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jerryking : synergies   10

Strategy or Culture: Which Is More Important?
“Culture eats strategy for breakfast.” These words, often attributed to Peter Drucker, are frequently quoted by people who see culture at the heart of all great companies. Those same folks like to cite the likes of Southwest Airlines, Nordstrom, and Zappos, whose leaders point to their companies’ cultures as the secret of their success.

The argument goes something like this: “Strategy is on paper whereas culture determines how things get done. Anyone can come up with a fancy strategy, but it’s much harder to build a winning culture. Moreover, a brilliant strategy without a great culture is ‘all hat and no cattle,’ while a company with a winning culture can succeed even if its strategy is mediocre. Plus, it’s much easier to change strategy than culture.” The argument’s inevitable conclusion is that strategy is mere ham and eggs for culture.

But this misses a big opportunity to enhance the power of both culture and strategy. As I see it, the two most fundamental strategy questions are:

1. For the company, what businesses should you be in?

2. And for each of those businesses, what value proposition should you go to market with?

A company’s specific cultural strengths must be central to answering that first question. For example, high-margin, premium-product companies that serve wealthy customers do not belong in businesses where penny-pinching is a source of great pride and celebrated behavior. Southwest has chosen not to enter a NetJets-like business, and that’s a sound decision.

Likewise, companies whose identity and worth are based on discovery and innovation do not belong in low-margin, price-competitive businesses. For example, pharmaceutical companies that traditionally compete by discovering novel, patentable drugs and therapies will struggle to add value to businesses competing in generics. The cultural requirements are just too different. This is why universal banks struggle to win in both commercial and investment banking. Whatever synergies they might enjoy (for instance, from common customers and complementary capital needs) are more than offset by the cultural chasm between these two businesses: the value commercial bankers put on containing risk and knowing the customer, versus the value investment bankers have for taking risk and selling innovative financial products.

Maintaining cultural coherence across a company’s portfolio should be an essential factor when determining a corporate strategy. No culture, however strong, can overcome poor choices when it comes to corporate strategy. For example, GE has one of the most productive cultures in the world, and its former leader, Jack Welch, concedes that his acquisition of Kidder Peabody was a failure because its cultural needs did not fit GE’s cultural strengths. The impact of culture on a company’s success is only as good as its strategy is sound.

No culture, however strong, can overcome poor choices when it comes to corporate strategy.

Culture also looms large in answering the second question above. In most businesses, customers consider more than concrete features and benefits when choosing between alternative providers; they also consider “the intangibles.” In fact, these often become the tiebreaker when tangible differences are difficult to discern. For example, most wealthy individuals choose financial advisors more for their personal chemistry or connections than their particular range of mutual funds. Virgin Airlines tries to attract passengers who like its offbeat, non-establishment attitude in how it operates. Culture experts are right to point out Southwest, Nordstrom, and Zappos because these companies have instilled norms of behavior that are essential features of their winning value propositions: from offering consistently low-price, high-quality service in Southwest’s case, to consistently delivering surprising staff service at Nordstrom and leading customer satisfaction at Zappos. What these companies really demonstrate is how culture is an essential variable—much like your product offering, pricing policy, and distribution channels—that should be considered when choosing strategies for your individual businesses. This is especially so when the behavior of your people, and particularly your frontline staff, can give you an edge with your customers.

Strategy must be rooted in the cultural strengths you have and the cultural needs of your businesses. If culture is hard to change, which it is, then strategy is too. Both take years to build; both take years to change. This is one of the many reasons that established companies struggle with big disruptions in their markets. For example, all the major credit card companies are seeking to transition from traditional payments to digital commerce. This shift in strategy will be difficult to pull off. It not only requires a cultural change, but also a change in companies’ target customer, value propositions, and essential capabilities—the three most fundamental choices a business strategy comprises!

Consigning strategy to just a morning meal for culture does injustice to both. Confining culture to the narrow role of “enabling” strategy prevents it from strengthening strategy by being part of it. It also weakens the power of strategy to turn your company’s cultural strengths into a source of enduring advantage.

Don’t let culture eat strategy for breakfast. Have them feed each other.
cultural_clash  cultural_change  intangibles  management  organizational_culture  Peter_Drucker  questions  quotes  strategy  synergies  value_propositions  via:enochko  unscalability 
march 2019 by jerryking
Why It’s Not Enough Just to Be Disruptive - The New York Times
By JEREMY G. PHILIPS AUG. 10, 2016

Short-term success may be driven by exceptional execution; long-term value creation requires building a defensible model.

Any microeconomics textbook will tell you there are limited sources of competitive advantage. The most valuable companies combine several reinforcing strands, like scale and customer loyalty.....

While it is hard to stay ahead solely through superior execution over an extended period, it is sometimes enough in the short term to draw a deep-pocketed buyer where there are strong, immediate synergies. Creating enormous value over the long term requires turning a tactical edge into some form of durable advantage....Superior tactical execution can still create real value, particularly where it provides ammunition for a bigger war (like Walmart’s battle with Amazon). And in the long term, value is created not by disruption, but by weaving together advantages (as both Amazon and Walmart have done in different ways) that together create a barrier that is hard to storm.
disruption  value_creation  Gillette  competitive_advantage  execution  books  slight_edge  Amazon  Wal-Mart  microeconomics  short-term  long-term  barriers_to_entry  compounded  kaleidoscopic  unfair_advantages  endurance  synergies  M&A  mergers_&_acquisitions 
august 2016 by jerryking
London lives again: Inside the revival in Ontario’s rust belt - The Globe and Mail
JOHN IBBITSON
LONDON, ONT. The Globe and Mail Last updated: Friday, Feb. 05, 2016

Synergies between the education sector and the private sector lie at the very heart of Southwestern Ontario’s future. By incubating, encouraging and then feeding workers into London’s emerging high-technology sector, Western and Fanshawe are doing for their city what the University of Waterloo has long been doing for Kitchener-Waterloo’s computer-based industries and the University of Guelph is doing for bio-technology in Guelph.
John_Ibbitson  rust_belt  manufacturers  job_loss  revitalization  Southwestern_Ontario  entrepreneur  automotive_industry  UWO  Kitchener-Waterloo  synergies 
february 2016 by jerryking
Ryan Seacrest: The Mogul Next Door - The New York Times
By GUY TREBAYDEC. 4, 2015

In a business organized almost exclusively around access and connections, it is surprising how few people incorporate the fleeting nature of fame into their career calculations or use their moment in the sun to build business opportunities, “Hollywood Game Night” being Exhibit A.

“Show business is what drives the other businesses,” said Mr. Seacrest, a consummate marketer, who looks upon his various day jobs, he said, as vehicles for the next cross-platform opportunity.

“In recent years, I don’t believe I’ve ever done anything on camera or on the microphone without thinking of the back-house opportunities and the next business play,” ....seeing everything I did as a course in the class of what to do next.”......“Ryan is a natural learner, always strategizing, always researching the next opportunity.”
next_play  Ryan_Seacrest  cross-platform  personal_branding  entrepreneur  entertainment  entertainment_industry  Hollywood  synergies  leverage  back-house_opportunities  side_hustles 
january 2016 by jerryking
With Safeway deal complete, Sobeys demands price cuts from suppliers - The Globe and Mail
MARINA STRAUSS - RETAILING REPORTER

The Globe and Mail

Published Wednesday, Jan. 08 2014,

In its letter, Sobeys says its acquisition of Safeway Canada will provide it with a new growth platform in Western Canada, the country’s fastest-growing region, while also significantly increasing the retailer’s economies of scale. To help it gain scale, Sobeys will require the retroactive 1-per-cent “synergy savings rate” from suppliers, it says.

“This 1 per cent synergy savings rate will be deducted from payments starting the end of January 2014,” the letter says. “Retroactive savings will also be deducted. The rate applies to all branded and private label grocery products.

“In addition, and as you are aware, current market retail pricing conditions leave no room for absorption of cost of good increases. As such, Sobeys Inc. will not accept any cost of goods increases through 2014.”

It will make some exceptions in cases of pharmaceutical supplies and “single commodity items,” which are currently priced daily or weekly, such as sugar, or possibly “where extraordinary unforeseen circumstances apply,” the letter says.
Marina_Strauss  grocery  supermarkets  retailers  Sobeys  Safeway  scaling  consolidation  supply_chains  economies_of_scale  synergies 
january 2014 by jerryking
Loblaw’s big bet on thinking small - The Globe and Mail
Jul. 16 2013 | G&M | SUSAN KRASHINSKY AND JOSH KERR.
(Charles Waud & WaudWare)
The push into the small-format direction is driven by changing consumer habits, as demands on time force consumers to look for more one-stop shopping solutions in their neighbourhoods, without having to drive to bigger retailers. The convenience store industry has already responded by attempting to alter its down-market image and offering more fresh foods. Loblaw has integrated pharmacies, as well as health and beauty products, into its locations. And along with Shoppers, drugstores have increasingly been selling everything from digital cameras and iPods to milk and dry goods, household items, and expanded beauty products.

This not only helps those retailers to market themselves to busy, younger urban shoppers, but it also addresses Canada’s aging population. Seniors are the fastest-growing demographic group in the country, and prefer to stick closer to home when running errands, Mr. Tyghe observed. “It’s very much about proximity and convenience.”

While the new general store model has worked for Shoppers – the price per share of Loblaw’s offer represents a 27-per-cent premium to Shoppers’ closing price a day before the announcement – there is room for Shoppers to improve in its food offerings, said Doug Stephens, author of The Retail Revival. The challenge, he said, will be to augment that section with some of Loblaw’s products without disrupting the overall shopping experience.

“They have to be very careful with the Shoppers Drug Mart model – a lot of allegiance there,” Mr. Stephens said.

Ultimately, the advantages for Shoppers stem from the buying power the chain inherits, which will allow it to provide whatever product mix works for changing consumer habits at a lower cost.

The “buying clout and synergies” Shoppers would gain post-acquisition will prompt competitors to find ways to match these benefits, said Kevin Grier, a senior market analyst at the George Morris Centre
big_bets  buying_power  convenience_stores  digital_cameras  downsizing  grocery  Loblaws  mergers_&_acquisitions  one-stop_shop  pharmacies  post-deal_integration  proximity  retailers  Shoppers  size  small_spaces  store_footprints  supermarkets  supply_chains  Susan_Krashinsky  synergies  time-strapped 
august 2013 by jerryking
Giving Great Advice
Janaury 2008 | HBR | Interview of Bruce Wasserstein by Tom Stewart and Gardiner More.

HBR’s editor, Thomas A. Stewart, and senior editor Gardiner Morse
spent many hours at Lazard and interviewed Wasserstein, setting out to understand how he creates value as a manager, as a deal maker, and as a counselor to CEOs. How does he attract and
manage talent, build and sustain knowledge businesses, size up companies and industries, and craft advice?

Wasserstein describes his approach as discovering whether a deal or strategy “makes sense.” Such sensemaking seems to underlie every move he makes, and it has paid off handsomely. Following is an edited presentation of HBR’s conversations with Wasserstein...first to execute deals really well and then to market that track record.

How do you develop individual talent? The idea is to create a hothouse where young talent is nourished by our culture and people are encouraged to think creatively, think deeply,
think about the long-term client relationship—but above all, think. I want them to reflect on what they are doing and why, and then wonder,“Can we do better?”

Talk about the advice business. What are CEOs looking for as you’re helping them understand the landscape? What do they
need that you’ve got? The point of advice is to create value. The
first thing in that effort is not to assume the banker knows more than the client. The second thing is to remind the CEO that corporations have to change in order to prosper and that inaction isn’t prudent—it’s radical. What we can do is help the CEO think through an array of options, partly by asking
the necessary questions, but also by inserting some very practical observations about the effects of specific decisions.
Good advice is at least as qualitative as it is quantitative....On the other hand, there’s the more qualitative part of the advice. This strikes me as being an underdeveloped side of most investment-banking relationships. Knowing the characteristics of the industry and possible consequences of a deal comes from having seen what’s happened in many companies and industries over time. So, for example, you might say, “Look, you need a very different mentality to manage this type of business than your other businesses. You have a process-oriented mentality, but you need a more market-oriented approach. Are you confident that you’re going to be able to keep the number two guy in the company you’re acquiring? Because the number-one guy will probably leave.”

Deals that make sense. Can you elaborate on that? Law school taught me to focus on dissecting premises. Anyone who’s a good logician can build an argument on just about any premises.
The argument may be taut, but the premises may be faulty. When we do deals, I always ask, “Are the premises sound? Is the risk exposure worth it for this particular company, and have
I protected my client’s back?” We proceed by identifying and evaluating qualitatively and quantitatively the key elements of risk in the transaction—overall economy risk, strategic
risk, operating business risk, financing risk, people risk. Similarly, you need to fully understand the upsides. What are the opportunities in cost cuts, synergies, internal development,
additional investments, or revenue enhancement? It’s useful to apply all the paraphernalia of mathematical science in an analysis, but focusing on the sense of things is a much better use of time. Part of determining the sense of a deal involves understanding the macroclimate, the broader context, which I think gets too little attention.

...We think of each deal in terms of a flow chart with a series of black boxes. Each box represents a facet of the deal—for example, valuation, financing structure, approach to the other party, negotiating tactics and deal process, taxes, legal structure, contracts, market reaction, and regulatory hurdles.
advice  argumentation  Bruce_Wasserstein  cost_of_inaction  dealmakers  deal-making  downside_risks  financial_advisors  financial_risk  howto  investment_banking  J.D.-M.B.A.  Lazard  logic_&_reasoning  M&A  market_risk  mergers_&_acquisitions  operating_risk  problem_solving  product_risk  risk-assessment  synergies  team_risk  upside 
july 2012 by jerryking
Ford searches for ways to cut costs VEHICLES CARMAKER EXAMINES POTENTIAL FOR SYNERGIES BETWEEN MASS-MARKET AND PREMIUM BRANDS:;
Feb 23, 2001 | Financial Times pg. 32 | by Tim Burt. 323
documents found for: ((mass-market or mid-market or mid-range or
mass-merchandise) w/4 ((luxury or premium) w/4 brand))
automotive_industry  luxury  branding  ProQuest  top-tier  synergies  market_synergies 
december 2009 by jerryking
Ducati's Motorcycles Face Tough Road
Jun 11, 2003.Wall Street Journal. pg. B.5.E By Nina De Roy.
Today, Ducati has 1,145 employees and produces motorcycles across five
segments: the "monster," the Sport Touring, the Supersport, the
Superbike and the newly launched Multistrada, designed to deal with a
variety of road surfaces and weather conditions. Ducati spends 6% of
revenue on innovation... "Consolidation would be good for the sector,"
says Mr. Minoli, when asked about a possible takeover. "But that need
not entail mergers. Ducati is open to synergies but at the moment we
have no plans to sell."

In many ways neither do the people who drive them. Ducati has made a
good job of targeting younger riders with catchy marketing ploys that
allow Ducati owners to feel part of the action.
Ducati  motorcycles  Italian  consolidation  synergies 
december 2009 by jerryking
Seven Ways to Fail Big
September 2008 | Harvard Business Review | by Paul B. Caroll
and Chunka Mui.
(1) The Synergy Mirage (2) Faulty Financial Engineering (3) Stubbornly
Staying the Course (4) Pseudo-Adjacencies (5) Bets on the Wrong
Technology (6) Rushing to Consolidate (7) Roll-Ups of Almost Any Kind.
Avoiding Disasters: The Devil's Advocate.
See also "Questions Every Company Should Ask" at the end of article.
HBR  magazines  overoptimism  synergies  failure  devil’s_advocates  roll_ups  decision_making  thinking_big  strategic_bets  taxonomy  financial_engineering  questions  red_teams 
may 2009 by jerryking

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