Blog # 3: Why you can be the winner in the market Champion?

Takeaways:

1.    Corporations are facing the strongest competitors all over the world to win or survive in a global market. The way to win is to build up a unique strategic position in the market.

2.    Build up the strategic position need coherence inside the company. The company can create consistency in three steps: First, know the way to play. Second, build up a capability system for the company. Third, generate product & service fit.

3.    The value proposition should fit the trend of customers; otherwise, coherence may block the company's reform.

                     

When we come to an interview, many interviewers will ask a common question, "why you"? It is a theoretically tough question since we need to differentiate ourselves from all the other competitors. Similarly, corporations are asked these questions again and again by each customer. Previously, they can find reasons in geography. But in a globalization era, multinational corporations have to face robust competitors worldwide, so it is significant for the company to build up a unique strategic position in the market. And “The Coherence Premium”[1] can give us inspiration about how to do this.

 

The Coherence Premium tells us how to form a whole in strategy and ability. First, know the way to play. All levels in the company should know what kind of value they will create for customers. Second, build up a capability system for the company. To deliver the value proposition, the company needs to have three to six core capabilities. Third, create a product & service fit. Products and services can leverage the core capability system. However, there is a risk that should avoid this mechanism. Once the order has been built, it will be hard to reform. So the value proposition to customers must fulfill the change of the market; otherwise, if the need for customers changes, companies with a pre-industrial coherence will be damaged by industry revolution.

 

Southwest Airlines is an example of coherence’s power. In the first place, they decided to provide cheap and quick transportation for ordinary people, which was the trend with new customers. Then, they built six core capacities in the picture below (dark grey circles). And finally, they aligned their products and services with the six core capacities. Therefore, they win customers and hardly lose in their 30-year history.

 

 

Porter, “What is strategy”[2]

 

Nevertheless, someone may argue the meaning of coherence. To form a differentiated positioning with competitors, the company must maximize its areas of expertise and make it impossible for competitors to replicate. According to Michael Porter's theory, there are two ways to improve the company's efficiency: one is strategic, and the other is operational. With the spread of company management best practices, there is always the possibility of learning by others. Therefore, it is necessary for the company to form a whole in strategy and ability, and to achieve a specific positioning in the minds of consumers, to prevent it from being surpassed by opponents.

 

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[1] Leinwand, Paul & Cesare Mainardi. The Coherence Premium. Harvard Business Review, June 2010.

[2] Porter, Michael. What is Strategy? Originally published in November 1996.