Strategy Leadership

Management theory teaches us there are 'core strategies'. Each core strategy represents an area in which companies could excel. The 'catch' is that companies must choose, they cannot excel in all areas. You can't be the cheapest, the best and the most customer oriented at the same time. Porter, and later Treacy and Wiersema have done a lot of research in this field, and 'operational excellence' (or cost leadership), 'customer intimacy' (or customer leadership) and 'product innovation' (or product leadership) are considered the three core strategies. Others have suggested customer lock-in and brand mastery (brand leadership?) as the fourth and the fifth core strategy, but for the purpose of this story, let's stick to these three.

Many organizations do not understand they need to make a fundamental choice between these strategies, and in their mission statements claim to be everything for everyone. Usually this leads to a bland value proposition that is not recognized, and as a consequence not overly successful, in the marketplace. Choosing for customer intimacy means more expensive processes to cater to special wishes. Choosing for operational excellence means creating mass markets. Choosing for product innovation means creating new markets, instead of catering to existing customer requirements.

But some organizations break the 'rules' and get all three right, who -- in the words of management author Jim Collins -- move from the 'Tyranny of the OR'  to the 'Genius of the AND'. Recently I spoke with the CEO of a website that offers second hand cars to the general public. Their customers are the car dealers, who offer their cars through the e-business website. Although the website did not have first-mover advantage, it entered the market relatively late, it quickly gained marketshare and is now market leader in the region where they are active. Customers get the value proposition intuitively, probably without knowing about beating the three core strategies. The website itself is about product leadership, as it positions itself as the most reliable website for second hand cars. It has achieved so by a highly automated process (operational excellence) in which the characteristics of the car (such as age, mileage, maintenance details) are thoroughly checked against external data sources. At the same time, it offers the car dealers a system (customer intimacy) to enter car data and pictures themselves. Car dealers that repeatedly try to 'cheat the system' are being barred.

How do you call an organization who is a product leader, a customer leader and a cost leader? I'd like to call it a 'strategy leader'. The conversation with the CEO revealed there was no grand design when they started the business, the business model was perfected over the last three years. Slowly it discovered that 'data quality' was their unique selling point, which drove a high level of automation and process integration with the car dealers. Provocative marketing campaigns did the rest, the general public picked up on the concept.

In essence, it shows strategy leadership is a continuous process. Continuous improvement of processes, systems and practices. Continuous feedback on how the business is going. A continuous finger on the pulse. If strategy is a continuous process, business performance management (BPM) is the engine. BPM can best be explained by the metaphor of 'connecting the dots' of a circle. Connecting the dots of the management processes, such as planning, measurement and reporting. Connecting the dots of performance indicators, to create insight in cause-and-effect relationships. Connecting the dots of systems, to make sure there are no conflicting versions of the truth. Connecting the dots of management, by creating a collaborative culture. And if all dots in the circle are connected, strategy formulation and strategy execution become one.

Does this mean Porter, Treacy and Wiersema are out of the window? I don't think so. What the website did is create a new level, where the competition now needs to live up to. The triangle of the core strategies still plays the same role, and the stakes are upped. Until the next one finds a way to break the new rules...