Fad-Free Strategy by Daniel Deneffe

Author:Daniel Deneffe
Language: eng
Format: epub
Publisher: Taylor and Francis
Published: 2019-09-03T16:00:00+00:00

Our approach is likely to lead to vastly superior results, in that our business plan figures will turn out to be much closer to the actually realized revenues and margins than your typical strategist’s business plan ever can be. The fundamental reason is that we do not start from top-down averages but from an in-depth understanding of differences in individual customer preferences.

Notes

1Experience from many projects reveals that managers then tend to embellish that disappointing finding by considering “superior customer relationships,” “a trusted partner” or something along those lines as their superior assets.

2For an interesting debate on this topic, see Gerd Gigerener, Risk Savvy: How to Make Good Decisions (London: Penguin Books, 2015); see also Daniel Kahneman, Thinking, Fast and Slow (London: Penguin Books, 2011).

3For the sake of brevity, we leave out a chapter or two on whether one can really ever confirm a hypothesis.

4Note that the type of reasoning and analysis would be exactly the same when the question for the Grand Strategy exercise is not about geographic expansion but product diversification or differentiation, for instance.

5Forgive our little excursion here, but we can state the rule of thumb, without generalizing too much, that whatever is good for government is bad for business. That is surely the case for “perfect competition” as described by microeconomic textbooks (i.e., companies making zero economic profits in the long run). Incidentally, we cannot resist to interject a small warning sign: don’t be overly scared off by the atrocities of perfect competition (for the companies, that is – governments love it). The microeconomic textbook assertion that no one makes money in perfect competition is totally driven by the assumptions that all companies have the same cost structure (and a weird cost structure for that matter, unobserved in reality, with marginal cost curves that take on very, very peculiar shapes) and that in the long run companies enter until they cannot make any economic profits. The reality is of course that even in perfect competition (or whatever approaches perfect competition), some companies have much lower marginal costs than others. For instance, Chilean copper producers have a lower cost than Zambian or US copper producers, and can make healthy profits even in the long run. Secondly, the long run can take a very, very long time to kick in and, in the meantime, plenty of supernormal profits can be made, making this perfectly competitive market not such a bad place to be. Some people (think of Ari Onassis) even get to become the wealthiest individual in the world from operating in a perfectly competitive market, which oil tanker shipping is. This is because the long run takes a lot of time to happen: it takes years to build new oil tankers (that was at least the case during his lifetime) that meet the needs of the customers. And when capacities cannot adjust, prices will shoot up well above cost (whichever one: marginal cost, average cost, etc. – make your pick). Sorry about this side-note. Chances are that our

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