Creating Corporate Advantage

"Creating Corporate Advantage"

By David J. Collis & Cynthia A. Montgomery

This article on creating corporate advantage could be considered a literature review and an empirical piece. The authors take their existing knowledge of corporate advantages, apply it to three multibusiness companies and their strategies, and ultimately answer the question "how can you tell if your company is really more than the sum of its parts?" As most multibusiness companies are nothing more than the sum of their parts, many corporate executives face pressures to add value to these parts. It is not the lack of trying to create this value, rather it's the struggle to define and understand what is important in a firm's strategy. Most executives focus on individual elements of their resources, business, and organization without integrating all the parts into a whole.

First, it is important to understand what a good corporate strategy is. According to the authors, it is not a random collection of individual building blocks, rather a fully constructed system of interdependent parts. In order for the organization to thrive, executives must actively direct decisions about resources the corporation will develop, and the business in which it will compete. During this, the executives must make sure all elements are aligned with one another. By applying the triangle of corporate strategy, the strengths of all special assets, skills and capabilities will illustrate how each element "fits." The Resource Continuum is another model that shows the basis for corporate advantage along a continuum. This model can be applied differently to different business, as one size does not fit all. Many companies choose to integrate other businesses based on products rather than resources, and end up with a "plain vanilla" infrastructure. By following this continuum it will constrain the set of businesses to compete in while limiting the choices of the design of the organization.

The authors then looked at a company called Newell, an old-line manufacturer of brass curtains. This company originally had no real strategy but then developed this tagline, "Build on what we do best." This was written to focus on the hardware and do-it-yourself market. From this, Newell made their first non-drapery acquisition followed by seventy-five more within the next three decades. By 1997, Newell had come up with an articulated strategy that helped them reach nearly $3 billion in sales and ranked twenty-second on the list of Fortune 500 companies.

Today, Newell offers a wide range of products from hair barrettes to office products. They pride themselves on relationships with discount retailers, efficient high-volume manufacturing, and superior service. Why did Newel's strategy work? For a couple reasons, with the first being the