TL;DR
The author reflects on their journey through a strategy development class, initially unsure but ultimately enriched by the experience. They highlight the importance of aligning internal capabilities with external market positioning for sustainable success. Through case studies like Southwest and NVIDIA, they explore the concept of creating a coherence premium. The author expresses gratitude for their teacher and emphasizes the value of developing curiosity in education. The narrative underscores the significance of community and personal growth in the learning process.
It is Monday, the start of the penultimate week of class. I stride into the room as I have done for the past couple of weeks, never too early to be considered a model student and never too late to be considered a bad student, just on time. I shake as many hands as I can, and ask everyone about their weekend. A couple of weeks ago I wasn’t sure that I belonged here; I signed up for this class out of pure curiosity and beyond reading the class description I had no idea of what to expect. Several weeks later, these are my peers, this is my lecturer, and this is my class.
Unbeknownst to me, this change has been obvious to others. Just before I take my seat, my lecturer goes, “You are going to miss us, aren’t you?”. Yes, I am!
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When I signed up for the Strategy Development class, I had dreams of Clausewitz and Thucydides. To say that my expectations were unmet because none of those were required reading will make me a fisherman whose desire to catch salmon has blinded him of the immense value of the Platinum Arowana. I got more than I imagined and deserved from my strategy class.
The key lesson that I take from this class is that to achieve sustainable superior returns, it is important for businesses to align their differentiating internal capabilities with the right external market positioning i.e to create a coherence premium. It is my most important lesson because it sums up major themes we explored in class in an actionable sentence. To demonstrate the summative nature of this lesson, it is worth noting that all the other lessons learned in this class can be categorised as either guiding companies to better understand themselves and better the things they are good at, and how to manage external conditions, or a combination of both. For a company to implement this lesson (creating a coherence premium), it will have to; appreciate the value of strategy, understand the market in which it operates (hopefully with Porter’s five forces), identify and horn what it is good at (like Shouldice Hospital Ltd), be true to its vision (like KABOOM!), find ways to measure performance that creates shared value (hopefully with the Balanced Scorecard), sometimes merge and acquire competitors in appreciation of market dynamics, and avoid the innovator’s dilemma. All of which can hardly be achieved with faulty mental models.
Two cases used in class that truly embodied the application of this lesson, are the Southwest case, and the Coke & Pepsi case. With the former emphasising the lesson from a pacesetter’s perspective, and the latter emphasising the lesson from a view point of intense competitor action. As this class was my very first encounter with Southwest airlines, it was very instructive to learn about the “Southwest way” and to realise the power of the coherence premium Southwest created in that although competitors could see the essence of Southwest, it was almost impossible to implement select elements of their strategy without the others. In my assessment, a considerable majority of the decisions Southwest made were sustained and/or built on past decisions, and in turn reinforced the entire system, making it much harder to replicate. Some remarkable failures of this nature are Continental Lite, Ted by United, and Song by Delta. On the other hand, the success of JetBlue in copying most of Southwest came from its more thoughtful attempt to replicate the entire Southwest way.
In fulfilment of class requirements, I chose to study NVIDIA for the duration of the class. It was a pseudo-random decision and yet it was a good decision. In studying NVIDIA for my class assignments, I learned two important lessons about creating a coherence premium.
My first lesson was on the importance of vision as concerns appreciating what will be important in the long term. It became obvious to me from studying NVIDIA that when a company has a convincing and accurate view of what the future will look like, it is more likely to create competitive moats because it can create coherent systems that are not immediately seen as valuable to competitors. As such, there is less pressure to counter competitor moves and companies have the liberty to be more competitive in their strategy.
My second lesson was that if companies leveraged their coherence to develop markets in which their coherence will be profitable, they did not have to consistently sacrifice coherence in the pursuit of growth. Southwest’s LaGuardia question was essentially about picking coherence or growth, and how much of each should be sacrificed in pursuit of the other. My thinking and the class discussion surrounding this situation pushed me to consider growth and coherence as competing concerns. As such, it was instructive for me to read about how NVIDIA was able to pursue growth in a way that only enforced its coherence. For example, NVIDIA grew its market by positioning the GPU as an interoperable computer component that could be bought both by computer manufacturers and individual hobbyists alike. After establishing itself in the graphics processing industry, NVIDIA grew the market while conserving its coherence and dominance by making it easier for individual developers to buy its GPUs (by providing software that made it easier to program them), and later to computer hobbyist who just wanted to engage themselves in cryptocurrencies and finally AI enthusiasts.
I am fascinated by Strategy because it has no boundaries. How do you handle an annoying friend whose importance in your life is undeniable? What is the right career to pursue? Should I cross the road here and now or walk till the zebra crossing ahead? All decision making is the practice of strategy and the transferability of lessons in strategy development is so apparent that one could never be wasting time by studying strategy (unless of course the law of diminishing returns shows up).
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This Monday feels strange, I had no required reading to complete before coming to class, and we are not in groups of fours and fives (one group never followed the rules). As we take turns talking about what we loved and did not love about this class, the realisation that this is indeed the last day of class starts to sink in.
“Thank you everyone; it has been a pleasure to have you in my class. Thank you for always coming prepared and for enriching our discussions with your experiences”, my lecturer shares before she looks in our direction. “Our direction” because this particular section of the class has been the property of 7 students who became more than just classmates. “I see that some of you have made friends; that over there is a big friend group for life”, she says as she points at us.
As the class comes to an end we pass phones around, exchanging Instagram handles (much to my chagrin as I had to install it), and ask about plans and hopes for the future. It is clear as day that this phase is over, and what a great phase it was.
This class has further solidified my belief that school and the educational system at large should be about developing curiosity; to that extent school is more about the teacher than the subject. You only come to such a realisation when you meet great teachers. In the past six months I have come across really great teachers; Laura W. Synnott stood out. Thank you Prof Laura W. Synnott for being a great teacher, thank you for fanning the flames of my curiosity.
NB: One day I will write about Howdy Pierce’s class. It was a systems engineering class that taught more than systems engineering.