Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities. They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success. Their growth emanates not from the core but from the acquisition of apparent “adjacencies” that are often anything but and the exploration of “blue oceans” that turn out to be unswimmable. Even in contraction mode, when companies hunker down and try to wring more out of execution, most strategies fail to pay sufficient attention to capabilities. […] We’re not suggesting that companies disregard market signals; all strategy is set within that vital context. We are suggesting, however, that companies start from the opposite direction, figuring out what they’re really good at and then developing those capabilities (three to six at most) until they’re best-in-class and interlocking. From there, strategy becomes a matter of aligning that distinctive capabilities system with the right marketplace opportunities—and the market rewards them with outsize returns. We call this the “coherence premium.”
Authors: Cesare R. Mainardi, Paul Leinwand
Source: strategy+business
Subjects: Management, Strategy
Click to Add the First »