What Is the Theory of Your Firm? (corporate theory ( (The strategist…
What Is the Theory of Your Firm?
Strategy involves discovering and targeting attractive markets and then crafting positions that deliver sustained competitive advantage in them
Equity markets are full of companies with
powerful positions and sluggish stock prices.
Valuable positions, protected from imitation and appropriation, provide sustained profit streams.
"Efforts to grow blur uniqueness, create compromises, reduce fit, and ultimately undermine competitive advantage. In fact, the growth imperative is hazardous to strategy."
Essentially, a leader's most vexing strategic challenge
is not how to obtain or sustain competitive advantage focus
but, rather, how to keep finding new, unexpected ways to create value.
reveals how a given company can continue to create value
Value creation in all realms, from product development to strategy, involves recombining a large number of existing elements
The strategist cannot see the topography of the surrounding landscape
leaders must draw from available knowledge and prior experience to develop a cognitive, theoretical model of the landscape
Companies that enjoy sustained success are typically founded on a coherent theory of value creation.
"Walt Disney's Theory of Value Creation in Entertainment").
explains how they can create value by combining the company's unique resources and capabilities with other assets.
foresight about an industry's future, insight into which internal capabilities can optimize that future, and cross-sight into which assets can be configured to create value.
Strategy is the process of discovering and targeting attractive markets and then crafting positions that will deliver sustained advantage in them.
predicts future customer tastes
or consumer demand
foresees the development of
forecasts the competitive actions of rivals
competing companies can replicate your strategic actions
An effective corporate theory is therefore company-specific, reflecting a deep understanding of the organization's existing assets and activities
A well-crafted corporate theory
Not all corporate theories are created equal, however,
and some companies never discover valuable ones.
There is nothing so practical as a good theory."