Myth 2: It’s all about profitability

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Here’s another that just jumps out of the strategy books and articles. Strong performance, it is said, shows up in higher profitability [return on sales or invested capital]. So good strategy which leads to that lovely ambiguous phrase, ‘sustained competitive advantage’, shows up in persistently higher profitability than competitors.

Well, sometimes – but investors value growth in free cash flows. So would you rather get $15 a year back from a company you have invested in, or $12 that grows ...

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Myth 1: Continual reinvention

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Many of the articles, comments and conferences about strategy-related issues seem to perpetuate some damaging myths – so I thought it might be useful to develop a list of these as I come across them.

This one comes up all over the place – the idea that successful strategy requires constant ‘re-invention’ of the business model. Even sober journals like the Economist ooze over this fallacy, as they did when reviewing the 10-year anniversary of e-commerce in 2005. Ebay, ...

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