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What does “All hat and no cattle” mean?

It means you put all your effort into looking the part and not delivering the goods

no cattle, lots of hat

all hat and no cattle…

Corporate Strategy and Competitive Advantage

Strategy matters, because how companies think, plan, invest, and act to win customers from their competitors determines whether they will be around.

And at one time, that last sentence might have ended with “in the long term” — not anymore.

The average holding time for stocks has plummeted from 8 years in 1965 to 5 days today.

In last week’s post What Comes First — Your Company’s Strategy? Or Your Company’s Talent?, I pointed out that for all the millions of words said and written on the topic of corporate strategy, and in particular how important it is to have talent aligned with strategy, you would think that there are all kinds of ways to measure and chart a company’s strategy.

But you would be wrong.

And ever since Sir Isaac Newton said “If you can’t measure something, you don’t understand it”, he was right.

4 Factors of Competitive Advantage

Michael Porter of the Harvard Business School has pursued the topic of defining corporate (and country) competitive strategy during the past 2 decades.

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Yet his models yield a bewildering array of images to clarify them.

Searching on Google Images for ‘Michael Porter Competitive Advantage’ confirms that observation.

As ground breaking and influential as Michael Porter’s writings are, I find the 1987 book titled Moments of Truth, by Jan Carlzon, then CEO of SAS, more helpful.

Drawing on ideas from both sources led to conceiving of competitive strategy as being driven by 4 different ways to beat the competition, illustrated below…

larger view? click image

The 2 quadrants on the left side focus on revenue.

The 2 on the right size focus on extracting profit from revenue.

Clearly, all 4 deliver value to customers and shareholders, but how much priority should be assigned to each depends on what drives customers to buy and the unique market differentiators the leadership has chosen to offer.

The top 2 quadrants focus more on thinking skills and technology.

The bottom 2 focus more on emotion and negotiation.

Utilizing Strategic Priority

The next set of figures illustrate how different companies in the same general market (retailers) can compete differently and both win.

They also illustrate how different business units within a company require different strategic priorities driven by their function and customers…

Walmart succeeds within discount retail, becoming the world’s largest retailer by focusing on doing what it takes to keep costs low, and passing that along to price-sensitive customers.

Federated Stores (Macy’s and Bloomingdales) does well in department store retail by offering high quality top brands, staffing their stores with knowledgeable, savvy sales associates.

Apple stores focus strategically on the customer sales experience and offering great products.

Apple corporate focuses on designing sleek, innovative offerings and producing them effectively at scale (by outsourcing to offshore manufacturers).

Measuring Competitive Strategic Priorities As Seen By the CEO and Senior Leaders

However the charts above represent external professional estimates based on corporate behavior.

It would be more interesting to measure the competitive strategic priorities as seen by the CEO, the top leadership team, and then by the pivotal professionals who shape and execute the tactics that bring the strategy to life.

Fortunately, a simple online assessment requiring just 6 clicks (The Competitive Strategy Profiler) does just that.

Here are the findings from one of America’s oldest companies, now going through an effort to regain its former glory…

for larger view, click image

The CEO’s allocation of strategic priorities fell much closer to the priorities documented in their strategic plan than did the average of the CEO’s direct reports.

Securing new orders at favorable pricing depends on positioning themselves as the reliable, flexible, provider of quality products in their high-tech manufacturing sector.

They need to offer competitive quality, innovation, and durability, and they need to fix the ‘stupid stuff’ in the manufacturing process.

However, their near term top line growth will come from focusing on sales effectiveness.

They will almost never win a sale because they bought their raw materials or component parts cheaper than their dominant competitor, who is larger than they are.

How effective can strategy be unless it translates into priorities that are shared by the senior leaders that report to the CEO?

And then, what about the next level of leadership that reports to the senior leadership team?

Let’s find out…

How Function and Culture Eat Strategy for Breakfast

This next pair of charts contains the average strategic priority charts for the IT and Finance teams—the people that report to the CIO and Treasurer…

These functional teams, both of which rely on the compliance model of motivation and neither of which have external customers, don’t see the sales experience as a big priority.

Not shocking, but clearly problematic.

Having the best offerings isn’t that important either, when you can mandate that people use the new ERP system, or get their expense reports in on time if they want to get paid.

The problems come when Finance needs to authorize some exceptional spending to close a large account.

Or IT has to change the inventory management system to allow for new component parts.

Not a priority for them, as they see it.

They are too busy figuring out how to cut the cost of their database upgrades or their revenue accounting system.

I suppose when you are a cost center, your job is to cut cost.

Anyone familiar with the phrase Penny wise and pound foolish?

When You Can Measure It, You Can Manage It

Since presenting the first row of charts to the Leadership Team, the decision was reached almost immediately to examine strategic priority charts for each of the 3 operational business units.

The resulting charts lined up strategic priorities with how each business unit wins business from competitors, communicating those priorities clearly to the managers and frontline workers that execute the tactics to deliver value to customers.

Plans are now being finalized to track the strategy metrics further down the organization, and the behavioral changes that have been made to the bottom line.

For the professional functions (IT, HR, Finance, Accounting, Legal), efforts are underway to bring the strategic priorities of those who lead those functions a bit more into alignment with the operating units they support.

Finance and accounting need to ensure compliance with EBIDA targets and GAAP, but they can also devote some bandwidth to finding additional ways to encourage and support product innovation and sales excellence.

Same goes for IT, HR and Legal.

Avoiding expensive puddles regarding IT systems, HR regulatory compliance, or legal entanglements remains an important focus, but these functions directly impact how the operating units promote innovative excellence in product offerings and improve the customer engagement experience.

The Critical Role of Culture in Driving the Right Strategic Priorities Through to Execution

Once the CEO champions the right competitive strategic priorities, and ensures that the Senior Leaders of the primary operating units align their priorities with their customer and functional value propositions — is it time for the “Mission Accomplished” banner?

Not just yet, partner.

Strategy is necessarily malleable, changing as markets and technologies change.

Culture takes longer to form, longer to build, and is harder to change.

It can be measured and managed as well, but that is the topic for next week’s blog.

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Tom Janz

Chief Scientist at People Assessments

Tom Janz is a seasoned, published thought leader in talent sourcing, assessment, and development.

He applies the following strengths to creating human asset value:

  • advanced analytical skills
  • emotional intelligence
  • realistic optimism
  • a passion for achievement, and
  • the courage to be new

Tom's specialties include behavioral interviewing, business impact analysis, strategic performance modeling, testing, performance management, corporate culture assessment and development.

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