An activity View of Sustainable Competitive Advantage…

Much of what we at Valen teach our strategy consultants comes from economic modeling because economics is the decision as to where to allocate scarce resources. This is a critical part of strategy, we follow much of the main activities Michael Porter teaches, which is to determine what choices or trade-offs will be made. Furthermore, that those choices made are aligned toward a unique set of activities that create a sustainable, competitive advantage. You know you have a good strategy because it provides the organization an above-average margin versus competitors. We cannot compare margins across industries generally, but within an industry or more precisely within a defined competitive set.

Some traits that you should observe in strategy consulting firm consultants you hire include:

Flexibility to follow the facts. Expect the best strategy consultants and consulting firms to ask for lots of leeway in their analysis because strategy consulting will begin with a hypothesis and like a detective follow the facts to conclusions and recommendations.

Use the hypothesis method. Top strategy consulting firms train their teams to use a hypothesis to guide their work. A hypothesis is critical to the effectiveness of strategic analysis. Most management consultants work from expertise or best practices in the practice of management. This is different that solving strategy problems where the problem crosses function and could reside in anyone’s expertise.

Generalists. Strategy problems are typically across functions or departments and thus require limited bias. Specialists are critical for deep insight, but have difficulty because of lack of experience seeing other patterns. Most of the top strategy consultants are generalists, they know a little about a lot and while they may have grounding and depth in an industry or function, they are able to converse about any function. At the Valen Group, we find our strategy consulting discussing economics or finance in assess if a company has above average margins and then turning abruptly to assess what is the brand equity, operational production or service delivery capabilities to understand how a broad set of a global organization’s activities sum up to the margin they produce compared to competition. This strategy discussion covers finance, operations, marketing and more, with a top strategy consultant able to discuss the intricacies of how to create or assess brand equity.

A Trusted Advisor. Top strategy consulting firms are really not about the firm itself or the name but rather about the people. A great strategy advisor to management is a transparent communicator who can effectively provide an honest perspective. The best strategy advisors can clearly articulate the issue and why is an issue and asks a lot of questions to test their hypotheses. They also gain trust not just because of honest but because they are respected and say they don’t know or we don’t have the information to make that decision yet.

Spot patterns and the most important facts. Strategy firm top performers simplify complex problems into the essence or working model only including the most relevant levers or factors to consider. Issues that most talk about as black and white, they pull out the gray and deduce the probability of a conclusion or action.

Good strategy discipline. A valuable strategy is unique, rarely does copying the competition work but the idea is so compelling, counterintuitive and many times, is rewarded in the short-run by investors. Also, because each organization is unique, whether new or very well established, the culture, consistency of decisions by management (or lack thereof) can be easily observed and determine the unique assets and methods for executing, it makes no sense to do it “their way” but rather find your organization’s way to serve our unique set of target customers. This means you will hear “no” a lot in your strategy discussions with a clear explanation as to why that doesn’t leverage the organization’s unique capabilities.