Monday, June 12, 2017

Knowing When to Quit: The Importance of Strategy Coherence

Consistency is to key to any successful business. Whether it is with your messaging, finances, or cultural values, there is tremendous strength afforded to a company that aligns its operations with its core values and competencies. This is no more evident than in the chief strategist’s office, where strategy coherence is paramount. Some of the most successful companies are able to do this extremely well, as with Southwest Airlines, and design their strategy with their core values at its foundation. Other times, companies like GE recognize the need to strategically exit industries or shutter business units when the risk of undermining strategy consistency is made apparent. Knowing when to quit is, therefore, of vital importance in order to avoid the perils of diluting the company’s overall strategy with distracting business operations.
            As seen in the Business Insider article and Jeffrey Immelt case study, GE showed their strategic dominance in how they rightly recentralized their business units to focus on high-tech industrial innovation and reject those units that were not aligned with this core value, such as financial services. What the case and interview prove to be most interesting is just how difficult it can be to ignore lucrative segments of one’s business and convince investors that the move will return long-term growth and returns. When Immelt talks about how their locomotives are aligned with their operating system, he is accurately depicting the necessity that every corporate initiative or product reinforces the overarching essence for why the company and strategies exists. Doing so allows the company to be focused solely on those products or services that they are in the best position to deliver to the best of their ability and this, in turn, allows the company to evolve and transform in response to a constantly shifting market.

            In order to evolve naturally, companies need their leaders to have the foresight and the confidence to reject the notion that programs should be maintained in order to continue reaping short-term rewards and should, instead, work to ensure that employees and investors alike understand the core values well enough to recognize when a product or service stands in stark contrast. Doing so will allow for a graceful and relatively painless from outlier markets and reinforce the overall strategy and position within the company’s core market. The challenge for the strategist, therefore, is to constantly study the company’s offerings and its market to assess and reassess that every action has the effect of strengthening the institutional core values.

--Dave DeBor

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