Montgomery, Cynthia. The Strategist. Be the Leader Your Business Needs

Posted on January 1, 2017

Concepts

Value Creation

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A trio of economists— Adam Brandenburger, Barry Nalebuff, and Harborne Stuart— who study game theory suggest a wider angle. They remind us that managers need to think not only about what’s best for their own firms, but also about how what they do affects others. This involves the two outer lines: Customers’ Willingness to Pay (essentially customers’ satisfaction with a good or service) and Suppliers’ Willingness to Supply (essentially their opportunity cost— the lowest price at which they would be willing to sell to a particular firm). It’s when a company drives a wider wedge between these lines— expanding the total value created— that its existence matters in an industry.

(Montgomery, 2012, p. 53)

Hallmarks of Great Strategies

  1. Anchored by a clear and compelling purpose: It is said that “if you don’t know where you’re going, there isn’t a road that can get you there.” Organizations should exist for a reason. What’s yours?

  2. Add real value: Organizations that have a difference that matters add value. If any of them were to go away, they would be missed. Would yours? 

  3. Clear choices: Excellence comes from well-defined effort. Attempting to do too many things makes it difficult to do any of them well. What has your business decided to do? To not do? 

  4. Tailored system of value creation: The first step in great execution is translating an idea into a system of action, where efforts are aligned and mutually reinforcing. Does this describe your business? In most companies, the true answer is no. 

  5. Meaningful metrics: Global outcome measures like ROI indicate whether a strategy is working, but key performance drivers, tailored to your own strategy, are a better indication. They break big aspirations into specific, measurable goals, and guide behavior toward what matters. 

  6. Passion: It’s a soft concept, but it’s at the heart of every great strategy. Even in the most mundane industries, companies that stand out care deeply about what they do.

(Montgomery, 2012, pp. 101–103)

Strategy Pitfalls

  1. Generic statements: Simply saying you are in book publishing, steel fabrication, or sports marketing tells little. Within that domain, what makes you distinctive? Ask yourself this: If they read your strategy statement, would your customers recognize you? Would your employees? Pixar didn’t say it made movies— it said it developed “computer-animated feature films with memorable characters and heartwarming stories that appeal to audiences of all ages.”

  2. No trade-offs: You can’t be everything to everybody, although a lot of weak strategies and strategy statements implicitly claim to be. It doesn’t work.

  3. Empty clichés: Grand statements unsupported by credible detail are vacuous. Terms such as “Excellent,” “Leading,” and “Outstanding” don’t say anything specific. Strategy statements gain credibility when specific statements capture what a firm does particularly well.

  4. Forgetting the means: Many weak statements eagerly tell you the what but forget the how— the critical activities and resources that enable the firm to realize its competitive advantage. It is through the how that a reader gains confidence about what you’re doing. Which do you find most convincing: “We’re the low-cost producer,” or “We’re the low-cost producer operating the world’s largest titanium dioxide plant utilizing DuPont’s proprietary technology”?

  5. Leaving out the customer: Who you serve is a crucial part of your story. It not only defines your playing field; it also says who will ultimately decide whether what you do really matters. 

  6. Deadly dull: There is no other way to say it: A lot of strategy statements in their initial drafts drone on, without conviction, without inspiration. Ask yourself: Would you want to work for this company? Would you want to buy from it?

(Montgomery, 2012, p. 105)

Quotes

Business Purpose & Strategy Definition

Does your company matter?

That’s the most important question every business leader must answer.

If you closed its doors today, would your customers suffer any real loss? How long would it take, and how difficult would it be, for them to find another firm that could meet those needs as well as you did?

(Montgomery, 2012, p. 7)


In fact, the terms purpose and competitive advantage could be used in conjunction with each other, but competitive advantage places the focus on a firm’s competition. That’s important, but it’s not enough. Leaders too often think the heart of strategy is beating the competition. Not so. Strategy is about serving an unmet need, doing something unique or uniquely well for some set of stakeholders. Beating the competition is critical, to be sure, but it’s the result of finding and filling that need, not the goal.

(Montgomery, 2012, p. 46)


A good purpose puts a stake in the ground. It says “We do X, not Y.” “We will be this, not that.” It’s a commitment. Choosing to be one thing means not being something else. Michael Porter recognized that such choices involve trade-offs— letting some things go in order to be better at something else. Companies that don’t choose, for whatever reason, run the risk of ending up in no-man’s-land, being nothing of distinction to anyone. If your purpose does not preclude you from undertaking certain kinds of work, then it’s not a good purpose. Purpose, like strategy, is about choice, and a real choice contains, if only implicitly, both positive (“ We do this”) and negative (“ By implication, then, we don’t do something else”) elements.

(Montgomery, 2012, p. 50)


If you feel your company’s strategy is too complex to summarize in one or two paragraphs, that’s likely a sign that the strategy itself is unclear, or convoluted in some way.

(Montgomery, 2012, p. 100)

Strategy & Leadership

Ironically, the most successful and admired leaders, the titans of business, understand the profound significance of competitive forces outside their control. They know the crucial importance of picking the right playing field. They don’t buy the management myth that a truly good manger can prevail regardless of the circumstances.

(Montgomery, 2012, p. 30)


[on attempting to formulate one’s strategy] It’s a struggle because analyzing yourself is always harder than analyzing someone else. The cool objectivity and clarity you enjoy as a spectator often gives way to uncertainty and doubt when you start to confront the reality of your own situation.

(Montgomery, 2012, pp. 79–80)


Many people believe a strategist’s primary job is thinking. It isn’t. The number-one job is setting an agenda and putting in place the organization to carry it out.

(Montgomery, 2012, p. 77)


At heart, most strategies, like most people, involve some mystery.

(Montgomery, 2012, p. 109)


….the resources that are particularly valuable in most strategies are … intangible resources such as brands and corporate reputations, and complex organizational capabilities and routines that are vital to a firm’s distinctiveness yet relatively scarce and difficult to imitate.

(Montgomery, 2012, p. 74)

Change

Great firms— Nike, Toyota, and Amazon, to name a few— evolve and change. So too do great strategies. No matter how compelling, or how clearly defined, no one strategy is likely to be a sufficient guide for a firm that aspires to a long and prosperous life.

(Montgomery, 2012, p. 110)


After slaying the Minotaur in Crete, the hero Theseus sailed back to Athens in a well-worn ship. As each plank decayed, it was replaced by new and stronger timber, until every plank in the ship had been changed. Was it then still the same ship? And if not, then at what point— with which plank— did the ship’s identity shift? It’s a paradox that Plutarch called “the logical question of things that grow.” …. as a leader, you must allow yourself to be open to reinterpreting what your business is about…Theseus was willing to change over every part of his ship to preserve its seaworthiness.

(Montgomery, 2012, pp. 126–139)

Success

Pablo Picasso put it bluntly: “Success is dangerous. One begins to copy oneself, and to copy oneself is more dangerous than to copy others. It leads to sterility.” 

(Montgomery, 2012, p. 140)

Case Studies

Cirque du Soleil

The founders of Cirque du Soleil, performers themselves, understood the essence of the traditional circus—that is was focused on children and that its economics were badly strained by the expense of transporting and caring for large, wild animals. By focusing on an adult audience, which let them drop many of the animal acts, they skillfully positioned themselves to avoid one of the industry’s greatest drains on profits while targeting customers with the highest willingness to pay.

(Montgomery, 2012, p. 31)

IKEA

Before going to the School of Commerce in Gothenburg, Kamprad signed the paperwork to start his own trading firm, IKEA Agunnaryd [I for Ingvar, K for Kamprad, E for the family farm Elmtaryd, and A for Agunnaryd]. The mail-order business grew to include everything from fountain pens and picture frames to watches and jewelry. With a keen eye for value, Kamprad ferreted out the lowest-cost sources. Frugality was the norm in Smaland. Its farmers, eking their living from a harsh and spare environment, had to make every penny count.

Noticing that his toughest competitor in the catalog business sold furniture, Kamprad decided to add some to his offerings, supplied by small local furniture makers. Furniture quickly became the biggest part of his business; in the postwar boom, Swedes were buying a lot of it. In 1951, at age twenty-five, he dropped all his other products to focus exclusively on furniture.

Almost immediately he found himself in a crisis. Growing competition from other mail-order firms led to a price war. Across the industry, quality dropped as merchants and manufacturers cut costs. Complaints started to mount. “The mail order trade was risking an increasingly bad reputation,” Kamprad said. He didn’t want to join the race to the bottom, but how could he persuade customers that his goods were sound when they had only catalog descriptions to rely on? His answer: create a showroom where customers could see the merchandise firsthand. In 1953 he opened one in an old two-story building. The furniture was on the ground floor; upstairs were free coffee and buns. Over a thousand people came to the village for the opening, and a gratifying number wrote out orders. By 1955, IKEA was sending out a half a million catalogs and had sales of 6 million krona.

Kamprad understood his customers on a personal level. As he would later say, in explaining IKEA’s philosophy, “Since IKEA turns to the many people who as a rule have small resources, the company must be not just cheap, nor just cheaper— but very much cheaper … the goods must be such that ordinary people can easily and quickly identify the lowness of the price.”

(Montgomery, 2012, p. 41)

BibTex

@book{montgomery2012,
title={{The Strategist: Be the Leader Your Business Needs}},
author={Montgomery, C.A.},
isbn={9780007426683},
year={2012},
publisher={HarperCollins Publishers Limited}
}

Montgomery, C., 2012. The Strategist: Be the Leader Your Business Needs. HarperCollins Publishers Limited.