Wednesday, November 18, 2015

Why Core values are important for Strategy

The importance of core vision for a Company's growth is well established. But the role it plays in determining the companies Strategic decision should also be analyzed. The core vision gives the company the essential perseverance to carry on during its journey. As i went through the articles for this week, it came to my realization that core values play a vital part in the Strategic planning and the cases discussed in the articles more or less tend to prove it.

During the last financial crisis, it was discussed how GE had to abandon its financial arm GE capital and focus back on production sector. It was stated that the GE capital was formed to obtain gains in the financial markets. Even though , it was because of the financial crisis that GE capital was hit hard, it was the company decision to deviate from its core values and pursue financial gains, that might have led to that scenario. GE with its evolution of more than a century, could have avoided that crisis beforehand, had it stayed on course with its core values. But later it had to abandon that modified course and adhered to its old methodologies and altered its strategy accordingly. In this case GE's had to correct its strategy in tandem to its core values. A little aversion from such values costed GE both in reputation and finance.

In the article 'Seven Ways to Fail Big' , several cases were discussed how well established companies failed. In almost all cases, failure was a result of deviating from core values. The cases in which companies had to fail because of mergers, can be attributed to the company's decision to alter its course because of perceived gains. Such cases can be attributed to deviation from core values.

In the article 'The Coherence premium', Paul Leinwand stresses the importance of how coherence premium enables capability-driven strategy. Most of the capabilities to form such a coherence are synonymous with the core value. I would say that sticking to core values itself, brings about coherence. Thus core values not only acts as the fuel for perseverance, but also as milestones in determining the organization's journey.

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