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.
Many strategies start with the objectives of the company. For example,
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:
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:
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:
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:
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:
Brands and innovation
Brands and innovation
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?
Bullet points: Unilever
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