Reflets Mag #140 | Corporate Strategy: Play to Win?

In Reflets Magazine #140, Jérémy Borot (E05), member of the Executive Committee at Cdiscount and with previous roles at McKinsey and Natixis, is here to give us an overview of corporate strategy: what is its aim? How can we achieve it? What does “winning” mean when you’re a business leader or entrepreneur? Here is a free online translation of the article… Click here to read the rest of the issue (in French)!"

Many companies today publish their “strategic plan”. They set out their ambitions and a series of actions to align all stakeholders: clients, employees, suppliers, etc. The word “strategy” is a bit out of place here: it’s hard to imagine Napoleon revealing his battle plans in a pamphlet...

If we also have a real, less public, strategy alongside our plan with the same name, these semantic discussions fade into irrelevance. If, though, the public plan is a substitute for more in-depth analysis, it can be dangerous. So, do you have a strategy? Do you play to play or play to win? What is winning, anyway?

The consulting firm I worked for defined a strategy as something like this: “A set of binding decisions taken before the uncertainty phase, to achieve XYZ.”

Each word in bold is important. These involve a number of actions, and backsliding should not be easy. Decisions are made early and contain an element of the unknown. “XYZ” may mean creating value, hitting targets, saving lives... I like to replace it with “winning” and let everyone choose their own end goal.

How do you win in business? Differentiation, relative size, costs, macro trends, innovation, allocation of resources, M&A, talent, organisation, culture, coopetition, regulation, risks, execution, speed... All of these subjects are important and academically proven. It’s easy to get bogged down in them.

What enables you to win?

Maybe you’ve got a natural advantage...

Being cheaper, the biggest, or the furthest along the learning curve can be enough. When you have an open-pit gold mine, when you’re operating in a low-cost country and you’re ten years ahead of your competitors... That gives you an advantage! You might want to read Cost Curves and Supply Curves (1931) or a few BCG Perspectives classics from the 1970s, covering exactly this subject.

…or maybe you’re different…

Without natural advantage, differentiation is the most common imperative. This is the message of Michael Porter’s famous paper, “What is strategy”, that’s taught in all business schools. It’s so widely taught that I encountered it in three different classes while I was at ESSEC! In a similar vein, you could read The Attacker’s Advantage (1986), Blue Ocean Strategy (2005) or one of the many books about close relationships with customers.

…in the right place…

And yet, while I was at McKinsey, the dominant analysis was that it was better to follow macro trends. Granularity of growth (2007) sets out how an average strategy in an excellent sector creates more value than the other way around. This means you need to identify trends (No ordinary disruption, 2016) and reallocate resources accordingly.

…with an excellent corporate centre…

This means analysing and managing rare resources, selling a business when you’re no longer the natural owner, making M&A a differentiation factor, minimising the costs of friction between activities... The schools of thought in corporate strategy can sometimes be difficult to grasp.  

…made up of outstanding talent…

The best teams naturally make the best decisions. From Good to Great (2001) proposes that talent is the best strategy. It’s even more powerful if the company can get the best out of them (Beyond performance, 2011) and enable them to consistently make the best decisions (read Dan Ariely and Olivier Sibony on this subject). In short, attracting and retaining the best talent makes everything else easier.

…able to move with the sector and the times

Others believe that it’s the regulator that has the biggest impact (Connect, 2015), that the ecosystem is key (Co-opetition, 1997), that you need to win the market before anyone else at all costs, that you need to manage risks or disappear (Black Swan, 2010), or even predict the signs of decline (How the Mighty Fall, 2009)…

It’s a long list! So, who’s right? That depends on you, your sector, your competitors, and the era. All of the above suggestions make sense. Use them as a checklist. It’s primarily about selecting a few points that are most relevant to you, using them to make a strategy, and then testing it.

10 tests of strategy

How can you differentiate communication and strategy to win? I like the ten timeless tests of strategy published by McKinsey in 2011. They are demanding: two thirds of business leaders who use them achieve a score of 4/10 or under. How will your strategy stack up?

1. Will your strategy beat the market? It gives us a real advantage over the market. It is significantly different to what the rest are going to do, and are expecting us to do. We don’t just do things the same way as everyone else.

2. Does your strategy tap a true source of advantage? Our action plan is based on things that our competitors do not have access to. We don’t conduct a lenient and inaccurate diagnostic when it comes to what drives our performance.

3. Is your strategy granular about where to compete? Our markets are finely segmented and we understand our allocation of resources in detail. We haven’t defined things too broadly to make the connection between opportunities and our resources.

4. Does your strategy put you ahead of trends? Our plans predict profound evolutions, disruptive events, and things that may seem unpredictable. We avoid thinking that the status quo will continue.

5. Does your strategy rest on privileged insights? Our market, client, and product analyses are original. We don’t draw similar conclusions from similar data.

6. Does your strategy embrace uncertainty? We know that our plan may need to change and we have taken this into account. We do not ignore alternative possibilities, and we are not paralysed by the unknown.

7. Does your strategy balance commitment and flexibility? We keep room for manoeuvre so that we can manage the unexpected in parallel to our strengths. We do not allocate all of our resources in advance.

8. Is your strategy contaminated by bias? We list possibilities and conduct a rational analysis. Our roadmap has not been dictated by our prejudices, personal preferences, and biases.

9. Is there conviction to act on your strategy? The entire management team supports the strategy. Each department has broken it down to their level, and it is widely shared. Our habits and beliefs are not opposed to the new direction.

10. Have you translated your strategy into an action plan? Beyond words, we adjust the distribution of our financial and human resources. This is not just paying lip service to the strategy; these are observable actions.

So, will your strategy make you a winner?

Translation of an article published in Reflets Magazine # 140. Subscribe here to get the next issues (in French)!

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