Learn from Felix Oberholzer-Gee about how to deploy simple tools to help you streamline your business initiatives, make strategies easier to execute, and allow yourself to focus your attention where it matters most.
What makes the world’s most powerful companies so successful? How do they outperform their rivals, and keep up with the rapid technological changes of today? The key is a simplified yet comprehensive strategy, says renowned Harvard Business School Professor and competitive strategy expert Felix Oberholzer-Gee.
Citi Latitude invites you to explore, learn and deploy the simple tools for a streamlined strategy in this engaging session with Felix and observe its five key actionable takeaways.
A business strategy aimed at improving the financial performance of a company needs to be clear, uncomplicated and well-articulated. However, I often find that it is very hard for people to articulate, grasp and work towards a unified business strategy. Consequently, the approach they end up taking is very bureaucratic and somehow related to or merely revolves around budgeting.
You simply need to broaden your business horizons. Having started my professional journey as an investment banker, followed by over 20 years in academia, my research and teachings attempt to tackle this very hurdle in the hope of making strategy accessible. It should not be merely about budgets; it should be all about honing in on a successful strategy and finding financial success that exceeds what people view as typical in their respective industries.
A sound business successful strategy really boils down to two moves – what is it that you do in terms of value creation for your customers, and what is it that you do in terms of value creation for the employees in your organization.
When I first started out by looking at the most successful companies, my expectation was that I would see something very complicated that only a few resourceful companies with really exceptional talent and finances could pull off. But what really surprised me is that I found strategies deployed by successful leaders and companies in the end came down to these two moves.
Ultimately, the way you create value for the employees in your organization also turns out to be the way to create value for the customers of your business. This combination is extraordinarily powerful and really hard to match by your competitors if you get the balance right.
Your approach to strategizing must be predicated on value creation. That may sound like something that we've been saying forever. But what's important about such an approach these days is that everything is data-driven including value creation strategies.
Clear numbers matter. For me, value creation for customers is the difference between willingness to pay and price. That is, willingness to pay is the maximum that I would ever pay for a product or a service, and the price is what I actually charge.
It's really important as a differentiator because it's not the company with the best quality that wins, it's not the company that has the most innovative product that wins – what matters is this difference between willingness to pay. So, when strategizing, always think about such differences. We also have this exact same notion on the employee side as well. Willingness to sell for an employee is the lowest compensation that the person would accept, and still join the company, or still stay with the firm.
Of course, managing the “willingness to pay” equation is only one facet of a successful approach as customer/price centricity has been with us as an idea for a long time. What should also follow is an understanding of your supplier's cost structure. If you lower your supplier's cost, you have more room to bargain.
Of course, it's easy to routinely pick the cheapest one if every supplier offers the same. If you force every supplier to offer the same, you forgo opportunities for them to be really creative in how they bring down costs, and as a result, how they free up more margin that you can then bargain over. Instead, you can bargain with your suppliers in a way that keeps the margins of the supplier intact, and yet, you will get products at lower prices. This is done by determining the specifications of exactly what you want, and then go to suppliers with a specific price point. The results would surprise you. Among the companies that have really favorable cost positions, around three-quarters also have really active forms of collaboration with their suppliers. If you lower the cost of your supplier in a meaningful way, that's bargaining room for your own business.
Finally, to be successful, your business does not need to do a thousand things and try multiple avenues. Simply have a few ideas and execute them well with a clear vision deploying a strategy / value map for success.
Everybody can be a strategic thinker if they put their minds to it and learn to manage complexity. In reaching that alamo, draw up a strategy or value map. Determine the value drivers your business is competing on, translate value drivers into your own and your team’s key performance metrics, into individual and collective responsibilities, and the company’s headline objectives. This will help you get a beautiful, and ultimately successful, alignment across your business.