Zenger - what is the theory of your firm? (HBR 2013) (Lecture notes…
Zenger - what is the theory of your firm? (HBR 2013)
Critique of competitive advantage
Investors don't reward occupying and defending position - they reward growth
As per Porter's argument - growth undermines current market position
"Efforts to grow blur uniqueness, create compromises, reduce fit and ultimately undermine competitive advantage"
How do you find new and unexpected ways of creating value?
This paper presents "Corporate theory"
How you can continue to create value - how to select strategies
Recombination of large, existing elements
Need to envisage the topography of surrounding landscape to pick right combinations
Draw from knowledge and experience to put landscape together
Guess where valuable configurations of capabilities, activities and resources are - put theory to test!
Successful companies are typically founded on a coherent theory of value creation - get into trouble when this is lost
Walt Disney given as example - founder had a clear theory about how company created value. He created a map of the key assets and identified patterns in them. Shows synergistic relationships between core and other assets. This was lost on his death.
Three sights of strategy
Identify what is rare, distinctive and valuable about company
Understand companies assets and how different to competition
Recognise where the value sits
Prediction of future trend
Foresees new technologies (or relationships between) e.g. Apple
Forecasts actions of rivals
Which investments, acquisitons or strategic actions will give the most value
Specific, but different from perceived wisdom
If widely shared assets become desirable and therefore expensive
If not unique, unlikely to create sustained value
Ability to recognise complimentary activities and how new assets could be paired with existing ones
How can we leverage what we have above and beyond what it is today
Use the 3 sights to compose a succession of value creating actions
Paper linked to Disney article and Corporate Strategy
Diversification should be considered - is it related or unrelated to core business strategy
Should ask yourself - what value is this bringing
Consider synergies - introduces lot of trade-offs
Take back to origins
Foresight often sits within organisation - need to give people the space/belief to develop ideas
Reading recommendation - when strategy walks out the door
New entrants will often go into markets that are percieved as unattractive to incumbants
How does family ownership change dynamic
What business in portfolio
How does businesses relate to each other
How to businesses relate to corporation
Intuition in strategy
Peter Thiel - what do you believe that no one else does
Theory of sustained value creation
Other Zenger articles
"Start with a theory, not with a strategy"