ebay vs amazon
The Coher
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86 Harvard Business Review June 2010
1191 Jun10 Leinwand REV.indd 86
5/4/10 10:42:19 AM
HBR.ORG
Paul Leinwand (paul. leinwand@booz.com) is a partner at Booz & Company in Chicago.
Cesare Mainardi (cesare. mainardi@booz.com) is managing director of Booz &
Company’s North American business and is a member of the firm’s executive committee. ence
Is your company disciplined enough to focus intensely on what it does best? by Paul Leinwand and Cesare Mainardi
ILLUSTRATION: TOMASZ WALENTA
S
ustainable, superior returns accrue to companies that focus on what they do best. The truth is that simple, and yet it’s incredibly hard to internalize. It is the rare company indeed that focuses on “what we do better than anyone” in making every operating decision across every business unit and product line. Rarer still is the company that has aligned its differentiating internal capabilities with the right external market position. We call such companies “coherent.”
Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities. They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success. Their growth emanates not from the core but from the
acquisition of apparent “adjacencies” that are often anything but and the exploration of “blue oceans” that turn out to be unswimmable. Even in contraction mode, when companies hunker down and try to wring more out of execution, most strategies fail to pay sufficient attention to capabilities. Costcutting, for example, is usually an across-the-board exercise, rather than a considered reallocation of resources. In fact, few strategies explicitly mention capabilities at all. Instead, strategy development follows the well-worn path from the market back to the boardroom.
We’re not suggesting that companies
Premium
86 Harvard Business Review June 2010
1191 Jun10 Leinwand REV.indd 86
5/4/10 10:42:19 AM
HBR.ORG
Paul Leinwand (paul. leinwand@booz.com) is a partner at Booz & Company in Chicago.
Cesare Mainardi (cesare. mainardi@booz.com) is managing director of Booz &
Company’s North American business and is a member of the firm’s executive committee. ence
Is your company disciplined enough to focus intensely on what it does best? by Paul Leinwand and Cesare Mainardi
ILLUSTRATION: TOMASZ WALENTA
S
ustainable, superior returns accrue to companies that focus on what they do best. The truth is that simple, and yet it’s incredibly hard to internalize. It is the rare company indeed that focuses on “what we do better than anyone” in making every operating decision across every business unit and product line. Rarer still is the company that has aligned its differentiating internal capabilities with the right external market position. We call such companies “coherent.”
Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities. They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success. Their growth emanates not from the core but from the
acquisition of apparent “adjacencies” that are often anything but and the exploration of “blue oceans” that turn out to be unswimmable. Even in contraction mode, when companies hunker down and try to wring more out of execution, most strategies fail to pay sufficient attention to capabilities. Costcutting, for example, is usually an across-the-board exercise, rather than a considered reallocation of resources. In fact, few strategies explicitly mention capabilities at all. Instead, strategy development follows the well-worn path from the market back to the boardroom.
We’re not suggesting that companies