Encyclopedia of Leadership

HOW TO USE THIS LEADERSHIP TOOL

“Once a business unit has defined the type of competitive advantage that it intends to establish, it faces the

challenge of actually creating the intended advantage, a process that has two parts: 1. designing the value con-

stellation, and ...2. managing the value chain.”

—Anil K. Gupta, in THE PORTABLE MBA IN STRATEGY

Focusing strategy at the right level can be a challenging task. For example, should a paper goods

business unit focus on “paper goods,” or one level down, on “diapers, towels, and tissues”? You

can define strategy too precisely; for example a wristwatch business-unit strategy (circa 1970): “the

production of mechanical, pin-levered watches.” This missed the now-burgeoning market for elec-

tronic watches. On the other hand, if you define strategy too broadly, it doesn’t provide the crisp

focus needed to guide day-to-day business decisions. The challenge of finding the right level is

defining business-unit scope. Indeed, challenges surface through all five stages of business-unit

strategy, and a lack of superiority along any critical dimension of relative competitive advantage

will sooner or later result in your business unit being unable to sustain its current market position.

WEB WORKSHEET

Use the workspace provided here to sketch out some opening thoughts about your business

unit’s strategy. This process will evolve as you work, and will take some time. Involve team

members early and often in this process. Invite and encourage them to influence the strategy

in meaningful ways. Implementation is next to impossible if people in the business unit don’t

deeply understand or aren’t fully committed to the strategy.

80 SECTION 3 TOOLS FORSTRATEGICTHINKING

This work requires understanding the overall organization’s dominant skills and relative weaknesses.

• Decide what work to do internally, and what to farm out (e.g., alliances, joint ventures, contracting).


• Reliance on others to perform essential activities, at which they are superior, may strengthen your overall bundle of
  products, services, and prices. However, this carries risks (e.g., nonperformance, profit skimming, competition).

Designing the Value Constellation

List the drivers of customer value, cost structure, and asset investmentfor each business activity (e.g.,

research, design, assembly, marketing, distribution). Ensure integration across value-chain activities, including those

performed by business partners and contractors. This may include reduced development or delivery cycle times, more

customization, smaller inventories, more effective communication, lower costs, and so on (e.g., electronic data

exchange between a supplier like Procter & Gamble and a retailer like Wal-Mart).

Managing the Value Chain

Defining Business-Unit Scope