In my last blog post, I noted the importance of strategic clarity, in terms of the ability of your company to articulate who you are selling to; what is the value proposition and how you can achieve competitive advantage in delivering designated products and services.
Easier said than done!
But let's stipulate that your company has crystallized its strategy in these terms. The next step is to ensure you can capture the inherent value in your strategy through strategic alignment.
Simply stated, strategic alignment is the development of a company's capabilities -- it's processes, operations, management systems and culture -- to uniquely support its strategy and desired value proposition.
Here are a couple examples to break through the jargon.
What do Southwest Airlines and BMW have in common? Very little actually, starting with distinctly different strategic priorities and value propositions. Southwest strives to deliver frequent, friendly reliable flights to price-sensitive leisure and business travelers at a cost others can't profitably match. BMW, on the other hand strives to deliver "ultimate driving machines" at a premium price that delivers value to a select segment of automotive enthusiasts.
Each of these value propositions can be highly successful, but only if these companies align their core competencies to consistently, efficiently and effectively execute their chosen strategy. In Southwest's case, this entails highly standardized and simplified flight operations (e.g. one plane type, one class of service, no meals), industry leading labor relations to foster a service-oriented culture and highly disciplined management to avoid over-extending route coverage in this highly cyclical industry. The net result has been decades of extraordinary shareholder value growth, with no morale-killing layoffs in an industry where most legacy airline competitors have been in and (sometimes) out of bankruptcy.
BMW on the other hand needs very different core competencies to support its distinctive strategic mission -- namely an organization that emphasizes R&D, state-of-the-art engineering and product development processes and a culture that encourages a commitment to best-in-class products. These are expensive capabilities to develop and maintain, but the company is explicitly investing to deliver value to a class of customer that is able and willing to pay a premium for consistently superior products.
Companies that succeed in creating a tight linkage between their strategic intent and aligned capabilities are very difficult for competitors to copy.
Sure, it’s easy for an airline competitor to temporarily slash fares to match Southwest, but unless they have the same underlying operational focus, organizational culture and management discipline, their cost structures will not allow a permanent low-fare position. Similarly, automotive competitors have run ads for years suggesting their products compare favorably with BMW (at a far lower price). But the marketplace has generally continued to recognize and reward BMW’s product excellence, despite its premium prices.
In sound bite terms, it seems so simple: clearly articulate your strategy (who/what/how) and align all your capabilities to support superior execution.
In my next post, I’ll opine on why so many companies struggle to meet these two strategic imperatives.
After 40 years in management consulting and venture capital, I joined the faculty of Columbia Business School, teaching courses in business strategy and corporate entrepreneurship
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