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What is the Theory of your firm? - Coggle Diagram
What is the Theory of your firm?
The Greatest Theory Ever Told
Attesting to the depths of Disney's disarray, corporate raiders in 1984 attempted a hostile acquisition of the company with a view to selling off key assets
The board chose the latter and hired Michael Eisner.
The power of this theory was perhaps most vividly revealed following Walt's death. Within 15 years leadership at Disney seemed to lose sight of his vision.
Eisner rediscovered Walt's original theory and used it to guide a heavy investment in animated productions
Companies that enjoy sustained success are typically founded on a coherent theory of value creation.
That cycle has repeated itself in the years since.
His successor, Robert Iger, quickly moved not merely to repair the Pixar relationship but to acquire the company
Leaders must draw from available knowledge and prior experience to develop a cognitive, theoretical model of the landscape
and then make an educated guess about where to find valuable configurations of capabilities, activities, and resources.
Disney's recent acquisitions of Marvel and Lucasfilm fuel this central asset, although they carry the company into somewhat unfamiliar terrain
Value creation in all realms involves recombining a large number of existing elements.
Walt Disney's road map for growth has clearly endured long past his death, providing a remarkable illustration of posthumous leadership
The Three "Sights" of Strategy
How can you tell if your own corporate theory is as good?
Insight
An effective corporate theory is therefore company-specific, reflecting a deep understanding of the organization's existing assets and activities
Cross-sight
A well-crafted corporate theory identifies complementarity that the company is singularly able to assemble or pursue by acquiring assets that can be combined with existing ones to create value
Foresight
Suggests which asset acquisitions, investments, or strategic actions will prove valuable in predicted future states of the world
When Strategy Lacks a Theory
Not all corporate theories are created equal, however, and some companies never discover valuable ones.
AT&T's first theory following the breakup never made clear how the company's supposed managerial competence could be uniquely applied to new types of assets; it lacked insight and cross-sight and certainly any vision of the future.
The company's second theory was equally flawed: It contained foresight, but in a form that was already widely shared and thus could not generate unique cross-sights.
Bargain Hunting with a
Corporate Theory
Mittal first major expansion move by acquiring a troubled steel operation owned by the government of Trinidad and Tobago
Mittal quickly proceeded to turn this business around as it transferred knowledge and increased sales.
Mittal began as a small mill in Indonesia, where it developed a capability in a new iron ore input technology (DRI)
Mittal knew how to create value from poorly understood and poorly managed stateowned steel operations in developing economies where demand for the product was growing fast.
Mittal Steel is a good example. From its origin it was a very small player in an industry consistently ranked at the bottom in financial performance.
Mittal's insight was its understanding of the value of DRI and its own ability to lead turnarounds in formerly state-owned enterprises
The real power of a well-crafted corporate theory becomes particularly evident when companies go shopping
Its foresight was an early recognition of the value of iron ore assets and the virtues of industry consolidation.
Its cross-sight was to recognize the types of assets that could benefit from the company's distinct capabilities.
By 2004 Mittal had emerged as the world's largest and lowest-cost steel producer
his success came from having a corporate theory that functioned as a rather remarkable treasure map