Sunday, April 17, 2011

A Critique to "Stress-Test Your Strategy"

In his article "Stress-Test Your Strategy", Robert Simons listed 7 questions that managers should ask about their businesses in order to determine the weak spots of their strategy. While I think that these questions are insightful, I would like to disagree on the following points:

1. "We have multiple customers." This is a sure recipe for underperformance.

In his first question, "Who is your primary customer?", Simons argued that if the company fails to identify a single primary customer, underperformance is inevitable. I disagree with this. The number and size of customer segments for each company will be different depending on 1) the kind of strategy they pursue, 2) the kind of industry it is in. For example, most commercial banks have segmented their customers in a way to promote different products. PC manufacturers such as Dell provide retail services to both individual customers and corporate clients. Are they underperforming? If so, who exactly are we comparing them with? On the other hand, companies that have defined strategies to target their services to a niche market will have a bigger chance to underperform if they try to accommodate multiple customers. For instance, airlines make sure that they put business flyers as their priority. Organic grocery stores such as Whole Foods and Trader Joe sell organic food to cater to health-conscious customers, and seldom will you find non-organic food in these stores. My major disagreement here is that having multiple customers will not lead to underperformance for certainty because it depends on the company's industry and whether it provides differentiated services to segment its customers.

2. Another way of forcing employees to think outside the box is to assign them to a second box.

Simons identified this as a way to generate creative tension. While this sounds reasonable, my experience in student organizations told me that this may not work out the way managers want. Individuals, when assigned to two teams, have a natural tendency to work harder in the team that they like more, but may slack off in the other team, especially when it is not a voluntary assignment. It is true that new perspectives emerge when people are forced out of their routines, such as when they attend cross-unit team meetings. But what will motivate them to attend cross-unit team meetings in the first place? Unless managers have a magical mechanism (i.e. incentives) in place that ensures individuals to be equally involved in both teams, I have doubts whether this tactic will effectively generate creative tension.

My questions for the class are:
  • Should companies always try to define "primary customer"?
  • How do companies ensure the effectiveness of cross-unit teams?

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