Strategy is also what you don't do
May 24, 2013
A corporate strategy is not only about what you do, but is just as much about what you don't do. This according to assistant professor Geert Desmet during the second of four Entrepreneurial Lectures at the TIAS School for Business and Society. “Having a strategy means making choices. It defines what makes a company unique.”
Image: © Nationale Beeldbank
The core of business model is determining the value proposition to the customer. This requires the company to answer three questions, namely: what do we offer? For whom are we doing that? And how do we offer that? The last question is not actually part of the customer value proposition, but it is an important question, says Desmet. “The how-question explicitly asks the customer: is what we offer a possibility? For example, bringing the delivery time down to two days instead of three weeks? The customer will then ask himslef the question whether the delivery time is possible. The proposition does have to be credible at all times.”
This requires making clear choices concerning what the company wants to be good at; the value disciplines of Treacy & Wiersema offer a framework of thinking to that end: the best total costs, best solution or the best product. A company has to choose to excel in operational excellence, customer intimacy or product leadership. People used to think that a company should excel in one of these aspects, while ignoring the rest, but studies now show that a company should excel in one of these three areas and not lose sight of the other areas and that these areas should be in keeping with the market.
Role of the leader
The role of the leader is important in sticking to the chosen strategy. He or she decides which choices are to be made. Monitors that choice and repeats the message. “The message will have to be compatible with the attitude of the leader”, says Desmet. He gave the example of a supermarket chain in Asia that wanted to set up a price buster. On the second day, the appointed managers went off to choose an expensive company car before starting their new jobs. “As you can imagine, that price buster never got off the ground.”
Value proposition has a 'Best before' date
And a leader is not allowed to rest on his laurels. Because the value proposition of today has a 'Best before' date. “The competition does things that can change the expectations of the customer”, according to Desmet. Which is why, as a company, you should always be working on the value proposition of tomorrow. “A company should actually always be working on two strategies: one for today and one for tomorrow. But someone who is working on new things has a different mentality compared to someone who is engaged in present-day business. And so this brings two mentalities together in one company”, says Desmet. There is an apparent contrast between the employees who put the value proposition of today to work and generate cash flow on the one hand, and the innovators who develop the value proposition of tomorrow and who secure the future of the company on the other.
The leader plays an important role in bringing these two worlds together. “Because they truly do need one another. The cowboys need the money generated by the existing business. And the existing business needs the cowboys to continue to grow."