GE has failed the cocktail napkin test. If you can’t explain your strategy to someone on the back of a cocktail napkin, it’s too complicated. The best-performing organizations have a single, overarching strategy that everyone in the organization understands. More complicated organizations end up tripping over themselves. That’s why GE is going to split up. Many of its individual businesses are focused. The conglomerate as a whole is not.
Strategic planning is about generating and selecting broad options to deal with barriers and close gaps between current realities and objectives. A good strategy guides the creation and allocation of resources to the right place, in the right way, at the right time, over time to bring to fruition your mission, vision, objectives and goals while following guiding principles.
A slight update to Porter’s model suggests organizations should pick one point on the value chain at which to focus in addition to the selling that everyone must do: invention, production, delivery, and experience. Your single overarching strategy should identify the right way to build and leverage unique strengths relative to competitors at your choice of one of those points.
Strategic priorities flow from that single overarching strategy and guide choices across the other points on the value chain by clarifying in which you need to be “Best-in-class’/superior (top 10%), “World class”/parity with the best (top 25%), “Strong”/above average or “Good enough.” In general, you’ll want to invest in the first two and simplify, scale or outsource the last.
GE’s lack of focus
GE plays across the entire value chain: Invent – produce – deliver – experience.
- GE invents. They “develop the next generation large additive machines.”
- GE produces as a “world-leading manufacturer for jet engines.”
- GE delivers, combining “decades of industrial leadership with cutting-edge data science and analytics acumen to create an efficient, productive and reliable digital-rail ecosystem.”
- GE provides a complete experience, supporting its customers with its “leasing, financing, services and consulting.”
It is not possible to do this as a unified company. The different points in the value chain require completely different cultures.
- Inventing the next generation of large additive machines requires an innovation-centered culture in which people are encouraged to take risks and rewarded for taking those risks whether they result in the next revolutionary step or helpful learning.
- Producing world-leading jet engines requires a disciplined culture in which people are rewarded for consistency and reliability. When jet engines fail, lives are at risk.
- Delivering across an efficient, productive and reliable digital-rail ecosystem requires a culture of systems thinkers orchestrating multiple parts and players as a cohesive whole.
- Providing an experience across leasing, financing, services and consulting requires a culture of service. People working here must think customer-first and pull existing solutions together in response to customers’ needs.
There’s much to be learned from Thomas Edison as an inventor and from Jack Welch as the ultimate creator of value in a conglomerate. Now, the leveling influence of the Internet has meant that winning organizations will be the ones with single overarching strategic postures, supported by clear strategic priorities completely aligned with their cultures.
Basics for you
- Strategy: The overarching strategy guiding all choices.
- Priorities: Resource choices in line with that strategy.
- Culture: Behaviors, relationships, attitudes, values, environment.
Push yourself and your leaders to get to one overarching strategy – simple enough to explain on a cocktail napkin. That strategy should make clear where you play and your core competitive advantage.
Be brutal about choices in the strategic priorities required to deliver that overarching strategy, investing in the very few things in which you must be either best-in-class or world class and decisively simplifying , scaling or outsourcing the things that need be only good enough.
Make sure your cultural behaviors, relationships, attitudes, values and environment are aligned with that overarching strategy and priorities. Just like GE, your strategies will evolve over time. Your people will change. In the end, the only sustainable competitive advantage is your organization’s culture.