Stop asking ‘What is Strategy?’

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Online groups  seem obsessed with asking what Strategy is, and what’s its value. If we don’t know, we can hardly expect others to listen to us. It’s simply setting powerful but realistic aims, and defining how to get there. It’s purpose is to create business value (NPV of future free cash flows). Because things change, these must be updated continually. (In non-commercial cases, the purpose is to achieve non-financial aims, though within financial constraints).

So, let’s stop debating this basic issue, ...

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Exploiting decline

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A senior exec taking my course points out a common blind-spot – the strong cash-flow possible in mature/declining sectors. This firm, part of a global business, makes large-volume manufactured products, sold through distributors to numerous installers.
Management diverts resources away from any sector where growth slows, but as in other cases, there is easy money to be made. Everyone else avoids the sector too, so little effort is needed to steal business, and lack ...

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Beware divesting core business

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A rare example of clear and useful academic research from Emilie Feldman at Harvard [but treat it with care – see below]. Emilie “investigates “legacy” divestitures, the sale or spinoff of a company’s historical core business. Firms appear to divest their legacy businesses within the context of larger efforts to reshape their identities. I find that operating performance deteriorates in the years following legacy divestitures, and this decline appears to be linked to a loss of intangible resources embedded in the ...

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Analysts press for underinvestment

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I have noted before that stock analysts need know little about how strategy affects firm performance, so an academic study on the impact of stock analysts on firms’ investment behaviour is intriguing. The unpublished working paper by Benner and Ranganathan at Wharton finds that negative pressures from analysts to improve cash flow and stock price trigger reductions in strategic investments during periods of technological change. Two examples:

  • One analyst continually pressured Kodak to cut costs and investment in digital technology: “…we suspect ...
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