The Foundation for What We Do
Much of what we do is featured in two books:
Compete Smarter, Not Harder lays out a detailed process for Strategic prioritization:
At every step of the process, make the right choice with the right prioritization at every step:
Choose the wrong market and it doesn’t matter what else you do.
Choose the wrong part of the industry value chain to operate and compete – a part where someone else owns a key point of strategic control - and it doesn’t matter what else you do.
Choose the wrong set of customers to compete for – those that are less profitable, for example - and it doesn’t matter what else you do.
Choose the wrong incentives inside of your supply and value chain and it doesn’t matter what else you do.
Choose the wrong tactics – pricing, messaging, social strategy, etc. – and it doesn’t matter what else you do.
We work with organizations to ensure that every step is right so that your strategy is built on a solid foundation, not a house of cards. Good strategy gets all of this right and has each step build on and reinforce. each other.
The Carrot and the Stick uses the constructs of Strategic Control Points (the “Stick”) and Vertically Aligned Incentives through Asset Specificity (the “Carrot”).
These are material to firm performance.
In a detailed study of firms in the S&P 500 over an 8-year period using Wharton’s WRDS database, companies who did well on Strategic Control and Vertical Incentive Alignment significantly outperformed those who did not. Some evidence that this is material to firm performance:
34% of EBITA growth was explained by Strategic Control and Vertical Incentive Alignment alone.
A full 41% of share price change over these 8 years was explained by just 3 factors: Strategic Control, Vertical Incentive Alignment and Net Income.
Companies that did well on both Strategic Control and Vertical Incentive Alignment more than doubled EBITA and saw a 70% share price appreciation over this period whereas those that did poorly on both actually saw EBITA decline. This is material to firm performance - it matters.