• Corporate Coherence Works

    by  • March 11, 2012 • Leadership, Strategy

    Ever since I started blogging about leadership and strategy, I’ve been harping about the notion of “doing less, better” as a business modus operandi.  Wall Street is against the idea. They think companies have to “do more and more” to get bigger and bigger. Recently, they’ve been pushing Starbucks to expand beyond coffee into a variety of foods. It will be interesting to see whether Howard Schultz will give in to them. My former employer, Kraft Foods “does more and more” quite well, albeit through acquisitions – a bit of a cheat in my view. Jacobs Suchard, the coffee/chocolatier that I headed in North America was just one of a long list of Kraft acquisitions that started with General Foods  in the eighties. Suffice to say deep pockets, rather than business brilliance snatches the prize.

    The value of focus is knowhow, nimbleness and strategic insight. Successful multi-product companies in various markets achieve success by narrowing their businesses into manageable units. We use to call them SBU’s, strategic business units. Procter and Gamble do this like no other. Last year, Booz & Company conducted a broad study amongst 1,800 executives on the power of focus in business. They refer to  it as corporate coherence, but the concept is the same. The study substantiates my theory of ‘doing
    less, better’, whether that focus be on projects, product lines or markets.

    Booz & Co. determined that 64% of executives say their company has too many conflicting priorities, and 49 percent say a list of strategic priorities doesn’t exist at all. Here are some other relevant details.

    The survey indicates that the companies who focus and prioritize are the ones who outperform their respective competitors. In fact,  only 18% of executives of incoherent companies say their firms are performing above the industry average versus 59% of the coherent company executives.

    So here’s the obvious question: If the majority of executives claim their companies are not coherent, and yet performance amongst coherent companies is superior, who is to blame for incoherence?  In the comments section, please cast your vote for the main culprit of incoherence. I’ll tell you my vote in next week’s blog.

    1.  Wall Street?

    2.  The Board of Directors?

    3.  The CEO?  

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    About

    Formerlife: Jacobs Suchard CEO (Kraft, Nabob), Strategy Consultant. Afterlife: Palgrave Macmillan Author, Business Blogger, Wannabe Novelist

    3 Responses to Corporate Coherence Works

    1. March 12, 2012 at 2:29 pm

      Hi John, not sure blame can so simply be applied in all cases. Indeed not sure blame is ever a profitable pursuit. However if pressed I would start with the CEO.
      Appreciate your contributions.
      Frank

    2. March 15, 2012 at 6:49 am

      John, I do agree with you. But, for the Howard Schultz’s who are encouraged to ‘do more’ I say, whatever else you will do, especially if it’s an acquisition, be clear on the strategy for the new venture. The big problem is the M&A ‘synergies / efficiencies’ trap which assumes that your current strategy will work with the new one…no matter how similar they look. It simply can’t. The analysts have never run a company so they get it wrong every time. It only works in the tech sector because it’s growing wildly and the mistakes get covered up – I was talking with one only the other day!!

    3. John
      March 15, 2012 at 11:34 am

      Alan, I suspect Howard will follow the proven Starbuck way of growing organically. I also believe that if he takes the bait to do “more with more”, he find a way to do it well. After all, Starbucks has an awesome consumer image and knowing Howard, he’s a tenacious, visionary leader. I’d rather see him do more with coffee and there are countless untapped strategic options available. Some may include backward integration such as owning fincas, developing better brewing equipment/methods, pioneering one-cup technology that doesn’t require inferior instant coffee as a ingredient. BTW, I was amazed that Starbucks actually put their name on an instant. It tells me they sacrificed their strategic principles for gratuitous grwoth. Sure, they can get bigger making coffee cake, sodas and sandwiches. But is this the best strategy for the long haul? And is it necessary? Thanks for weighing in, Alan. You are always insightful.