In 1995, two Harvard Business School professors, Collis and Montgomery, published a paper that shook the strategic planning world. The mavericks argued in the article that it’s not enough to know your marketplace in addition to what you do, and don’t do, well. (In strategic planning parlance, think SWOT.) What also matters when developing strategy is pinpointing the right resources and putting them to work in a way that places you at the head of the class.
However, when they talk about the right resources, the authors aren’t necessarily pointing to that great widget maker you just bought, a zany advertising campaign you’re ready to plug in, or the brilliant product developer you hired; neither are they promoting your expertise like knowing where to whack expenses and restructure, nor useful programs like TQM, lean manufacturing, kaizen, etc.
At a minimum, the right resources will meet several criteria. Primarily, they have to be:
Truly unique and hard to get;
Durable, or deliver long lasting value; and
Be competitively superior enough to drive profitability.
Analysts call advantages like these moats because they protect the business from market threats. Topping the list are the touchy-feely, soft, intangible assets that make up your company culture.
Company culture meets the test. Culture is unique to each business and can drive employees to enthusiastically pursue business goals. We know a culture like this is hard to get because so few companies can brag about having one. It’s durable because it supports greater profitability in so many ways and can generate great returns year after year. And it’s competitively superior because companies with the right culture stand out from the industry pack.
Other resources besides culture can certainly meet the basic test to be a moat and create strategic advantage. Take Coca-Cola’s classic recipe, for example. It meets all the basic criteria. But its value as a resource is limited without other resources to successfully bring it to market.
That’s why the best potential resource a company can develop is a workforce with a culture of collaboration and personal commitment to exceptional business results. A culture like this can make other resources like Coca-Cola’s recipe far more valuable than they would be without it.
The proof the Harvard pair cites is from Jim Collins’ research published in books like Good to Great where great companies derive from great cultures tied to the marketplace. If you have employees, the message is that the most important component of strategy for you should be nurturing their commitment to shared success. That means developing leaders and employees who understand the business and who support each other with the initiative to do what it takes to succeed as a business unit. That’s all about culture.
Strategic planning defines how we will compete in a marketplace. Focusing on building the resources to compete — especially a workforce culture of employees actively working to improve business results — should be at the top of the strategic plan. It’s the big differentiator for businesses that excel in their markets.
So when you think about your business strategy, don’t overlook the obvious — the human resources you employ every day — and consider how you can invest in them to build a great culture. It’s the resource that can give you a major competitive advantage over those whose strategic planning process is…well...so yesterday.
Kevin Herring is a workforce performance turnaround expert, consultant and speaker. Founder of Ascent Management Consulting, Kevin Herring has radically transformed the performance of many struggling managers and work units through his high involvement leadership development and consulting methods.
Killen Herring is an experienced leader with a background in strategy, operations and financial services. He has led teams in strategy development as well as risk management and mitigation.