Leadership

Is your company managed based on a competitive strategy?

Marko Rebane Marko Rebane

According to Michael Porter, whose book Competitive Strategy is one of the most highly regarded works on management, a company develops a competitive advantage over its rivals when it purposefully differentiates activities from others in order to create unique value.[1]

Strategy thus presumes making specific interlinked choices (including what not to do) and building business activities around those choices. That positions the company in a unique way in its field, allowing it gain a permanent advantage over competitors and offer the best value to customers with its goods and services.

Typical misconceptions about strategy

Managerial expert Roger L. Martin has astutely noted that making choices is hard and many managers focus more on urgent day-to-day questions than what is actually important. It is natural to want to keep various doors open as long as possible. Instead of expending resources on developing a comprehensive strategy and making difficult decisions, Martin says that in his experience managers tend to approach strategy in an inadequate and ineffective manner:[2]

  1. Defining strategy as a vision. Mission and vision are only a part of strategy, but they do not cover more specific choices as to what business to get involved in and which to eschew, nor does it provide guidance for building a competitive business and attaining the desired goals.
  2. Defining strategy as a plan. Action plans are also part of strategy yet they are not enough on their own. A plan may list the company’s activities and timetable, but there is no certainty that the activities will create a sustainable competitive advantage for the company.
  3. Denying the possibility of a long-term strategy. The world is changing at a head-spinning pace and some leaders argue that it isn’t possible to build a long-term strategy (or there’s no point in doing so) and an organisation should respond on the fly to possibilities and threats it sees. A company that thinks this way is easy prey to strategic-minded competitors, says Martin. Google, Microsoft and Apple have proved that strategy is not just possible in such an environment, but changes offer attractive possibilities for key value creation and competitive advantages.
  4. Defining strategy as optimisation of the status quo. Optimisation can sometimes be an effective tool in business. It can help to raise efficiency and create value but there is the risk that the company will spend its resources on wrong activities or for optimising an entire ineffective business model. Thus, optimisation cannot be treated as a strategy.
  5. Defining strategy as a best practice. There are many tried, true and widespread approaches in every field. For that reason, some organisations think of strategy as doing the same thing as competitors, only more efficiently. Roger L. Martin notes that sameness is not a strategy and breeds mediocrity.

An adviser can help in seeing the big picture

Smart strategic management keeps the company’s mission and goals in the focus and seeks the best approaches for offering differentiation advantage. It is based on previous experiences and takes into account all of the critical key factors within the organisation’s external and internal environment to create a sustainable competitive advantage (situation in the economic sector, business fields/segments, partners, customers, the company’s resources and cost structure, competitors’ activities and so on, as well as related strengths, weaknesses, threats and opportunities).

The question of which market or business segment to focus on and which would be the appropriate winning strategy requires comprehensive analysis. It can be even more complicated to determine the best strategy and “sell” it to the management or create the structure and systems needed to implement strategy and manage changes to the structure. Yet with skilful managerial and communication techniques, it is possible to build a dialogue-based organisational culture that is conducive to producing the desired results.

Grant Thornton’s specialists are at your service when it comes to strategic management issues. We can offer a number of services in this field:

  • Strategic audit and management consultations – strategic audit is a full strategic analysis of the organisation with the goal of assessing the existing goals and strategy. The result of the audit serves as a basis for making strategic managerial decisions for improving the organisation’s performance. 
  •  “6-box” model – in cooperation with researchers at Oxford University, Grant Thornton’s specialists have developed a model that will help company management to identify and address challenges facing them in the short and medium-range perspective in the course of implementing the corporate strategy. The tool helps take strategic decisions, prioritise activities and prepare specific action plans. As the name says, the 6-box model takes in six areas: strategic ambitions, financing growth, managing risks and regulations, optimising operations, engaging leadership and talent, and maximising stakeholder value.
  • Financial projections and budgeting – different alternatives in regard tostrategies mean special conditions for needed resources, risk level of investments and the return on them. Our company’s finance team fuses different financial management, advisory, accounting and strategic planning skill sets. We help clients to prepare financial projections, forecasts and budgets as well as cost-benefit studies and financial analyses.
  • BenchmarkingGrant Thornton uses databases that allow for analysis of general financial indicators and companies’ performance. Comparing helps to better evaluate the organisation’s current position and set suitable goals and performance indicators. 
  • Coachingacoach helps managers and teams analyse and reflect on experiences, ideas and challenges ahead and achieve the set goals. Grant Thornton Baltic’s executive coach Katrin Oblikas provides individual and team coaching. She also provides advisory services to companies on developing and implementing organisational culture and human resources development and managing cultural changes. Katrin has received ICF PCC (International Coach Federation Professional Certified Coach) accreditation.

 


 [1] Michael Porter. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Simon & Schuster, 1980.

 [2] Alan G. Lafley, Roger Martin. Playing to Win: How Strategy Really Works. Harvard Business Review Press, 2013.