Mark McDonald

The Essential Advantage is a good business book, providing a different perspective on strategy, corporate development and business operations. The book ostensibly is about being capabilities driven organization, but in reality the book’s main theme is coherence rather than capabilities. Its central argument is that firms who are, in the author’s words, resolutely focused and clear minded about their market position, distinctive capabilities and product and service portfolio.

The authors use the idea of coherence to revisit major enterprise decisions ranging from corporate development to cost cutting and M&A. The book is filled with solid advice based on this idea that you need to stick with what you are good with.

This book is really about coherence and more than it is about capability, so people looking for an update on how to apply resource based theories of competition will be misled by the title. The authors do talk a bit about capabilities and resources, but that is only as a path to achieve coherence. The principle framework is about coherence and how you align “the way you play” (read go to market) with your products and services with your capability system (read operations). I can understand that is hard to write a book, whose basic advice is be consistent and coherence, but that is the fundamental advice throughout the book.

The book is divided into four parts along the major lines of coherence.

Part 1 provides evidence that coherent companies – those with greater focus – perform better than their peers. It also talks about how you create a capabilities-driven strategy is based more on go to market strategies than a resource base.

Part 2 concentrates on elements of a capability driven strategy with particular focus on the need to know which are the four to six capabilities you use to win in the marketplace. These capabilities form the ‘capabilities system’ that is part of the framework used throughout the book.

Part 3 Creating value discusses how to apply these systems to different growth situations including organic growth, M&A, and cost cutting/focus. The principle is the same coherence/focus wins out.

Part 4 Living coherence every day finally discusses a process by which you create a new way to play and capabilities.

Overall, this is a solid book, giving good advice, but it is a book about go to market strategies and coherence not capability. That is ok, because you need capabilities to achieve both, it is just that finding solid and actionable advice on capabilities is challenging.

The book is recommended for people who find themselves at companies doing 1,000 things and none of them very well.  It is also recommended for managers who are tired of old finance based ways of thinking and acting and want to focus more on how you actually win in the marketplace.

Strengths

• Effective use of case studies to illustrate how coherence drives financial, operational and strategic advantage. The write up regarding how Wal-mart refocused in the mid 2000’s is particularly insightful.  One drawback is that many of the case examples are older than 5 years suggesting that these ideas may not be current best practice.

• The authors provide counter-intuitive advice and use the way to play and coherence to back up their thinking. This is helpful, particularly in discussions about cost cutting, market focus, etc, as for some reason executives often fail to see the capability based implications that are obvious to line management and executives.

• A consistent use the term coherence and describing things in those terms as the book could have easily chased just about every idea in strategy, but it was coherent itself.

• Focus, the book is tightly written in around 200 pages with a clear message, good stories and just enough detail to let you know that the authors how what they are talking about and the advice is sound.

Challenges

• The book honest in the fact that it borrows and recasts many ideas originally advanced by others, most notably Hamel and Prahalad.  This is fine and the references are a sign of good scholarship and anchoring the reader back to other proven ideas.  However, it creates a challenge regarding what is new here.  Being coherent and having a strong go to market strategy are important ideas, but hardly new.

• The book makes little account of current context or the realities of current capability sets.  There is no substantive mention of technology – the groundwork for much capability evolution and innovation, nor is there much recognition of globalization on the supply chain side. Given that these are two major forces influencing capabilities, they are conspicuous by their absence.

• The authors place an emphasis on chapter 10, the capabiliteis driven roadmap throughout the book as the place where all the how to questions will be answered.  Unfortunately chapter 10 occurs too late in the book, it would have been better as part 2, so by the time you get there your expectations are so high that its bound to be ok, but not bring everything together.

Overall, this is a solid business book.  Insightful.  The concept of capabilities and how you manage an organization absed on them is powerful and this book does a good job of suggesting hwo they influence strategy.

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Category: 2011 Book Review Strategy     Tags: Book Review, Business Leadership, Business Strategy, Strategy and Planning

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