Creating Corporate Strategy
How can you tell if your company is really more than the sum of its partsl
CREATING CORPORATE ADVANTAGE
BY DAVID J. COLLIS AND CYNTHIA A. MONTGOMERY
M
OST MULTIBUSINESS COMPANIES ARE
the sum of their parts and nothing more. ^ Although executives have become more sophisticated in their understanding of what it takes to achieve competitive advantage at the level of individual businesses, when it comes to creating corporate advantage across multiple businesses, the news is far less encouraging. True, corporate executives face mounting pressure from their boards and from capital markets to add value. To date, however, that pressure has had the greatest impact on corporate strategy in pathological companies such as ITT, where the destruction of value was so great that it had to be stopped.
ARTWORK BY JEFFREY FISHER
71
CREATING CORPORATE ADVANTAGE
What has slipped under the radar are those companies-the majority, we would argue-that don't destroy value at the corporate level, but neither do they create it. That failure is not for lack of trying. Indeed, in many of the 50 companies we studied during a sixyear research project, corporate executives were struggling to create viable corporate strategies. Some were working on their core competencies, others were restructuring their corporate portfolios, and still others were building learning organizations. In each case, executives were focusing on individual elements of corporate strategy: resources, businesses, or organization. What was missing was the insight that turns those elements into an integrated whole. That insight is the essence of corporate advantage - the way a company creates value through the configuration and coordination of its multibusincss activities. Ultimately, it is Vk^hat differentiates truly great corporate strategies from the merely adequate.
THE TRIANGLE OF CORPORATE STRATEGY
Cofnpetitive Advantage-
\
Control
Choices Along The Resource Continuum
An
CREATING CORPORATE ADVANTAGE
BY DAVID J. COLLIS AND CYNTHIA A. MONTGOMERY
M
OST MULTIBUSINESS COMPANIES ARE
the sum of their parts and nothing more. ^ Although executives have become more sophisticated in their understanding of what it takes to achieve competitive advantage at the level of individual businesses, when it comes to creating corporate advantage across multiple businesses, the news is far less encouraging. True, corporate executives face mounting pressure from their boards and from capital markets to add value. To date, however, that pressure has had the greatest impact on corporate strategy in pathological companies such as ITT, where the destruction of value was so great that it had to be stopped.
ARTWORK BY JEFFREY FISHER
71
CREATING CORPORATE ADVANTAGE
What has slipped under the radar are those companies-the majority, we would argue-that don't destroy value at the corporate level, but neither do they create it. That failure is not for lack of trying. Indeed, in many of the 50 companies we studied during a sixyear research project, corporate executives were struggling to create viable corporate strategies. Some were working on their core competencies, others were restructuring their corporate portfolios, and still others were building learning organizations. In each case, executives were focusing on individual elements of corporate strategy: resources, businesses, or organization. What was missing was the insight that turns those elements into an integrated whole. That insight is the essence of corporate advantage - the way a company creates value through the configuration and coordination of its multibusincss activities. Ultimately, it is Vk^hat differentiates truly great corporate strategies from the merely adequate.
THE TRIANGLE OF CORPORATE STRATEGY
Cofnpetitive Advantage-
\
Control
Choices Along The Resource Continuum
An