By: Michael Kaiser
Rather than “reinventing the wheel” I chose the
following three options to the question.
VIEW # 1
In a recent article by Ken Favaro, a Senior Partner at Booz and Company, (How Leaders Mistake Execution for Strategy (and Why That Damages Both)) explains that:
“When discussing strategy, executives often invoke some version of a vision, a mission, a purpose, a plan, or a set of goals. I call these “the corporate five” (see exhibit, below). Each is important in driving execution, no doubt, but none should be mistaken for a strategy. The corporate five may help bring your strategy to life, but they do not give you a strategy to begin with.
Before they get to the corporate five, companies need to address five much more fundamental, and difficult, questions. Let’s call them the “the strategic five:
1. What business or businesses should you be in?
2. How do you add value to your businesses?
3. Who are the target customers for your businesses?
4. What are your value propositions to those target customers?
5. What capabilities are essential to adding value to your businesses and differentiating their value propositions?”
Favaro reaches the following conclusion to the above:
“They can’t answer those questions because often they haven’t asked them in a very long time, if at all. Instead, the corporate five have become a mask for strategy. When that happens, the real substance of strategy—making deliberate and decisive choices about where to play and the way to play—is lost. There is no foundation for decision making and resource allocation. Everything becomes important. Indiscriminate cost-cutting and growth become the order of the day and, sooner or later, with no strategy as a guide, a business drifts”
VIEW # 2
By contrast,here is a recent article by Tania Prive in the Forbes Magazine issue of March 29, 2013 with the title “Top 11 reasons startups succeed”. Here are her titles for those 11 reasons
“1) Vision- 2) Speed -3) Budget Masters – 4) Social Skills – 5) Discipline – 6) Determination -7) Ability to adapt to Change – 8) Fundraising Skills – 9) Unwavering belief – 10) Master of time management -11) Execution”
At the end of the article we read that “…successful startups are always looking for opportunities to do something better by thinking outside the box and constantly questioning the status quo”
Both authors make a good case: Favaro, with a more analytical emphasis on established companies and Prive from fundraising and personal abilities needed in order to lead to a successful outcome. This is not a contest between two authors, but rather a choice that is left to the reader to determine if a startup is purely based on innovation, and thus, why and when should it dovetail with strategic concepts that fit more established companies.
The answer and/or solution to such a conundrum may be found in an article authored by Uzi Shmilovici in Techcrunch (‘Strategy For Startups: The Innovator’s Dilemma’). Here are some excerpts:
“Strategy. Unfortunately, it suffers from a bad reputation among startups. It is associated with consultants who are paid millions of dollars only to come back with a two-by-two matrix of animals. Not that there is anything wrong with it. Some of my best friends are consultants.
However, strategy is crucial for startup success. Startups usually operate in an environment of constrained resources while competing with strong incumbents. Hence, the right strategy can be a matter of life and death…
The first concept we’ll look at is the “Innovator’s dilemma”, a term coined by Clayton Christensen from the HarvardBusinessSchool. The innovator’s dilemma discusses a situation in which there are established incumbents in a specific market who are investing in sustainable innovations — these are incremental improvements to an existing product. Usually, they are doing that to support the incremental needs of their customers
They are then faced with a new entrant to the market that introduces a disruptive innovation. The new entrant attacks only a small part of the incumbents’ business, usually the one in which the margins are very low. At this point, the incumbent decides not to compete in this business anymore because they don’t want to invest in defending their least profitable business and/or are afraid of cannibalizing their main business. As a result, the new entrant is then able to capture a significant market share in that specific segment… it is important to understand the types of disruptive innovation that exist. There are four: a new product, a new technology to produce a product, a new way to distribute a product and a new way to provide services. The entrant can introduce a disruptive innovation along one or more of these dimensions.”
And last but not least:
What do you, the reader/analyst of the above views, believe to be the one that more closely reflects your opinion?