Lecture Notes

Part Two—Creating, Adapting, and Implementing Strategy

Chapter 7 – Creating Advantage: Synergy

and Commitment vs. Opportunism vs.
Adaptability

Content of Chapter 7

1. An SCA is an element or combination of elements of the business strategy that provide a

meaningful, continuing advantage over current and potential competitors. SCAs can be
based on assets and competencies such as quality reputation, delivering value (customer
support), and brand familiarity.

2. Synergy exists with a combination business units (which could involve alliances),
generates one or more of the following: increased sales, reduced costs or reduced
investments as compared to each operating independently.

3. Strategic commitment, a “stick-to-your-knitting” focus on a single business strategy, can

lead to strategic stubbornness when the strategy is failing or becoming obsolete. Strategy
opportunism emphasizes current opportunities, and can lead to strategic drift where the
firm lacks the means to succeed in any market. Strategic adaptability, predicated on the
assumption that the firm can anticipate and drive emerging markets and submarkets, can
lead to strategic blunders when wrong judgments are made about the dynamics of the
market. There are few firms that use only one philosophy; most have a blend.

SCA

Ask the class to name successful firms (try to get a mix of service, durables, packaged
goods, hi-tech, etc.). For each, name the SCA. Spend enough time to get it to 5 or more. The
class should see that naming the SCA is not easy. Then do it for two to four other firms.
Compare the answers to the list of 32 drawn from the study in Figure 7.3 SCA for 248 firms on
page 126. Reputation for Quality was number 1. Why? Why are it and the other highly-related
SCAs (like brand recognition, and customer base) considered SCAs?

What is the difference between an SCA and a KSF (key success factor)? (The KSF is
about points of parity on important dimensions while the SCA is about points of advantage).

Ask also what companies had SCAs and lost them.

© 2010 John Wiley & Sons Lecture Notes Chapter 7–page 1

Synergy

What is synergy? Give some examples. Did synergy get implemented and work in any
of those situations? If the discussion is hard to get off the ground, suggest some examples like
Google and one of its acquisitions like YouTube or blogger. The implementation can be
difficult. The mirage of synergy is contained in Chapter 11.

What is the difference between synergy between alliance members vs. synergy
between the parts of the same company?
See question 3 for discussion.

Strategic Philosophies

Give examples of strategic commitment. Wal-Mart is one. Why does it work? What are
the conditions or assumptions? What type of organization is needed? What can go wrong?

Give examples of strategic opportunism. Nike is one. Why does it work? What are the
conditions or assumptions? What type of organization is needed? What can go wrong?
Give examples of strategic adaptability. PowerBar is one. Why does it work? What are the
conditions or assumptions? What type of organization is needed? What can go wrong?

FOR DISCUSSION:

1. What is a sustainable competitive advantage? Identify SCAs for Dell, P&G, Tide, and
Citibank.

A sustainable competitive advantage is an element (or a combination of elements) of the

business strategy that provides meaningful advantage over both existing and future
competitors. Often it is an asset or competency, i.e., Wal-Mart’s logistics system and low
price, and Nordstrom’s legendary customer service.

SCAs for Dell would include their direct delivery system and better-than-others customer
service, and most importantly customize-able products.

SCAs for P&G would be their mastery of distribution and innovation (R&D) when it comes to
consumer products.

SCAs for Tide would include their brand reputation and their leading market share in their
product category.

SCAs for Citibank would include their ubiquity, market share, brand name, reputation, and size.

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2. Pick a product class and several major brands. What are each brand’s points of parity and
points of difference? Relate POPs to KSFs and the POD to SCAs.

POPs are not unique to a company – each company can and should have POPs. These would
relate to KSFs.

On the other hand, PODs could be KSFs as well as SCAs. PODs have a strong, favorable and
unique brand association based on some attributes or benefit association.

3. What is synergy? What are the sources of synergy? Give examples. Why is it so elusive?

Synergy means that the whole is more than the sum of their parts. While some believe the
following equation is true: 1+1=2; synergy disproves it. 1 + 1 > 2
Synergy means that two businesses or two product-market strategies operating together will
be superior to the same two businesses operating independently in that more value is
delivered to customers (resulting in higher sales or margin), lower cost, or reduced
investment.

Synergy can be elusive because what looks good in a plan may actually not materialize in the
execution. What might seem related and synergistic just be wishful thinking because the
implementation does not produce the same results as planned.
When Sony bought Columbia Pictures, the Japanese culture clashed with the Hollywood
culture – high expenses versus efficiency.
When Daimler Benz acquired Chrysler there were culture and strategic issues that prevented
the synergy to emerge as much as they had planned.

4. What is a strategic commitment? Can you name examples that fit besides those
mentioned in the book? What examples of strategic stubbornness come to mind? Why are
good strategists so blind to this problem? How does strategic commitment differ from
strategic intent? Illustrate with examples.

Strategic commitment is a “stick-to-your-knitting” focus on a single business strategy. Wal-Mart

is an example. It is complicated by the fact that a firm like Toyota may engage in
opportunism or adaptability but Lexus is very much into strategic commitment. When the
direction is wrong, that commitment can lead to people not seeing the warning signs or not
believing them or not acting on them. They are too busy following their commitment—that
is what commitment is. Strategic intent is all about winning, focusing on competitors, and
does not have the commitment to a strategy aspect. It goes out 5 or 10 years and asks the
question “what would it take to be the largest, or the best, or the market share leader.” This
essentially ignores the constraints of the company today and determines the resources it
would need to achieve a position 5 to 10 years out. Samsung is an example.

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5. What is the difference between strategic opportunism and strategic adaptability? Can you
give examples of each? What is the difference between the risks of both? Can you give
examples of firms that have experience dirt of misread trends?

Strategic opportunism has a view of TODAY – how can we make money today. Strategic drift
occurs when decisions are made incrementally, maybe as a result of market forces rather
than being guided and directed by the vision of the organization. Strategic adaptability is
predicated on the assumption that the firm can anticipate and even drive emerging
markets and submarkets and adapt strategies for them. It can lead to strategic blunders
when wrong judgments are made about the dynamics of the market.

6. Examine a major firm and determine their philosophy blend. Where does each of its
philosophies become visible?

If you start by trying to find a pure philosophy you quickly realize there aren’t any. So you find
the blend. Where does each fit into the firm? HP has a commitment to printers but is
adaptable when it comes to evolving models over time.

Discuss the quotes from the front of the chapter.

“All men can see the tactics whereby I conquer, but what none can see is the strategy out of
which great victory is evolved.”
- Sun-Tzu
Chinese Military Strategist

“Don’t manage, lead.”

- Jack Welch, GE

“Where absolute superiority is not attainable, you must produce a relative one at the decision
point by making skillful use of what you have.
- Karl von Clausevitz, On War, 1832

Ancillary Notes

“Capital isn’t that important in business. Experience isn’t that important. You can get both of
these things. What is important is ideas.”
- Harvey S. Firestone

“The secret of business is to know something that nobody else knows.”

- Aristotle Onassis

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“Business more than any other occupation is a continual dealing with the future; it is a
continual calculation, an instinctive exercise in foresight.”
- Henry R. Luce

“The rewards in business go to the man who does something with an idea.”
- William Benton

“Boldness in business is the first, second, and third thing.”

- Thomas Fuller

“No one can possibly achieve any real and lasting success or “get rich” in business by being a
conformist.”
- J. Paul Getty

“Do not quench your inspiration and your imagination; do not become the slave of your model.”
- Vincent van Gogh,
Painter

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