The question what a good strategy is is difficult to answer. With hindsight it is easy: A good strategy is one that works. But in foresight? Many formulated, intended strategies are plain boring, generic and not customer centric, but focused on investors. Many business model innovators on the other hand have clear strategies that are focused on customers and on the value proposition.
“We earn a premium on our cost of capital”
“We form the best team in industry”
“We help our customer to be more successful”
“We ensure sustainable development”
Have you found out which company has these pillars for its strategy?
Probably not. The strategy is so generic and interchangeable that it fits for almost any large company.
Are you attracted as a customer to this company?
Probably not, since so many companies claim to help customers to be more successful.
Does this spur emotions in you?
Definitely not! It is just plain boring!
How about this company: It claims that it is driven by “passion of success” that rests on “four cornerstones”: “superior brands”, “superior supply chain”, “superior talent in lean organizations”.
Do you know which company it is?
No, since it is so generic. It could stand for many companies in many industries. It is boring. It does not give the company any real purpose to exit.
Value centric strategies
So how about this:
“to organize the world’s information and make it universally accessible and useful.”
Do you think this is interesting for you?
Probably yes, if the company can fulfill its high aims.
Do you have any idea which company is behind this statement?
So how about this: “The [firms] Concept is based on offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”
Yes, if you do not go for overpriced designer furniture.
Do you know the company behind it?
All quotes are taken from the strategy section of the homepages of the corporations. So here is the solution.
Company 1 is BASF, one of the largest chemical companies of the world. Company 2 is Beiersdorf with its world-famous Nivea brand and with its daughter company tesa which produces the famous tesa tape (for Americans it is the European version of Scotch tape).
You don’t win customers with your corporate strategy
Interestingly, all companies are well-know and have a record of success in their respective industry. But why did we think that the latter are inspiring and the former plain boring?
The latter are customer centric. These corporations put in their strategies customers first. Their business strategies focus on the value proposition to the customer. They describe what value they create for their customers and what makes them unique.
The former are corporate strategies that have an internal point of view and addresses investors and shareholders. The former are also good companies but their strategies are boring.
What can we learn from this?
- There are different layers of strategy in a corporation. All levels are important. Besides a corporate strategy, which explains which business the firm is in, business strategies must exist. In the business strategy it is where you explain your business model and try to find points that make you unique to your customers. Then the product strategies follow your business strategy. On top is the corporate strategy, then comes the business strategy and product strategy.
- It is the business strategy that makes you successful in the market place not the corporate strategy. You find customers not with the corporate strategy but with a great business model as the outcome of your business strategy! And remember Peter Drucker. For him the purpose of a business is to create profitable customers. A good business strategy is customer focused and explains the benefits in doing business with the corporation. A good strategy should not be generic but tangible for the customer. A good strategy explains your business model and what makes your business model unique for the customer.
Large corporations focused in the last years too much on their corporate strategies and forgot their business strategies. They entered new markets, bought new divisions with new businesses but too little focus was on the business aspect of the strategy of what makes the firm unique to their customers. In today’s recession the pendulum is back on business strategies since it is there where you earn money.