INDIVISIBLE PRODUCT STRATEGY
Why Product Line Strategies are so important
Focus matters in business. A good focus sets up brilliant decisions and actions, and a poor focus leads to marginal performance.
Focus is the most critical component of any?strategy .
Many entities and groups need a sharp focus and strategy to drive the performance of a large company. The corporate enterprise needs its focus and strategy. Plus, each business unit, department, and group needs its own focus. But the bigger challenge is that all the strategies must align and should boost one another.
Different Strategies
Consider how corporate and business unit strategies differ.
A corporate will be aspirational and focus on topics like people management, sustainability, and corporate citizenship.?It shares a purpose and states a direction, but doesn’t address day-to-day activities.
A business unit’s focus is on operations and customers. It must provide clear guidance on “where to play” and “how to play.”1 ?And each business unit’s strategy must align with the corporate strategy.
At the level below a business unit, each function is a focal point needing a strategy. For example, supply chain and IT each need strategies. These strategies should enable fast decisions and actions in the trenches of day-to-day work.
Where to Focus
Most important, leadership needs to figure out how they want to focus and build strategies for products and offerings. Here, management can anchor their focus on “where-to-play” and “how-to-play.”
Good strategies demand more than figuring out focal points. They also gain alignment and build synergy across strategies. Think of alignment as the coordination level that assures one strategy doesn’t harm another. Synergy goes further. It’s when one strategy boosts another beyond what it can achieve on its own.
Business dynamics create challenges in gaining and keeping alignment and synergy. Each strategy must change in response to other strategies and to market, technology, and competitor changes.
Indivisible Strategy
Often, developing a full answer to the “on what to focus” question can be difficult. Professor Roger Martin, the famed strategy expert, shares insights that help us in this task. He teaches us that some strategies should be indivisible.2
The indivisible level is where you gain nothing by further dividing a strategy and its focus.
If you divide the focus too much, the?parts ?become indistinguishable from one another. Yet the divide sets up different strategic paths with different decisions and actions. You end up with two similar parts going in different directions.
You’ll see that when strategies diverge, their combined performance declines. For that reason, companies should create their focus and build strategies at the indivisible level.
Martin’s indivisibility principle suggests two types of strategy mistakes:
Strategy Levels
It’s easy to see how a Business Unit Strategy divides from a Corporate Strategy. One is customer and operational-focused. The other is aspirational. It’s also easy to see how functions like those for sales and IT strategies need a unique focus and strategy. But the focus on products and offerings often confuses management teams.
Consider the different levels and influences management teams must recognize about products and offerings. Management may view products as individual offerings,?product ?families, or product lines. In accounting, the product concerns may be on individual SKUs and bills of materials. Sales may be concerned with geographies, industries, or customer size. In marketing, the emphasis may be on brands and competitive positioning.
Making the “on what to focus”?decision ?about products demands managers to understand the discrete product-related entities: products, product lines, and product families. The decision is straightforward when you use Martin’s “indivisibility” lens.
Product Strategy Indivisibility
So, at what level does the strategy related to products become indivisible? Let’s view Samsung, the Korean conglomerate, to explore the answer.
Most people know Samsung’s Consumer Electronics business unit. But Samsung also has several other BU’s, including Heavy Industry, Electronic Components (chips, etc.), Chemicals, and Insurance.
A dive into Samsung’s Consumer Electronics BU shows it has a broad product family comprising several product lines. These lines include TVs, Cell Phones, Tablets, and Appliances. Many products within each line target many?market segments ?(Where to Play) with unique feature sets (How to Play.)
The indivisible strategy level is the?product line . It’s not the product family or the individual products. Suppose you divide Samsung’s TV product line into separate entities related to market segments. You’ll lose the leverage the product line gains from a common design and production platform. That’s not likely to help, especially since the global TV industry competes on price-performance.
Gains from a strategy will also degrade if you seek to manage the strategy at the full product family level and include phones and kitchen appliances with TVs. In this case, you’ll lose responsiveness to customers and competitors.
For products and offerings in large companies, strategy indivisibility almost always falls to the product line. Go too low, and you’ll lose scale and positioning advantages. Go too high, and you’ll lose responsiveness. You build scale using platform-levers, engineer coordinated sets of product features, and gain synergy across products at the product line level. Plus, a product line focus helps you make moves that drive up customer satisfaction while hampering competitors.
Indivisible Performance
Strategy indivisibility is crucial to performance. The product line is a core building block of any business unit strategy. But each product line strategy must also work in unison with the business unit’s product lines. Plus, it must work in unison with sales, branding, operations, and supply chain strategies.
A simple visual analogy of a chain helps explain the strategy unison within a business unit. Each indivisible strategy is a link in the business unit?strategy chain . The strength of the chain depends on the strength of each link. But it also depends on how well they connect.
Should a link fail, the entire chain can fail. That’s what happened at Hershey many years ago when the IT group’s SAP implementation failed. The failure caused the company to lose an entire holiday season for producing and selling its beloved chocolate. Today, you’d find Hershey’s IT?chain-link ?one of the strongest of any consumer products company.
Strategy Unison
When indivisible links are strong and working in unison, the strategies can boost one another. Consider how an indivisible IT strategy can enable synergistic boosts across the other indivisible links. These gains happen when IT advances the organization’s capabilities beyond data handling to data analytics and AI. Sales can respond faster to customer needs before problems occur. Marketing can segment markets more precisely. And operations can control costs and improve quality levels previously unachievable.
Perhaps the most impactful outcome of advancing and unifying the indivisible links is how it expands product and service possibilities. No longer is product strategy a marketing and engineering result.?All links must be involved.
In the chain-link analogy, the manner the indivisible strategy links connect is the?business model . Also, recognize that changing the business model will change the strategy links and their unison.
You’ll also find transformations cause shifts in all indivisible strategies. For example,?digitalization ?may affect product lines, sales, and operations. Such a change nearly always requires new alignment. But equally important, it also enables new synergies.
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Pivots and Business Models
Product line pivots also create major changes that affect a business unit’s strategy chain. That’s because a?pivot ?is more than an addition to the system. It’s a change to the?product line system ‘s basic?archetype. ?For example, when a product line team shifts their line’s source of leverage from design to service-centric, they change the line’s archetype.
A product line pivot always demands changes across strategies. The full change enables alignment and synergy. It’s also why product line archetype changes go hand-in-hand with creating new business?models .
Knowing where to focus is critical to any strategy. But the focus must be more than seeing and recognizing the focal point. It demands a?deliberate and intense focus. Recognize also that each indivisible strategy needs such focus. Companies gain intense focus through organizational structure, skills, abilities, processes, and practices.
Product Line Systems
It’s fair to use systems thinking to reinforce Martin’s indivisibility notion. Each indivisible strategy is a system. Don’t think of this as a mechanical system with defined, well-understood parts. In business, it’s more like a complex organic system where parts morph, strengthen and weaken, get created, and die off. If you divide a system too far, performance will decline. And if you try to manage the system at too high a level, you’ll lose influence over parts and?forces ?that determine success.
In all systems, organic or not, there are a limited few parts that dominate or influence the whole. These limited few parts will control the indivisible system’s output, which means an intense focus on these few parts will yield the greatest bang for the buck. This principle is like saying 10% of the system’s parts will determine 90% of its performance.
The 10% principle is also the foundation of strategy. Each indivisible strategy has its own 10%. Strategy formation is about deciding the indivisible strategies, finding each strategy’s 10%, and creating an intense focus on these few parts.
For business units, the strategy job is to choose the indivisible strategies and to enable their alignment and synergy. For product line strategy, the job is to decide “where to play” and “how to play,” and to spot the key parts on which to focus intensely.
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Footnotes
Vice President Market Strategy at FORTERA
2 年Great article Paul O'Connor . A strategy focus is a key element to lead the business to its greatest competitive advantage and there must be a mechanics to focus the organization on what it will do best and keep it from getting distracted by other opportunities that come along. Focus and indivisibility will lead the strategy performance