Stretch , Fit and Leverage – Strategic Intent
Global
competition is not just product versus product or company versus company. It is
mind-set versus mind-set. Driven to understand the dynamics of competition, we
have learned a lot about what makes one company more successful than another.
But to find the root of competitiveness--to understand why some companies
create new forms of competitive advantage while others watch and follow--we
must look at strategic mind-sets. For many managers, "being
strategic" means pursuing opportunities that fit the company's resources.
This approach is not wrong, Gary Hamel and C.K. Prahalad contend, but it
obscures an approach in which "stretch" supplements fit and being
strategic means creating a chasm between ambition and resources. Toyota, CNN,
British Airways, Sony, and others all displaced competitors with stronger
reputations and deeper pockets. Their secret? In each case, the winner had
greater ambition than its well-endowed rivals. Winners also find less
resource-intensive ways of achieving their ambitious goals. This is where
leverage complements the strategic allocation of resources. Managers at
competitive companies can get a bigger bang for their buck in five basic ways:
by concentrating resources around strategic goals; by accumulating resources
more efficiently; by complementing one kind of resource with another; by
conserving resources whenever they can; and by recovering resources from the
market-place as quickly as possible. As recent competitive battles have
demonstrated, abundant resources can't guarantee continued industry leadership.
Strategic Intent is seen as
going beyond Business as Usual Seen as Core
Competency in Practice Apple and Honda's strategic intent was global dominance. Compare
with Strategic Fit which doesn't
have a long term component. Basically they used their core competences to
achieve Strategic Intent. The difference between Intent and Resources is
call Strategic Stretch.
Examples:
§ Apple beat Microsoft
in mobile apps market
§ Google beat Microsoft
is search and categorization of networked information
§ CNN beat CBS is news
and current affairs presentation
Firms first need to understand the
competitive environment - e.g. those companies winning and losing market share.
The next step is to diagnose the competitive environment. e.g. Its market
segments, potential for profitability and growth.
Managers require their frame of
reference from the culture of the company, business school education, peers,
consultants and their own experience. They therefore frame their competitive
stratagems from these managerial frames.
From Fit to Stretch
A good place to start to break these
managerial frames is to ask the question What is strategy? The
answers normally center around;
§ The concept of fit or
the reparations between the company and its competitive environment.
§ The allocation of
resources among competing investment opportunities
§ A long-term
perspective towards building a company.
This perspective is not wrong just
imbalanced. It has obscured the merits of alternative frames in which the
concept of scratch supplements the idea of fit; leveraging resources is
as important as allocating them. Take two companies. Company A is big,
dominant on the market and can outspend its competition on R&D, marketing
and other resources. Company B is an upstart, with fewer resources, employees
and financing etc. Strategically, Co A can preempt Beta by building new plant,
increasing production and introducing new products at a lower cost. But B can
retaliate by adopting guerrilla tactics, searching for undefended niches, etc.
What distinguishes Co B from Co A is not B's limited resources but the greater
gap between its current resources and its aspiration or stretch Alpha's
problem is insufficient stretch. The products of stretch i.e.
Encirclement not confrontation, accelerated product development, focus on a few
core competences, strategic alliances.
From Allocation to Leverage
Perhaps GM was too strategic. It had
the resources to employ new technology but the employees were unable or
unwilling to adopt new practices and absorb new technologies. At one time Canon
had 10% of the market share that Xerox had but eventually displaced Xerox.
Upstart CNN became the first place to go for breaking news instead of tuning in
to CBS, ABC or NBC. There are two approaches to increasing productivity. One is
by downsizing and maintaining the same output with fewer resources. Or, take
the Ikea approach, can do more with the existing resources and stretch the
organization.
The Arenas of Resource Leverage
Management can leverage its resources,
both financial and non-financial in five basic ways. By
§ Concentrating them
strategically
§ Accumulating them
efficiently
§ Complementing one
resource with another
§ Conserving them
§ Recovering them from
the market place in the shortest possible time
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