Coherence Premium is the key to competitive advantage in market

The article on “Coherence Premium” by Leinwand and Mainardi from the Harvard Business Review addresses the core notion that successful organizations are always aware of their capabilities and the growth of their business is largely underpinned by the strategies that attempt to leverage these values. In this era of cut-throat competition, it is important for any organization to intensely focus on “what they are best at” and cannot rely solely on “expanding the portfolio of products or services” or “acquiring or divesting” as part of their strategic purpose. The authors call the companies that effectively blend these characteristics while devising their strategies as “coherent”. The idea of Coherence Premium is the realization and aggregation of these best attributes and it allows the organizations to hold a competitive advantage in a market.

My appreciation of this idea of coherence premium and why it is a key to the performance of a company comes from my past experience of working in the foods and beverages industry. Cadbury, a leading chocolate brand in India and now owned by Mondelez International, faces competition in the market from various small and big players that include global leaders such as Nestle, Ferrero, and local players such as Amul. Being in the chocolate industry, it is imperative for any manufacturer to have a business strategy that spans across multiple dimensions such as the product should be in sight of consumers at all times, it needs to be planned in a manner such that it does not remain on shelves for long, and this has to be coupled with effective marketing and sales strategy.

Cadbury understands these core principles, knows its strengths and have incessantly focused on building their brand by targeting consumer categories across all price segments, maximizing store presence, and even providing retailers with coolers under conditions that these always remain in the line of sight of the consumers. The company has innovated with new products but has maintained a strong focus on its most promising products as well. Further, their marketing strategy is particularly appreciable because they understand that Indian culture has numerous festivities which are celebrated by exchanging sweets and they connect with people’s emotions through compelling stories conveyed by artists and celebrities that the population admires. There is no surprise that Cadbury understands this idea of coherence premium as best as any other player in the Indian chocolate industry and continues to maintain a competitive advantage along with strong bottom line and value creation for its shareholders.

As rightly put by the authors Leinwand and Mainardi, “coherent companies build deep, scalable expertise in just a few areas and align their strategy and day-to-day decision making to take advantage of them”, and Cadbury is certainly one example that fits this statement. Cadbury, now owned by Mondelez International, offers a wide variety of food products and confectionaries in the global market, and it will be interesting to see whether the company will make any attempts to diversify its portfolio in Indian market or continue to keep its strong personal connection with the customers through a mix of innovation in chocolates (its most promising product) and their pricing and branding aspects.