Saturday, April 4, 2015

Specializing to Achieve Coherence

This week we read an article about how companies are able to achieve a coherent strategy. My main takeaway from the article was that successful companies specialize in a few aspects that they do well in rather than trying to rise to the top of the market.

It is better for a company to focus on its core and internal strengths first rather than focus on external market pressures. The article provided a few examples of companies that do a good job of specializing in a few things they are best at, and companies that have tried to do too much. These companies end up losing at being the best and are not market front runners.

The article also discussed the "Coherence Test” which forces companies to examine if they say and live by ideas that will lead to coherence. The test ask companies if their strategy focuses on unique capabilities and if their actions work towards expanding on these capabilities. Though it may seem like common sense to specialize in a few capabilities or sectors, I think it is difficult for companies to focus because they often get immersed in heavy competition.

It is easy to apply these concepts to companies we interact with in every day life. Car companies often try too hard to be competitive and become market frontrunners that they lose focus on customer needs, like the article mentioned. They try to create so many models or include too many different features that they are not able to capture the market. A few car companies focus only on what they do best and have captured a segment of the market. I think BMW and Mercedes do this well because they have few models and focus on fulfilling the needs of those looking for a luxury car. They have established a few unique capabilities that specialize in only luxury cars. When they do create new models, they are careful and thoughtful about how they are developed. This strategy creates coherence because it focuses on strengthening its internal core which leads to a market advantage. 

An example of a company that fails in its coherent strategy is Comcast. These last few weeks  I have struggled with my internet service. I have called Comcast at least 10 or 15 times in the last week because my internet continues to drop in and out. The customer service representatives are very polite which indicates they have invested in customer service training. Online it states their their company offers many different features including phone, internet, television and other features. I believe Comcast has cast too wide a net. If it cannot provide proper internet service, as a customer I do not care how polite the customer service is on the phone. I care that the basic functions of the company are served. Rather than trying to expand its product offerings and investing in customer service trainings, Comcast should focus on a few capabilities, as the article mentioned.

When companies identify their strengths and invest in them, market competitiveness will follow. Companies too often try to make themselves larger in hopes of becoming competitive. This approach often backfires and these companies are not able to form a coherent strategy.  

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