By: Prateek Jain, PGDM 2014-16
Strategy as Stretch
Strategy must be built upon where the firm is and where it wants to be in future.
It is not the cash that fuels the journey to the future, but the emotional & intellectual energy of every employee.
Imagine that if you were an investor who, a decade or two ago, was asked to choose between the following pairs of firms as long-term investment opportunities then, where would you have put your money?
Most of the investors would probably have been tempted to invest in the firms in the left column. Why?
Because, these firms had strong reputations, technological richness & deeper pockets. They could hire the most talented people in their industry, had sizable market shares and in most cases, had a worldwide distribution presence. In short, they have lot of resources. Yet, they lost much of their leadership to firms with far fewer visible resources.
Why Companies Fail
When a company loses its competitive advantage, its profitability falls. The company does not necessarily fail; it may just have average or below average profitability. It can remain in this mode for a considerable time, although its resource and capital base is shrinking. Failure implies something more drastic. A failing company is one whose profitability is now substantially lower than the average profitability of its competitors; it has lost the ability to attract and generate resources, so its profit margins and invested capital are shrinking rapidly.
Let us take the example of RCA & SONY?
RCA (products of one of the world’s outstanding research laboratories) had almost single-handedly created color television industry in U.S., and every competitor relied on RCA patents. Now, how could Sony out-in...
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• Learning – Fully using the brain of every employee.
• Borrowing – Accessing resources of partners.
• Blending – Combining skills in new ways.
• Balancing – Securing critical complementary assets.
• Recycling – Reusing skills & resources.
• Co-opting – Finding common cause with others.
• Protecting – Shielding resources from competitors.
• Expediting – Minimizing time to payback.
The real issue for many struggling managers is not a lack of resources, but too many priorities, too little stretch, and too little creative thinking about how to leverage resources. (Lack of resources is not the problem but how to use the available resources in effective & efficient way is the main area of concentration).
Charles W.L. Hill and Gareth R. Jones. (2014). Strategic Management.
Gary Hamel and C.K. Prahalad. (1996). Competing for the Future.
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