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9 of 9 people found the following review helpful
4.0 out of 5 stars How to achieve coherence, February 20, 2011
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This review is from: The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Hardcover)
In this thought provoking book, Paul Leinwand and Cesare Mainardi argue that the essential advantage in business is coherence, all other forms of advantage that a business can enjoy are transitory, and provide their prescription for how a business can become strategically coherent.

In order for a business to become strategically coherent three factors need to come together, according to Paul Leinwand and Cesare Mainardi.

1. A business must have a clear way to play i.e. a considered approach for creating and capturing value in a particular market, in a way that differentiates it.

2. A business must have three to six mutually reinforcing capabilities i.e. a capability is the ability to reliably deliver a specified outcome that is relevant to the business.

3. A businesses products and service must fit its capabilities and way to play.

In essence, a strategically coherent business identifies its underlying value creation mechanism (i.e. what it does best) and the opportunities to meet the market effectively, and makes a choice that fits them both together into a coherent strategic position.

Companies that are strategically coherent reap a coherence premium in four specific, observable, ways.

1. Effectiveness: a renewed emphasis on, and continuous improvement of, their most relevant capabilities.

2. Efficiency: they obtain more value from their products and services, as they apply their capabilities across their products and services.

3. Focused investment: more efficient use of the businesses resources, attention and time i.e. the business spends more of its effort where it is needed the most.

4. Alignment: the business commits to a strategy and articulates it clearly. This provides everyone in the business with a common basis for the day-to-day decisions that they make.

Companies that are strategically incoherent reap a penalty, in the form of poorly used and wasted resources.

I am doubtfully about the authors' argument that coherence results in an permanent advantage. The authors appear to unwittingly contradict themselves, by providing examples in the book of where changes in the environment and/or competitors actions have resulted in a business having to change its way to play and its supporting capabilities. I suspect the authors would argue that coherence doesn't mean a business adopts a single strategy forever. It means a business continually refines and amends it strategy to remain coherent. My retort is that this is argument is a fallacy, because they are equivocating about what they mean by permanent advantage. This flaw does not, however, undermine the essence of the book, which is that a business that is strategically coherent business has a significant advantage over it competitors.

From my perspective (a policy analyst in the Strategy Directorate of New Zealand's Ministry of Agriculture and Forestry) I am interested in how applicable this theory is to New Zealand's biosecurity system, food safety system and its agriculture policy. Because the theory is targeted at business, it is directly relevant to New Zealand's processing companies e.g. Fonterra, the meat companies. I can also see that much of it could be applied to the different sectors in New Zealand's primary industries. Consequently, it provides my directorate with another method to analyse the performance of processing companies and the different sectors in New Zealand's primary industries. Finally, many of the concepts are relevant to MAF as an organisation. Consequently, I recommend this book.
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