Strategy Dynamics Breifing 17: The problems with correlation

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A devastating implication arises from this interdependency between resources from the previous briefing. Here is a simple story…

A company’s profits come from its revenues minus its costs, and its revenues reflect the number of customers. Amongst its costs, marketing spend mostly acts to win customers, rather than increase their purchase rate

  • The company raises marketing spend in order to grow sales and profits
  • But first, its profits fall because of the higher marketing cost
  • However, the marketing spend does win a few more ...
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Analysis-based strategy

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In Sloan Mgt Review Thomas Davenport of Babson College and Jeanne Harris of Accenture’s Institute For High Performance Business in What People Want Next (and How to Predict It) show how firms like Amazon.com use unprecedented data and sophisticated technology to inform decisions as never before. Great to see so much being written now about powerful strategic management being driven by data and analysis, not just gut and emotion [has anyone done ...

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Why has Amazon.com been so unsuccessful?

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The SMS conference reminds me of a long-standing puzzle. We have known for decades that investors value growth in earnings – because they either get rising dividends or a rising stock price they can sell on. Profitability – return on sales or on assets – is only of interest insofar as it enables future earnings growth. So how come the strategy field is obsessed with ‘explaining’ why some firms are more profitable than others, when investors aren’t interested and management does ...

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