Here is an excerpt from an article written by Cesare Mainardi with Art Kleiner for strategy+business magazine (published November 23, 2010/ Winter 2010 / Issue 61), published by Booz & Company. To read the complete article and check out other resources, you must first register (at no cost) by clicking here.
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Business strategy is at an evolutionary crossroads. It’s time to resolve the long-standing tension between the inherent identity of your organization and the fleeting nature of your competitive advantage.
It’s 8 a.m. in the executive conference room of a large global packaged-foods manufacturer (a real company, its name withheld to preserve confidentiality). For the past two months, a team made up of 15 senior people has been exploring options for growth, winnowing them down to three basic strategies. Each is now summed up in a crisp 20-minute presentation.
The first option focuses on innovation. The company would rapidly develop and launch many new types of snacks and foods, packaged in new and interesting ways, offering leading-edge nutrition and convenience.
Under the second option, the company would get closer to its customers, producing the food people ask for. It could incorporate ideas gathered online into its offerings and provide busy working families with customizable, convenient, and well-balanced meals.
The third option would involve transforming the dynamics of the relevant food sectors by competing more aggressively. The company would become a category leader by investing in new process technology, rightsizing operations to push costs down, and completing key acquisitions.
After the screen goes blank, the CEO leans forward and asks a simple question: “Which strategy would give us the greatest right to win?” His tone, calm and direct, makes everyone sit up a little straighter. And they probably should, for this is the core question underlying every business strategy, although it isn’t always phrased that way.
A right to win is the ability to engage in any competitive market with a better-than-even chance of success — not just in the short term, but consistently. Imagine a coach, observing a player entering a sports competition, saying, “That kid has the right to win out there.” Or a teacher, watching a student about to take a test, saying, “That student deserves to excel.” What they are really saying is, “That contestant is the right player, in the right type of contest, with the precise capabilities needed to meet this particular challenge.” Of course, the contestant will lose at times, but over the years, a consistent innate advantage will establish itself, giving this contestant the ability to pull off seeming miracles while making it all look easy. This essential advantage is particularly rare in business — a more free-form and unpredictable game than sports or academia. But it is increasingly important at a time of unprecedented competitiveness.
The phrase right to win may strike some observers as arrogant. After all, no company has this kind of assurance handed to it. But that’s precisely the point. The right to win cannot be taken for granted. It must be earned. You earn it by making a series of pragmatic choices that align your most distinctive and important capabilities with the way you approach your chosen customers, and with the discipline to offer only the products and services that fit. At Booz & Company, where we call this approach a capabilities-driven strategy, research and experience have led us to conclude that only high levels of coherence — among market strategy, capabilities systems, and a company’s portfolio of offerings — can give any firm the right to win.
All corporate strategies are at heart theories about the right to win. That is why, for those trying to understand the nature of business success, the history of strategy is both helpful and fascinating. One valuable recent source is The Lords of Strategy: The Secret Intellectual History of the New Corporate World (Harvard Business Press, 2010), in which former Fortune managing editor Walter Kiechel recounts the prevailing theories of business strategy over the past 50 years, and the stories of the people who developed them. Drawing on Kiechel’s history and those of others, such as Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel in Strategy Safari: The Complete Guide through the Wilds of Strategic Management (2nd ed., FT Prentice Hall, 2009), we have created a map of this conceptual landscape, organized on the basic principles underlying theories of the right to win. (See Exhibit 1.) The map depicts four broad schools of strategy; each represents a hypothesis about the nature of long-term success in a competitive world.
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Reprint No. 10407
Cesare Mainardi is the managing director of Booz & Company’s North American business and a member of the firm’s executive committee. He is coauthor, with Paul Leinwand, of The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Harvard Business Press, 2010).
Art Kleiner is the editor-in-chief of strategy+business and the author of The Age of Heretics: A History of the Radical Thinkers Who Reinvented Corporate Management (2nd ed., Jossey-Bass, 2008).
Disclosure: At least four people named in this article have been contributors to s+b: Ram Charan, Walter Kiechel, Henry Mintzberg, and C.K. Prahalad. Others named in the article have had associations with s+b staff members, with Booz & Company, or with its competitors. Where we assess individuals’ contributions and impact, we have tried to do so independent of any such associations.