Do large companies have the same strategy? (Part 1)

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Image credit: Nick Youngson

By the time a large company has finished its strategic planning cycle, it ends up with strategy statements that could apply to any company. The same phrases show up every time.  Why is that?  Do great minds think alike, are people running out of ideas, or are market trends forcing them in the same direction?  Before we get into the causes, let’s look at the strategies.

A.G. Lafley and Roger L. Martin, in their book Playing to Win, emphasise that strategy is a set of five choices: the company’s winning aspiration, where it will play, how it will win, its capabilities, and its management systems.  Their expectation is that a successful company has a unique right to win.

Similarly, Michael Porter’s famous article “What is Strategy?” states: “Competitive strategy is about being different.  It means deliberately choosing a different set of activities to deliver a unique mix of value.”

Can we see these principles at work in company strategies today?  What do the company strategy statements say?  For now, let’s take these as correct representations of the company’s actual strategies.

Industry names have been omitted from the statements below.

Objectives

Many strategies start with the objectives of the company.  For example,

Our overarching corporate objective is to achieve sustainable, profitable growth and thus to increase the value of the Group. We strive to attain the leading position in all of our businesses.
Our strategy is now centred on creating a simpler company, one that delivers higher, more predictable returns and growing free cash flow per share.

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position.

These objectives fit large companies in mature markets, that are defending their market position and want to maintain good returns to shareholders.

You can say that the objective of every company is to create shareholder value over the long term.  When they don’t, they get targeted for takeover or go bankrupt.  So, their objective is to stay in business and make money.  Nothing unusual there.

Where to play and how to win

How much is covered in each strategy varies between companies.  Some strategies specify the where to play choices that will lead to the objective:

Expanding the core: throughout our regions by focusing on key clients at the local, national and multinational level, building on strong existing client relationships.

Market-led growth in []. Build competitively advantaged businesses in [] and expand our marketing businesses.

You could argue that those are the two options: either you grow with existing customers, or you grow with new customers.  Here, the interesting strategic choice is the specific market segment and how attractive it is in its growth and profit potential.

It gets more varied once companies start talking about how they will win:

Deliver expert solutions.  We will continue to design and deliver expert solutions that combine deep domain knowledge with specialized technology to provide [], [] and productivity for our customers.

Exceed customer expectations with outstanding products and solutions … leverage deep expertise, innovative technologies and disciplined execution with sufficient and sustained investment

Cost leadership is in the DNA of our organization and essential to success in our industry. This means systematically and rigorously managing our costs, implementing best practices across the Group and taking advantage of our scale.

Customers’ favourite partner in digital life. By satisfying each customer’s digital needs in a personal and relevant way, we are building strong and lasting relationships with our customers.

Here, you see two different generic strategies at work: differentiation versus cost leadership.  The third statement, about satisfying digital needs, is becoming increasingly frequent.  Being more digital is not differentiating per se, but a desire to be where the customers are.  So even though it sounds like a how to win statement, it could be a where to play statement in disguise.

Capabilities and systems

When talking about their capabilities, companies highlight what makes them unique:

Our distinctiveness.  In our pursuit of excellence in [], our distinctiveness rests on four key elements: an exceptionally broad and deep understanding of [], the seamless integration of our [] capabilities, a diversity of approaches to maximise innovation, and a long-term orientation.

Our people: their expertise, hunger for knowledge and passion to excel. Above all, their loyalty and commitment.

Established in a large number of countries in Europe, Asia, South America and in the USA, we also have a wide network of agents. This organization enables us to offer a local service to both our international and local customers.

The capabilities divide into expertise, people, assets, and market positions.  Without the details, the types of uniqueness are the same.  Here, you expect companies to make where to play and how to win choices that build on their capabilities.  Where things tend to go wrong is when companies want to change their choices, but their capabilities cannot keep up.  For example, wanting to shift from selling products to selling solutions without the expertise to design, sell, deliver or maintain those solutions.

Management systems don’t get as much attention in strategy statements:

We put our clients first and we are accelerating our efforts and digitising our products and services. We are committed to creating an organisation and culture based on trust, where there is space for new ideas and new ways of working.

We place our operational resources close to our customers through autonomous locally managed businesses. We have central resources to increase innovation, international expansion and leadership talent.

One could argue that the management systems can be a significant source of competitive advantage.  Ask Toyota.  Perhaps it gets less attention in strategy because it’s seen as part of execution.

One more as a bonus, strategy by bullet point:

Portfolio choices

  • Category choices
  • Active portfolio management
  • Building a Prestige business

Brands and innovation

  • A focused approach to innovation
  • Driving efficiency and margins
  • Increased investment in digital marketing

Just like a list is not a song, a list is not a strategy.  I suspect the details are elsewhere, though I am curious why they posted this list on their website.

Differentiation, or common business practice?

Reading these statements one after the other, they could almost be the same strategy.  All of them sound like good business practice.  Apart from some How To Win choices, they do not contradict each other.  Porter’s definition of strategy as a different set of activities is not visible here.

Roger Martin made an interesting point in 2015 when he wrote, “I look at the core strategy choices and ask myself if I could make the opposite choice without looking stupid. If the opposite of your core strategy choices looks stupid, then every competitor is going to have more or less the exact same strategy as you. That means that you are likely to be indistinguishable from your competitors.”

It is interesting to consider why strategy writing results in generic statements. One cause could be design by consensus.  Senior managers have learned strategy in their MBAs, or they have consultants working on it, and everyone is working from the same playbook.

It may be that creating an overarching strategy for a large group that covers all its businesses, also creates something that covers almost every other large business with it.

Perhaps the market dynamics are such that any up-to-date strategy has to pursue long-term shareholder value, in a sustainable manner, while serving customers better using digital technologies.

Maybe the statements themselves don’t matter so much, and the truly interesting strategic choices are made elsewhere.

Or maybe making differentiating strategies is hard.

In Part 2, I will discuss if these statements accurately represent the companies’ strategies, and how to figure out what their strategies are.  At least, that is my intention.  We’ll find out when I write it.  Until next time.

P.S.  Dying to know what companies we’re talking about?

Objective: Daimler, Shell, Amazon

Where to play: Arcadis, BP

How to win: Wolters Kluwer, Caterpillar, LafargeHolcim, Telenor

Capabilities: Roche, OCI, Synthron

Management systems: ABN Amro, Halma

Bullet points: Unilever

© 2017 Veridia Consulting