“Where is (success) coming from? It’s coming from having, within a company, difficult-to-replicate and usually intangible resources. Things that can generate and sustain competitive success – things like reputation, a good customer group, network externalities, experienced and competent people performing your processes.
…we know that companies get good at something by doing it. Now that doesn’t mean (they were) always good at it. We have to understand that competencies are created by activity. If you internalize enough of those activities, you actually get good at them, and they give you a sustainable advantage for a certain period of time.
…and then the advantage evaporates on you.”
Strategy’s strategist: An interview with Richard Rumelt, The McKinsey Quarterly (August 2007)
Richard Rumelt is a modern giant in the field of strategy. He is a professor at the Anderson School of Management, University of California, and a visiting professor at France’s INSEAD. In this interview, he provided plenty of enlightenment for those who wonder what good strategy is and where it comes from.
Let’s pull apart the excerpt quoted here. First, note the emphasis on intangibles. Modern-day strategy does not emphasise things you can hold and touch, like plants and equipment and servers and vehicles: it focuses on the things that you can’t see. A company’s reputation or standing with the outside world; its emotional bond with its key customers; the way in which it motivates its people to do the extraordinary – those are the things that competitors can’t mimic or replicate.
Think about it: your IT system is, in itself, nothing. Or rather, nothing strategic. Sure, it helps you work better and manage yourself more efficiently (maybe); but nothing stops your competitors from buying that exact same system and configuring it in the exact same way you do. In fact there will be an army of vendors, trainers and consultants available to help them do exactly that.
But your IT system can be something else. It can be a cog in a bigger ‘machine’: a less visible machine that assembles data, enriches it through analysis, and passes it on to highly motivated people who use it to very good effect in making strategic decisions and serving customers better. It is in those intangible relationships that strategy lies: in why your people work better, and why your processes flow better, and why your customers love you.
A second insight: strategy is not developed in great cloudbursts of creative thought. Most of the time it is developed through the far more mundane process of trial and error. I hate to disappoint all of you creative geniuses out there; but in my experience, a great strategy just emerges, slowly and often painfully. People make a bet on something; they try to do it; they get it wrong; then they learn to do it better, and better, and better. Eventually, they become so good at it that the world stops to take notice (and people like me start writing about it!).
And finally, the killer punch: it doesn’t last! No matter how good your strategy, how painstakingly developed, how superior to all the pretenders out there – it evaporates one day. All that work will disappear into the ether someday. All that will remain is what you have learned, and what you can apply in starting all over again.
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{ 7 comments… read them below or add one }
Brilliant article, thought provoking
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Many biz leaders who think goals (KPIs) are strategy
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A good strategy evaporate! NEVER! A good strategy cannot be allowed to evaporate into outer space, it must be allowed to morph into the latest good stategy. Good strategy does not stop-pause-start, it evolves, it is about continous improvement, it is a product of effective knowledge management by the good stategist! What do you think?
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Jane:
Sure, strategies should evolve, morph, whatever, in order to stay relevant. But history tells us that inflection points do occur. Technological shifts, market upheavals can all lead to a situation where only a cataclysmic change in strategy will do.
Take for example Apple, on whose new product I am now typing this. In 25 years, that company has been undisputed market leader, then close to bankruptcy, and is now rising fast again. Its initial product-based strategy almost ruined it. It is only with the belated recognition that industry linkages and alliances are crucial did a renaissance happen.
Sometimes letting go of the succesful old ways is the only thing that will work. Many Kenyan companies are now facing that dilemma.
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Tea is a good example for Sunny last statement in his preceding comment.
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True, organisations sometimes lose track of developments external to a winning strategy but I lay blame on the strategist who don not recognise that strategy is not a marathon but is a relay, winning in one section does not mean the race is won! After winning in one section fatigue (burn out, boredom) requires that you hand over the baton to the next lot of strategists to take the organisation to the next level e.g Apple and the former CEO/now CEO during the ipod section of the race! The problem is how to tell the darlings of the board that they should now step back and allow some new talent to take us to the next level! Kenyan companies require shock therapy which will induce the necessary change in their defination/perception of who the cusomer really is! Two companies I know, by the way they keep adulterating/withdrawing successful beer/cigarette brands believe that the customer is there to serve them. Only a deep desire to develop (nurture) the customer while delighting him can help such Kenyan companies out of the rut.
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Interesting Sunny. Very deep thoughts here
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