Q: You claim that strategy is all about producing cash. Isn’t that too simple?
JB: No. Definitely not. The opposite is the case. As a holistic statement it’s much too complex. That’s why we have to break it down into several fields. But at the end of the day it’s all about creating a sustaining free cash-flow. It’s simple like that.
Q: That’s reminds on Milton Friedman …
JB: No, it reminds on Marc Bertoneche. Friedman is talking about profits. I am talking about cash. You can do a lot of profit, run into a scissor effect and fail. Poor strategy! But strong free cash flow shows a company and its management are performing superior.
Q: You are addressing the problem that science and real life show a huge gap in the field of strategy. Can you precise that?
JB: I got aware of the issue during my stay at Oxford University for the Advanced Management and Leadership Programme. The group as well as the faculty consisted outstanding individuals with great expertise and experience. We discussed several strategy methodologies and nobody seemed to be impressed. The opposite was the case. Most of the participants stayed skeptical. Why? Because there’s a huge difference between a labor and real life. The big issue on strategy is not to identify what shall be done. But how it can be done successfully!
Q: You disagree on Michael Porters 5 Forces Model. Why?
JB: I do not disagree on the 5 Forces. They are valid and important indicators. What I outline is that the 5 forces model is incomplete. I have great respect on Porter’s work on strategy but I think he misses the significant point. The team that shall apply the strategy is the key aspect and shall be the main driver of any strategic development. Can you imagine any soccer coach who wouldn’t design a strategy depending on his team? Or any general? Why do we think in management the people you are working with shouldn’t be the main driver of our strategic approach? It’s the employees who form the company!
Q: If you work through Porters essays you will find the he explains on the issue of „fitting“. Isn’t this exactly what you mean with your proposal resource driven strategy development?
JB: No, it’s not. Because Porters analysis of fitting are done on environmental and infrastructure circumstances. He analysis if there are synergies in plants and competencies. And so on. What I say is: Analyze what strengths, interests, what knowledge and know-how your people have and build a strategy on that. Your company will excel in creativity, alignment and execution!
Q: The common belief on strategic advantage is about being different.“ and „means choosing a different set of activities to deliver a unique mix of value.“
JB: I disagree because I deeply belief that also doing the same things – just better than the rest – can create an important strategic advantage and leads superior market performance. I’ll give you an example: Professor Porter illustrates in his essay What is Strategy that Japanese companies in the 80s hardly had any strategy. I think their ethos and their capability to produce significantly cheaper on a very high quality standard was a very appropriate and successful strategy to enter a market dominated by European and American players.
Q: Does your team driven strategy approach does not forget about the market?
JB: Who deals with the market? Your team does! If you ask them to accomplish things they cannot apply they and you will fail. It’s easy like that. If you have a consensual culture like in Japan you will find a tough time to identify the disruptors by nature. Your team might have different qualities to build your strategy on and achieve superior performance.
Q: Superior performance seems to be a main motive for you. What exactly means superior performance to you?
JB: First superior performance in an economic environment means producing a stable, sustaining free cash flow. Cash flow is the main indicator of entrepreneurial success and created value. Secondly superior performance means that the stakeholders of an entity identify it as superior performing. This includes customers and suppliers as well as employees and shareholders. Beside the free cash flow only the internal and external feedback makes you sure that you are on the right track.
Q: Is it really that simple? Free cash flow and satisfied stakeholders?
JB: What more can can you ask for when running a company? You create value. And I do not know any other relevant indicator then valuing the produced cash. And you deal with satisfied customers, suppliers, employees and shareholders? Isn’t that what you want to achieve?
Q: What about strategic threats like new market entrants or substitute products and services?
JB: You cannot prepare for disruptors except striving for the best and most efficient way to serve a customers need by yourself. Nevertheless you can be quite sure that sooner or later somebody appears on your market who serves your customer in a way you never would have thought of. And then it’s on you and your team how quick you are able to adopt, to elaborate on the opponents offer and to fight back. If you don’t want to be disrupted, be a disruptor yourself.
Q: That means you propose a passive me-too approach?
JB: No, but I definitely do not belief that there is nobody out there who will not find a smarter solution to my customers needs then I do. If I find a smarter solution first, I will market and develop it. That’s the daily goal to achieve. But if a competitor or a new market entrant finds the smarter solution to serve the need first, you should better quickly adopt. Sometimes it’s better to copy first class then to invent second class.
Q: That’s in strong opposition to another popular strategic approach: the Blue Ocean Model. Isn’t innovation important to you?
JB: Innovation is very important to me but we should define what we consider as innovation. Let me illustrate my thought on an example: Southwest Airlines, featured in the book Blue Ocean and also used by Michael E. Porter.
Southwest Airlines focused on its strengths and eliminated all the unnecessary within its offer. The airline focused on short distance flights and reduced the service offered to a minimum. Nevertheless this minimum-service is applied excellent and highly efficient. Applying a 5 forces analysis will tell you hardly anything how to get to this strategy. You have to ask your cabin staff and your guests what kind of service is needed and what can be eliminated to reduce the ticket-price. It’s more about finding the balance of the stakeholder needs and creating an appropriate offer than about disruption or innovation.
Q: What about Cirque de Soleil? Also just balancing of stakeholder interests?
JB: At the end of the day: Yes. But the strategy of Cirque de Soleil was not developed through a blue ocean process. The successful global circus franchise was used by the authors to illustrate the drivers of the approach. Matter of fact is that there’s no valid methodology today which tells you, do this and then that and the outcome is Cirque de Soleil and a billion dollar business. Unfortunately we still do not have this cooking recipe. A success like Cirque de Soleil appears through smart people with smart ideas and the ability to align and to apply. Cirque de Soleil is built on the 6th forces. The people who developed the concept, got the best artists available and attracted the audience to come and pay. Unfortunately today’s strategy-methodology is not really able to tell you how to achieve that.
Q: And your answer on this lack of methodology is the 6th Force?
JB: It’s not really an answer since there is no „one“ answer in the dynamic field of strategy. It’s about perpetual change. You have to be agile and quick to adopt because in a global competition can can be assured that there will be disruptors and price-dumpers. The 6th Force concept is about including your team to find the proper answers on these highly complex infinite challenges.
Q: You assume the personal qualities of a company can be measured and tested the same way like human beings to identify its strategic potentials?
JB: I got the idea during the OAMLP in Oxford. I was inspired by the Primary Colors 360° test which was done with each attendee and Lalit Johri’s explanation on the triple loop learning methodology. A company deals with internal and external issues. A company is capable to learn. It interacts with other entities. It even can be sued like a human being. Why not consider a company as a living and thinking organism. An entity which is more than the sum of its individuals. An entity with its beliefs and values. Having strengths and weaknesses. Having its potentials and limitations. Just like a human being. And if we consider this as a proper approach when we test the strategic potential of a company the similar way like a human. In other words: the fields of achieving superior performance are the same ones for a company as for a corporate leader.
Q: Can you elaborate on the parallels of evaluating humans and companies?
JB: Take a look at the seven dimensions being tested in the Primary Colors 360°. It’s about building sustaining relationships, leadership, team work, setting strategic direction and alignment, about planning and organizing and delivering results. All these qualities are asked from managers as well as from companies as a whole. A strong brand identifies itself by having a strong relation with its customers. A strong entity will be considered as a leader in its industry. The best companies make the impression that their team works fluently and aligned and has a clear strategic direction. And in regards to delivering results we just have to have a look at the stock exchange. There we learn about the perception of companies as individuals. As living creatures. So we can apply almost the same tools evaluating a company like a manager.