Sustained growth: a challenge

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We’ve noted before that strategy is about delivering earnings growth, not hitting ROIC ratios, but it seems that’s not easy. In Profit from the Core: A Return to Growth in Turbulent Times, Chris Zook and James Allen, coleaders of Bain’s global strategy practice, find that just 12% of companies grew revenues and profits more than 5.5% during 1998-2008. A few questions and issues arise:

  • This is further evidence that strategic management is not typically done well.
  • It would be interesting to know ...
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Knowledge brokering in open innovation

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I strongly recommend a McKinsey article on using knowledge brokering to improve business processes, with some simple but powerful points. E.g. effective business processes are key to performance throughout a firm, and do not result from a random process of making-it-up-as-we-go-along-and-see-what-works, but a deliberate process of search and design. The article focuses on product-related and other simple innovations (not the over-hyped ‘strategic’ type), and includes some nice simple examples.

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Six industry reviews

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Bain & Co offer good reviews of strategic imperatives in chemicals, retail banking, consumer packaged goods, engineered products and services, oil and gas, and technology – with supporting reports on each. Well worth a a look if you are in any of these, but also some useful insights applicable to other sectors. Chemicals, for example, offers the deadly combination of over-capacity and competitors with both innate advantages and naive strategies – just as was the case when I started my strategy ...

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Experience matters

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Nice to see confirmation that good strategic management is more likely if the complexities of the job are handled by people with experience. HBSP’s Daily Stat reports an academic study showing that insiders make better CEOs than external appointees. Perhaps this will hold back some Boards’ preference for paying exorbitant sums to head-hunters to fix grossly excessive deals for rent-a-CEOs, then paying those CEOs off with still more bags of cash when they mess up.

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Spreadsheets no good for strategy

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This blog post from HBS starts well, but ends in the wrong place, saying we shouldn’t try to quantify intangible issues. We do know how to deal quantitatively with such factors. We can handle both tangible qualities that differ between people, such as differing customer sales rates, and also intangible states-of-mind. A bank tracks ‘miserable moments’ their customers experience and knows well how recent history of those problems affects the likelihood of customers leaving. Call center companies know how ...

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