Why does “strategic focus” work?

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July 11, 2014
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Why does “strategic focus” work?

In the latest McKinsey Quarterly three authors report on their research on what successful companies do. They identify 4 recipes of successful companies, that “reflect a distinct underlying approach to managing, including core beliefs about value creation and what drives organisational success” (Smet, Schaninger & Smith, “The hidden value of organisational health – and how to capure it”, McKinsey Quarterly, April 2014).

business-models

There are of course lots of other ‘recipes’ out there from Michael Porters generic strategies of segmentation, differentiation or cost leadership; Treacy & Wiersema’s (HBR Jan’1993) value disciplines of customer intimacy, operational excellence and product leadership; Peter Weill’s operating models; and research by the Balanced Scorecard Collective led by David Norton into the successful modes of strategic alignment, all identify attributes of successful companies. What is remarkable about all these models is the persistent conclusion by these authors that successful organisations choose consciously or unconsciously what they will do and will not do rather than trying to do and excel in everything, and that the activities they choose to focus on are consistent and complementary to each other. What is also remarkable is that the exact details of the ‘recipe’ seems to be less important that the relationship of the actual goals and priorities to each other, as evidenced by the wide variety of models/recipes championed by the various authors.
What appears to be lacking in these models is research into why some selective choices are so successful rather than other choices or trying to excel at everything. The obvious economists answer would be that organisations are resource constrained and therefore they need to concentrate their efforts (allocation of scarce resources) in one or a limited number of areas where they get maximum bang for their buck, however this does not explain why very different models/recipes can all be successful while mixing other elements together or doing everything leads to failure.
I suspect the answer is more about people and psychology than economics and lies in the fact that an organisation that focuses on a specific area of expertise makes it easy for customers to understand what it stands for (marketing 101), is easy for employees to understand and act consistently/empowered (HR 101)and critically, it is easy for managers, especially senior executives to make decisions that are consistent with the organisations focus when allocating those scarce resources (especially their executive mindshare).
Many moons ago I did a personal goal setting exercise that was truly eye opening. The first step was to identify all my short and long term goals and dreams around work, family, health, education, wealth, spiritual self etc and document them in a long list. The second step was to build a grid on a sheet of paper with each goal listed along both the X axis and the Y axis creating a matrix. The final step was the real eye opener. For each pair of personal goals a notation was made on the matrix where they intersected. A ‘+’ was added if the two goals were complimentary or reinforcing, a ‘-‘ if they clashed or were mutually exclusive, and a ‘n’ if they were neutral. The value of the exercise was in showing where friction occurred between my goals causing personal stress, where others were likely to get mixed messages and be confused about who I am and what my priorities are, and what clusters of activities/goals support the personal my life’s mission/purpose (it also helped identify that purpose). It also helped consign to pure fantasy a few goals that were unobtainable due to incompatibility with my life’s purpose.
The same exercise could be applied to an organisation to assist in evaluating complimentary and contradictory goals to an organisation, I suspect it would help an organisation understand what goals/activities support its mission and those that do not. Perhaps something to do at your next executive strategy session

 

Link to original blog : http://businessitvalue.blogspot.com.au/2014/04/why-does-strategic-focus-work.html

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