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Under the second option, the company would get closer to its customers, producing the food people ask for. The third option would involve transforming the dynamics of the relevant food sectors by competing more aggressively.
A right to win is the ability to engage in any competitive market with a better-than-even chance of success — not just in the short term, but consistently. One might assume that the answer is to become completely resilient, morphing to match the changing demands of the market. According to Walter Kiechel, strategy became relatively formal in the 1960s for two reasons. These early efforts by the position (or positioning) school assumed that the right to win would be held by companies that comprehensively analyzed all critical factors: external markets, internal capabilities, and the needs of society. To Henderson, the right to win went to companies that made the best use of the experience curve by holding the leading position in market share for their sectors. The experience curve and growth-share matrix rapidly became popular because they worked powerfully well — at first. More generally, many business leaders became disenchanted with the idea of formal strategic planning.
At a seminar that summer, a European businessman asked Hayes why American productivity had declined so much during the past 10 years. Confused and shaken, Hayes began taking regular hikes and having long conversations with Abernathy, who had just arrived in Vevey and saw similar stagnation in the U.S. The execution message was bolstered by companies such as General Electric and Motorola, which provided influential examples of operations-oriented strategies with their reliance on executive training and such practices as Six Sigma. The idea of building value through managerial methods returned to strategic relevance after the dot-com bubble burst.
To Porter, execution-oriented ideas like reengineering, benchmarking, outsourcing, and change management all had the same strategic limit. The position school became a major driver of the resurgence of corporate competitiveness in the West during the 1980s and ’90s. Starting in the 1990s, another group of strategy thinkers provided an alternative to the position and execution schools. Thus, instead of analysis and planning, executives in the adaptation school (or, as Mintzberg called it, the learning school) sought to gain the right to win by experimenting with new directions. But the adaptation school is also seriously limited, because its freewheeling nature tends to lead to incoherence.
Hence the appeal of the fourth group of strategy thinkers — the concentration school.
However, in practice, the concentration strategy often becomes a way of holding on to old approaches, even when they become outdated. It’s important to note that most of the thinkers who introduced these strategies to business leaders saw the challenges and limits of their approaches, and even warned against misapplying them. How can your company gain the most from considering all these theories of the right to win? For example, the head of operations explains that the three strategies would require completely different investments.
It’s taken 50 years for the field of business strategy to reach the point at which many companies can conduct this kind of conversation effectively.
Recent studies conducted by Booz & Company of total shareholder return among CPG companies show that both of these ideas are, at best, incomplete. Paul Leinwand and Cesare Mainardi, The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Press, 2010).
Walter Kiechel, The Lords of Strategy: The Secret Intellectual History of the New Corporate World (Harvard Business Press, 2010). Donald Sull, The Upside of Turbulence: Seizing Opportunity in an Uncertain World (HarperCollins, 2009). Jim Collins, How the Mighty Fall: And Why Some Companies Never Give In (HarperCollins, 2009). Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (HarperBusiness, 2003). Henry Mintzberg, The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning, Plans, Planners (Free Press, 1994). Articles published in strategy+business do not necessarily represent the views of the member firms of the PwC network. Almost all retailers’ e-commerce businesses are experiencing consistent and significant, often double-digit, sales growth and, in many cases, online sales, while starting from a much smaller base, are still growing faster than any other channel.
This growth, combined with changing consumer shopping habits and technological developments such as mobile shopping and social media, heightens the importance of a successful multichannel strategy. As always, a business strategy defines the company’s strategic and financial goals, though these goals now reflect a changing channel mix. Leading retailers’ target customers, value propositions and customer experience strategies also reflect an evolving channel mix. Business strategy sets the direction for the concrete business decisions that form a retailer’s foundation. Determining the level of channel integration, or similarity of the product offering and customer experience across channels, best suited to shape a successful multichannel strategy is a key component of a retailer’s operating strategy.
Most retailers are maintaining a predominant core and increasing assortments online to drive incremental value. Successful merchandising decisions are supported by thoughtful pricing strategies across channels. Determining the level of customer service in each channel and category is another key operational decision. Finally, multiple channels provide a unique opportunity for two-way communication with customers. Finally, once the operating strategy is defined, the operating model may need adjustments to ensure it supports these new business goals.
For example, merchandise processes may vary across channels, and a decision around the optimal level of integration, timing and sequence of key activities and cross-channel linkages is integral to solidifying the operating model. Finally, supply chain and store infrastructure may require changes to accommodate multichannel operations. Because of these wide-ranging effects, successful multichannel strategies will be challenging to design and implement. The company would rapidly develop and launch many new types of snacks and foods, packaged in new and interesting ways, offering leading-edge nutrition and convenience. It could incorporate ideas gathered online into its offerings and provide busy working families with customizable, convenient, and well-balanced meals. The company would become a category leader by investing in new process technology, rightsizing operations to push costs down, and completing key acquisitions.
And they probably should, for this is the core question underlying every business strategy, although it isn’t always phrased that way. That is why, for those trying to understand the nature of business success, the history of strategy is both helpful and fascinating.
Even the most formidable market position can be vulnerable to technological disruptions, upstart competition, shifting capital flows, new regulatory regimes, political changes, and other facets of a chaotic and unpredictable business environment. No company can survive long, let alone distinguish itself, without a rich body of capabilities and a resonant corporate culture.


The answer is not to keep adopting new theories in hopes of finding the right answer, but to develop your own capabilities-driven strategy: your own theory of coherence for your business. The first was an increasing amount of available data on business costs, prices, and operational performance. Thus, starting in the mid-1960s, the idea of strategic planning, with echoes of Napoleon, Carl von Clausewitz, and Sun Tzu, evolved into an irresistible business management fashion. The phenomenon was hardly noticeable month by month, but every few years, capacity doubled and costs dropped 10 to 30 percent, so reliably that many companies could plan their investment cycles and competitive marketing accordingly.
This meant emphasizing the value of some divisions over others, basing those judgments on the dynamics of each business’s customer base (Henderson was an early proponent of market segmentation) and on its competitive position. Hayes hauled out the standard answers: organized labor, government regulations, the oil crisis, and the attitudes of the younger generation (which, at the time, meant the baby boomers). It is still one of the magazine’s most requested reprints, and one of the most controversial articles in its history.
Of the many people associated with the quality movement, including Toyota’s influential chief scientist Taiichi Ohno, the most significant for corporate strategy was W.
Unfortunately, many companies used reengineering as a launching pad for across-the-board layoffs that left them weaker, and operational excellence couldn’t compete with the exuberance of the high-tech bubble. In his early publications, from the late 1970s to the early 1990s, Porter brought positioning to a level of unprecedented sophistication.
They all led to better operations, but ignored the question of which businesses to operate in the first place. Although Michael Porter took pains to explain that industry structures can change and can be shaped by the actions of leading companies, he was interpreted as saying that some industries are innately good and others are irredeemably bad.
This was the idea of strategy as perpetual adaptation, best represented by Henry Mintzberg, professor of management studies at McGill University. A multitude of products and services that all have different capability needs and different market positions cannot possibly be brought into sync. Many companies (and private equity firms) translate this strategy into slash-and-burn retrenchment. Only by stepping back, away from any particular answer, to look at your company’s identity as a whole, encompassing the way you expect to compete, the capabilities with which you will compete, and the portfolio decisions that fit. For several more days, spread over a few weeks, the executive team talks through its three proposed strategies in detail: the estimated market value of each, the risks involved, and the capabilities required.
Becoming an innovator would mean configuring a flexible value chain to launch new products rapidly and economically. As an innovator, the company would focus advertising and promotion on new products, while ensuring rapid, widespread retail distribution. In the course of discussion, ideas from all four schools of thought come forward: ideas about holding an unassailable position, executing with new capabilities, adapting rapidly to competitive pressures, and focusing on the core business as a platform for growth.
Something of that sort has happened during the past two decades in the consumer packaged goods (CPG) industry. The conventional wisdom said that the best shareholder returns would accrue to companies with huge brands and the scale to compete in developing markets.
He is coauthor, with Paul Leinwand, of The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Press, 2010). Barnett, The Red Queen among Organizations: How Competitiveness Evolves (Princeton University Press, 2008).
Reviews and mentions of publications, products, or services do not constitute endorsement or recommendation for purchase. But many retailers have not yet integrated their channels, which is necessary to build a seamless experience, realize operational synergies and drive growth across all channels. The target customer may not change across channels, but her shopping behaviors and preferences for each channel likely differ, and understanding these differences is essential to providing a compelling product offering.
How these core components translate across channels is fundamental to how the business evolves.
How the assortment is managed across channels will not only impact customer relationships, but sales, margin and inventory performance as well.
Increasing the breadth of available sizes and colors is thought of as an easy win, but determining how that can be leveraged to drive increased productivity in-store remains a significant challenge and real opportunity. The option to differentiate pricing at each point in the product lifecycle (full price, markdown, clearance, promotional) creates complexity and will have concrete impacts on traffic, sales and margins.
It is shaped by the importance of customer service to a retailer’s business strategy.
The ability to gather more information than previously available helps retailers build a deeper understanding of their core customers, which can in turn be leveraged to develop more effective marketing in the future. Assessing processes, organization, tools and infrastructure within each functional area and across the company will help ensure the development of a comprehensive model that supports the overall strategy, as illustrated by Exhibit 2. Additional considerations, such as channel allocation and in-season inventory management, are also critical to bringing the strategy to life. Some areas of the business may need to be integrated, while others should remain channel-specific. In speaking with retailers about their multichannel strategies over the last several months, Kurt Salmon has found that only a select few retailers have fully examined the three core aspects of their business model, but this comprehensive approach is essential for success. For the past two months, a team made up of 15 senior people has been exploring options for growth, winnowing them down to three basic strategies. This essential advantage is particularly rare in business — a more free-form and unpredictable game than sports or academia. One valuable recent source is The Lords of Strategy: The Secret Intellectual History of the New Corporate World (Harvard Business Press, 2010), in which former Fortune managing editor Walter Kiechel recounts the prevailing theories of business strategy over the past 50 years, and the stories of the people who developed them. Since then, at least a dozen major trends and ideas have appeared under the rubric of business strategy, often in great conflict with one another, often drawing companies in very different directions. This was long before the invention of the spreadsheet program, so big companies hired armies of planning staffers to compile all this data into elaborate documents, which were debated in annual strategy sessions that became exercises in bureaucratic complexity. For example, Ford and General Motors experienced losses of more than US$500 million in 1979 and 1980 — their first such losses in decades. Two members of the faculty found themselves in Vevey, Switzerland, during the summer of 1979: William Abernathy, the HBS expert on auto manufacturing, and Robert Hayes, known for his studies of assembly lines.
They had introduced another school of strategic thought, based on the idea that the right to win came from execution and operational excellence: the development and deployment of better practices, processes, technologies, and products. By the end of the 1990s, execution-based strategy had been largely relegated to the production side of the business. Many leaders now understood, through experience, both the value of improving execution and its challenges.
To many corporate leaders in tough businesses, or in highly regulated industries like electric power generation, there was no real advantage to developing distinctive capabilities or facility with execution. In his history The Rise and Fall of Strategic Planning: Reconceiving Roles for Planning, Plans, Planners (Free Press, 1994), Mintzberg dismissed the position school (which he called the design school) as formulaic. The more diverse a company’s efforts become, the more it costs to develop and apply the advantaged capabilities they need. In fact, that’s exactly what happens with the packaged-foods company described at the beginning of this article. All three strategies have roughly the same potential for increasing enterprise value, but the differences among them become clear when the functional leaders speak. The closer-to-customers option would mean selling more food at different temperatures: some frozen, some fresh.


Being a solutions provider would move the company directly into engagement with consumers, through websites, social media, and better in-store displays.
Another company, even with the same market dynamics, might choose differently — appropriately so, because of very different capabilities and customs.
It takes time to complete this process, and it is very difficult and stressful at times, but the company gains, in the end, from a far higher level of coherence. Two of the most influential strategy ideas are so widely held, so intuitively appealing, and so apparently true in practice that they are very hard to give up. They invest their capital and attention in just three to six differentiated capabilities, supporting all the products they offer. Others named in the article have had associations with s+b staff members, with Booz & Company, or with its competitors.
Kaplan, Relevance Lost: The Rise and Fall of Management Accounting (Harvard Business School Press, 1987).
Business strategy and operating strategy intersect as retailers decide how each of these aspects is leveraged to develop a profitable multichannel strategy.
Three key questions can help a retailer flesh out a successful multichannel assortment strategy.
The online channel is unique, with heightened competitive activity and new technologies that provide real-time capabilities for the consumer and retailer, technologies that also impact the bricks-and-mortar space. In addition, most are discussing or already implementing distributed order management (DOM) systems to manage cross-channel inventory complexity. Retailers who ensure these core aspects reflect and are aligned to meet multichannel needs are better positioned for sustained growth and a competitive advantage in the future. Despite their differences, all four schools of strategy represent attempts to resolve the same basic underlying problem: the tension between two conflicting business realities. Very few companies have thoroughly reinvented themselves, and those that have managed it have typically had to force many people out, including top executives, and to replace them with new recruits chosen for a different set of attitudes and skills.
The economic stability of the early 1960s dissolved into the turbulence of the 1970s and ’80s, striking different components of society with different degrees of prosperity and calamity. Only gradually did it become clear that the plans did not correlate with real-world performance or issues. For instance, it was worth borrowing money to keep a star shining, because a star might end up dominating its market niche. Some, including Texas Instruments, got caught up in ruthless price wars that contributed to the commoditization of their own products. In the aftermath of these and other sharp reversals, mainstream business leaders began to question the wisdom of the position school, and its claim on the right to win. Big companies, they advised, should look for new upstart positions themselves, in places where there were no competitors already, breaking out of conventional ways of looking at their industry.
He acknowledged that execution was important, and much of his work was dedicated to analyzing what managers did in practice, but, like Porter, he felt execution was insufficient for success. It would also mean building a more direct, collaborative relationship between operations and R&D. But many food and consumer products sectors are fragmenting instead, with room for many profitable entrants.
This gives them a level of efficiency and effectiveness that most of their competitors can’t match.
Where we assess individuals’ contributions and impact, we have tried to do so independent of any such associations. Finally, the desired customer experience in each channel must be determined—how the brand is presented and how interactive and integrated the experience is across channels. Managing pricing effectively can provide value for the customer and produce top- and bottom-line results for the retailer. Perhaps online, customers shop primarily for basics and need less education from associates than the same customers need in-store.
Rapid economic growth in emerging markets has made advantage even more transient, bringing billions of people into the global economy, along with hundreds of energetic new business competitors. It is grounded in internal capabilities (that is, the things your company can do with distinction) and in market realities (that is, the games in which your company chooses to play).
No company could ever be sure it would remain on top (even in established industries such as steel and automobiles), global economies were highly interconnected (although it wasn’t always quite clear how they might interact), and corporate decision making was increasingly constrained by fiercer capital markets and upstart technologies. Sales rose as customers switched to TI from competitors, and production costs then fell further, which allowed TI to drop prices even more.
He began consulting regularly in Japan just after World War II, helping Japanese companies develop their production systems. The popularity of that approach demonstrated the pressure that business leaders felt to break free of established practices and find a niche that they could dominate with first-mover advantage. His strategic approach centered on finding a more creative, experimental approach to executive decision making. And the category transformation strategy would require new process technologies, economies of scale, and deftly managed acquisitions. New technologies, including in-store kiosks and other interactive features, provide innovative ways to support this decision and should be considered in light of customer preferences and return on investment. You earn it by making a series of pragmatic choices that align your most distinctive and important capabilities with the way you approach your chosen customers, and with the discipline to offer only the products and services that fit. As writers such as Jim Collins, Clayton Christensen, and Donald Sull have noted, it’s all too easy for established companies to fall prey to complacency and hubris (Collins), entrenched customer relationships and disruptive technologies (Christensen), or inertia (Sull). The more clearly and strongly you make these choices, the better your chances of creating a corporate identity that gives you the right to win in the long run. Even the billing procedures and advertising budgets became more efficient as those departments managed greater volumes. Sophisticated Americans barely understood computer-aided manufacturing software, but this firm of 40 people was using it on a daily basis, and producing custom-made tools.
Ignored in the West at first, he became prominent in the United States after 1980, and actively taught and consulted with many of the world’s leading companies until his death in 1993.
These and other strategic choices allowed the airline to operate a different type of flying business, one that could offer attractive prices and convenience even when compared with travel by bus, train, or car. And as the 2000s unfolded, companies with enviable market positions, such as Microsoft, also saw their advantage fade when new competitors, such as Google, emerged. Is certain merchandise more appropriate for specific targets, for example, unique customers or regions?
Not surprisingly, each of the four basic schools of thought in Exhibit 1 (position, execution, adaptation, and concentration) has something significant to offer business strategists, so long as they are adopted in an appropriately balanced way. Other plants in Germany, Switzerland, France, and even eastern Europe were using machine tools in ways that the Americans couldn’t match. Deming saw his methods as critical for escaping economic malaise (his most prominent book was titled Out of the Crisis [MIT Press, 1986]).
Sure, operational excellence was involved: Southwest had perfected fast turnarounds and friendly customer service.
But the core strategic decision was the pursuit of simplicity through a clear market strategy.



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