Nice concept, and BCG probably have intensive analytical tools to assess your rating on the 4 dimensions, but I fear that in practice it will join the list of qualitative and subjective ‘methods’ that seem to make sense, but don’t give much real value. It is hardly a great insight, for example, for a would-be multinational entrant to a RDE to discover it needs to focus on local adaptation of its products.

Good to see the Boston Consulting Group encourage us to focus on the core business (as we should have been doing in the first place), protect product development, look at competitors’ weaknesses etc. – and all with analysis too, rather than gut feel !

Unfortunate, though, that some of the proposals conflict, and some are positively dangerous. “.. begin with aggressive moves to cut costs and increase efficiency … some means of lowering break-even points are obvious: stripping out layers of the organization … consolidating central functions … “.

If you’re in danger of going under, maybe, but I keep coming across companies where everyone is ludicrously flat out and simply failing to get important things done. The strong impression is that many managements are grossly under-staffed, not top-heavy. And what goes out the door when you throw out those “time-wasters”? – the organization’s memory and knowledge of how to do simple, critical things. And those constant reorganizations do the same – in function after function, no-one knows how to do things because none of them have been there more than five minutes.

What you need in present conditions is settled people who really know what they are doing. [Reminds me of the three dimensions of organizational capability - the ability to do critical tasks well, fast, and cheap - see chapter 9 of Strategic Management Dynamics - analyst-driven obsession with doing things cheap does serious damage to doing things well, and fast.]

Then the article repeats that other current fad “Rethink your business model” – almost always wrong and in present conditions a bad distraction from making what you have work really effectively.

There’s some good stuff too though, so take a look – but with brain engaged!

Remember, though, that sound strategic business management requires keeping control of capabilities critical to competitive advantage .. we just need to be clear what those are!

One very common result is that firms may be less profitable, or even unprofitable, for many years, but still enjoy investors’ confidence and a strong share price. This support reflects the expectation that earnings will grow, even if they are not doing so yet. So I’ve asked now in 3 sessions here in Cologne why empirical research in academia hypothesises that ‘performance’ reflects some factor X, and then sets out to confirm that hypothesis correlation between factor X and profitability [ROS, ROA etc]. So far, I don’t get an answer that makes sense. The only attempt I heard was that “We are trying to explain ‘sustained competitive advantage’, and that is indicated by superior profitability.”

To illustrate the nonsense this gets us into – Amazon.com was loss-making for many years, and still generates rather modest profitability. Every time they could have become more profitable, they found further opportunities for growth. So if you took the academic logic, you would be trying to explain why Amazon.com has been an unsuccessful business !

‘Sustainable competitive advantage’ is important of course – if only we knew what it was. I’d go for ‘the ability to sustain stronger growth in earnings than other firms’, which is what managers seem to seek and investors value.

[ Strictly, investors value 'free cash flow' - the cash flow generated after the business has spent what it needs to grow - which is why they can be reasonably upset when firms with limited growth opportunities throw their cash away on ill-advised acquisitions. ]