Long-term survival in today’s market is always questionable as many of the hottest businesses today will eventually fade away. Firms continually reinvent themselves to stay relevant and competitive (Voelpel, Leibold, & Tekie, 2004, pp. 259-276). Today, many of the old-guard technology firms are moving as quickly as they can to the Cloud. Intel and Microsoft announced less than stellar earnings this week and cited their ongoing efforts in moving their focus to the Cloud. These tech behemoths are confronting enormous challenges in their strategy shift. However, these moves are necessary as they pursue new models for sustainable competitive advantage.
The three most common elements cited for enabling sustainable competitive advantages are business strategies, execution excellence, and an engaged corporate culture. A significant portion of organizational performance is attributed to the synergistic effects of these three components (Heskett, 2012, pp. 19-22). However, a consensus does not exist about the most influential of these elements. Historically, the strategy has taken center stage. More recently, the pendulum has moved towards an engaged corporate culture as the critical contributor to long-term organizational performance.
Strategy is not set in stone
A business strategy encompasses the concepts, plans, and decisions that a firm makes for the purpose of achieving various marketplace advantages (Teece, 2010, pp. 172-194). Before an organization embarks on its business strategy development, It is time to go back to the basics. A serious discussion from the Boardroom to the lunchroom needs to happen regarding the firm’s vision, mission, and organizational values. The vision and mission of an organization directly inform the business strategy (Hart, 1992, pp. 327-351). It provides the basic goals, purpose, and fundamental operational parameters. As the mission and values integrate throughout an organization, it becomes the cornerstone of the corporate culture and tightly interwoven with each other.
A strategy exists in every business, whether it is overtly planned or organically derived. Having a brilliant strategy does not guarantee a competitive advantage or market acceptance. However, the lack of a well-designed and pressure tested business strategy often dooms the business right from the start.
Many of the strategies are formulated during the earliest stages of the organization. Business strategy is not often changed, but then again, it is not a permanent fixture. As businesses and markets mature, the strategy needs to be refined and updated. This process allows organizations to refocus their efforts on remaining competitive in the marketplace. Intel’s comments this week and the shifts saw in the last half of 2015 for both HP and IBM is solid examples of these businesses changing in response to the evolving competitive landscape. They understand the mantra of adapt or die.
Execution does not mean…
One of the reasons that strategies fail arises from breakdowns in execution. This is common sense, but our internal biases often lead people down the wrong path. The 2015 Harvard Business Review article “Why Strategy Execution Unravels—and What to Do About It” by Donald Sull, Rebecca Homkes, and Charles Sull discusses some the execution myths that frequently lead to failures. This is one of the articles that should be on ever leaders must-read list. I will not bore you with a cheap summarization of their excellent work. Please take 15 minutes and read the article. It will change the way you think about execution.
An organization’s culture is not static. It evolves in response to the business environment and leadership actions. Additionally, research has shown a positive relationship between long-term business performances and advantageous cultural attributes (Marcoulides & Heck, 1993). When the organization’s culture aligns well with its strategy and execution, the factors that lead to the formation of internal barriers, confusion, and resistance are reduced. A healthy culture with engaged employees experiences higher levels of productivity and greater resiliency when faced with adversity (Damij, Levnajić, Rejec Skrt, & Suklan, 2015). By combining realistic expectations, proper resourcing, and a strong corporate culture, business strategy has the highest chances of being executed successfully and delivering on its goals.
The Answer is the Synergistic Combination of the Three Elements
Sustainable competitive advantage is the amalgamation of strategy, execution, and culture. When these elements are brought together successfully, organizational performance abounds. I am not sure a single central contributor exists for fostering the creation of a sustainable competitive advantage. If one element of the triad is removed, the structure will not stand. Only by combining all three elements do we build the business, foster innovation, and enable the organizational resiliency.