Coherent and Incoherent Strategies

Good business strategies are coherent strategies. A coherent strategy is one where the elements of the strategy fit together and reinforce each other. A coherent strategy produces more value, with each element of the strategy producing more because of the presence of the other elements.

Incoherent strategies, on the other hand, produce less value and are less effective. Strategic incoherence results when a firm brings together disparate elements that contradict each other and which fail to reinforce each other as a result. for example, a firm that chooses a strategy which offers an upmarket high quality product at down-market lower prices will generally fail: higher quality usually entails higher expenditures, which in turn requires higher prices. Such a strategy is a recipe for poor performance.

Research in Motion (RIM), the makers of the Blackberry digital communication devices, is an example of a firm that suffered from an incoherent strategy. RIM’s strength was the security and reliability of its operating network for business users. RIM’s foray into developing products that directly competed with mass-market offerings from Apple and Microsoft did not fit well with its core strength and created strategic incoherence.  Only recently has the company managed to reinvent itself by redefining its business and creating a more coherent business strategy.

Reinforcement in a strategy often comes about when complementarities are identified and exploited. For example, Toyota’s manufacturing strategy (the Toyota Production System) exploits complementarities that exist between smaller batch sizes, lower inventories, lower setup times, worker training, etc. These complementarities reinforce each other and work together as a system to create greater value, superior productivity, and lower costs.

Good strategic coherence begins with product definition. By defining its offering precisely, a firm can identify synergies and complementarities that exist between products and services, and these can be exploited through a coherent strategy. Such an approach also allows a firm to identify how best to structure its organization, which areas of the business will generate the highest returns, and which areas should be de-emphasized, sold off, or closed down.

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