Blog 2 : Coherence Premium: Growth Opportunities Where You Are

Before reading the Leinwand and Mainardi’s article, I’d never heard of the Coherence Premium. But as I began to understand the concepts, it felt familiar. Companies who do not prioritize coherence are similar to job seeking switching industry or function with no defined skills or applicable experience. Sure there are some “transferable” skills, but the new employee won't be able to sustain growth in areas where they have no expertise. Instead if they double down on what they know, they can earn more, get more opportunities and be positioned as an industry leader which all equals growth. 

The job-seeker analogy oversimplifies the concept, but ultimately the power of coherence comes from established capabilities, product & service fit, and a team that understands both. The article suggests that instead of falling for the allure of growth in the “new” there are growth opportunities within your own coherence. I liked the Walmart example and think I can extract another insight. Though they acquired digital first properties to accelerate their ecommerce efforts against Amazon, we are seeing they are still are more competitive against Amazon within their coherence through online grocery pickup. Both in-store and corporate teams know the play to win on convenience and low cost for customers, and are leveraging their capabilities in retail operations, logistics and data to excel pass Whole Foods efforts. Walmart’s acquisitions gave them the talent and tech to better deliver on their coherence.  

Not only are there opportunities for growth within a coherence premium, but companies are better positioned to defend against companies trying to transition into your company’s market share. I think about Frito Lay defending their spot in the industry against Anheuser Busch. They could only do that because they were focused and clear on their coherence.

I don’t think I have been senior enough in a company with the authority to create a strategy around coherence. However, this does give me language to communicate strategy that I have described in the past as “That acquisition doesn’t make sense” or “They just don’t know who they are. They are all over the place.” In the future this will be applicable as I become more senior in organizations. It will also be helpful for one of my goals: building a holding company. This article gives me a framework to identify strategy of top holding firms that I respect and then try to identify what I want the coherence to be across the businesses I own so that I have a strong holding company that is defensible in the market.