The Craft of Corporate Strategy
How do large companies decide where to compete, how to organise and where to put their capital, and how can anyone tell whether they chose well?
Corporate strategy is the set of decisions that sit above any single product: which businesses to be in, how to organise them and where to invest. It is also the part of management most prone to fashion.
This path begins with the economics of position, through Porter and Rumelt, and then turns to history, because the modern corporation was invented by people solving specific problems of scale. It continues with the most neglected strategic decision, capital allocation, and with evidence about how often big plans succeed. It ends with two warnings: against learning from stories of success, and against defending an advantage that is already fading.
The Decide cases on this path let you practise these choices without knowing the outcome, and the Decision Atlas shows how they played out across the site’s essays.
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The clearest route into the most influential body of strategy thinking. Magretta, working with Porter, explains the five forces, the value chain and the difference between operational effectiveness and strategy.
- Read it for
- Why competing to be the best is a trap, and why strategy means choosing a different set of activities.
- Carry forward
- Which of our activities would a rival find hardest to copy, and why?
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Rumelt’s definition of a strategy as a diagnosis, a guiding policy and coherent action cuts through the vision statements and targets that often pass for strategy.
- Read it for
- The kernel of good strategy and the hallmarks of bad strategy, especially fluff and the failure to face the problem.
- Carry forward
- Can we state, in one paragraph, the critical challenge our strategy addresses?
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Chandler’s history of how DuPont, General Motors, Standard Oil and Sears reorganised as they grew established that structure follows strategy, and explains where the divisional corporation came from.
- Read it for
- The case histories, and the argument that new strategies create administrative problems that only new structures solve.
- Carry forward
- Does our organisation chart reflect the strategy we have, or the one we used to have?
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The practitioner’s account of the same transformation. Sloan describes how GM balanced decentralised operations with central financial control, a model copied across the world.
- Read it for
- Coordinated decentralisation, and how financial controls and committees were designed.
- Carry forward
- Which decisions should be made centrally in our company, and which closest to the customer?
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Shifts the focus to the decision most chief executives treat as secondary, where to put the money. Thorndike’s eight unconventional leaders outperformed by allocating capital well.
- Read it for
- Buybacks, acquisitions, decentralisation and the habit of thinking like an investor.
- Carry forward
- If we were investors in our own company, where would we put the next unit of capital?
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Strategy Beyond the Hockey Stick
Brings evidence to the strategy room. Drawing on data from thousands of companies, the authors show how rarely firms move up the economic profit curve and which big moves make a difference.
- Read it for
- The social side of strategy planning, the hockey-stick forecast and the base rates of success.
- Carry forward
- How often do companies like ours actually achieve the plan we are about to approve?
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A necessary sceptic. Rosenzweig shows how many famous studies of business success mistake the glow of good results for their causes.
- Read it for
- The halo effect, survivorship bias and the delusions of single explanations and lasting success.
- Carry forward
- Are we copying what successful companies did, or what was written about them after they succeeded?
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The End of Competitive Advantage
Ends with the decay of advantage. McGrath argues that in many industries advantages are now transient, so strategy becomes a matter of moving from one to the next.
- Read it for
- Healthy disengagement, continuous reconfiguration and the case against defending old advantages too long.
- Carry forward
- Which of our advantages are we protecting past the point where they still pay?
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