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In the past few weeks, we’ve been talking about different aspects of Return Driven Strategy’s (RDS) Tenet 4: Deliver Offerings.
In these articles, we highlighted the importance of strategic planning, planning executability, and execution. We also featured case studies of various businesses such as:
- Harley Davidson
- Toyota Motor Company
- Toys R Us
- Motorola
Among the companies listed above, Harley Davidson and Toyota Motor Company have shown to generate high returns because of effectively implementing continual improvements to their strategies.
On the other hand, Toys R Us and Motorola failed to sustain their positions as market leaders because of their failure to deliver the exact offerings customers find valuable.
Let’s briefly recall where these companies went wrong in their strategies…
In the 1990s, Toys R Us failed to plan executability, or the concept that bridges planning and execution.
When the company realized the Internet and World Wide Web were starting to become a dominant force of retail, it created its online presence, www.toysrus.com. At first, the strategy made sense.
Here’s the problem: Before launching the online store, Toys R Us failed to determine whether or not its warehouses were capable of pick-and-pack shipping methods. As a result, the company disappointed thousands of customers and failed to deliver orders on time.
[Pick-and-pack: A term for warehouse work that involves picking the correct type and number of items from shelves and packing them efficiently for shipping.]
Meanwhile, Motorola’s Iridium satellite phone system was known as the only mobile system that worked flawlessly amid different circumstances in the early 2000s. However, despite achieving “operational effectiveness,” the product failed to generate high revenues for Motorola.
Why?
It was because of an inadequate strategy.
While Motorola’s Iridium was truly a marvel of technology during that time, there simply weren’t enough customers who could afford to pay high prices for the product. This shows that while the development of Motorola’s offering was sound, the estimate for the level of need for the offering wasn’t.
In the end, the company sold off its Iridium mobile phone system after suffering great losses.
What do these case studies tell you about RDS’ Tenet 4?
In delivering what’s promised, failure is NOT an option.
Business success is dependent on effectively delivering the offerings that a firm has branded in the minds of its customers. The difficulty lies in understanding exactly what consumers want (as in the case of Toys R Us), and NOT over-delivering on things they don’t deem as valuable (as in the case of Motorola’s Iridium phone system).
The consequence of failing to do these things?
Being on the receiving end of customers’ wrath and disappointment.
The Right Execution at the Right Stage
In the 1980s and 1990s, pharmaceutical and medical device companies like Abbott, Pfizer, and Medtronic showed some of the most consistently high returns year after year.
How did they achieve this performance?
Generally, at the early stages of the drug and device development pipeline, companies would expect to experience failures. After all, successful research, discovery, and creativity entail going through several failed attempts and trials.
However, at the end of the pipeline, when drugs and medical devices need to be launched and provided to patients, defects have to be ZERO; especially with people’s lives on the line.
This means there’s a right execution for every stage. The right systems, processes, and ways of thinking at the beginning of the pipeline should be drastically different from that at the end. This also supports the point that in actually delivering what’s promised, failure is not an option.
Abbott, Pfizer, and Medtronic recognized this and acted accordingly. They fitted the right methods for execution given the strategy and stage in place. The result?
They achieved consistently high performance and high returns for many years!
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According to Professor Joel Litman and Dr. Mark L. Frigo in the book, “Driven,” RDS’ Tenet 4 is fourth in the framework for a reason: Its focus must be squarely on achieving Tenets 1 (Ethically Maximize Wealth), 2 (Fulfill Otherwise Unmet Customer Needs), and 3 (Target and Dominate Markets).
Professor Litman and Dr. Frigo also say high-return businesses bypass unnecessary debates that separate strategy and execution.
Instead, they view these as concepts that go hand-in-hand, because management teams believe cash flow returns follow a focus on the executability of plans, and the effective and efficient delivery of promised offerings.
As strategies of today are executed, results must drive a reconsideration of those strategies to further improve a particular process or system. Simply said, the implementation of plans today is simultaneously a part of the plan development of tomorrow.
… and while strategy and execution are different, they are equally important focal points of great business success.
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