of one financial-adviser offices.” Collis and Rukstad buttress their arguments with examples of Merril Lynch, Wells Fargo, and LPL Financial. All serve unique customer groups and have strategies different from each other’s.

The starting point, of course, is a good and effective strategy. While the benefits of a short statement are immeasurable, nuances must be explained with examples and rationale. The purpose is to enable everyone to make careful and consistent choices in their fields of responsibility.

You can enjoy the original article here.

With every good wish,

V.N. Bhattacharya
Business Strategy Consultant