BETTER, SIMPLER STRATEGY

“Strategy is simple.”

Such is the bold statement that Felix Oberholzer-Gee makes in his book, Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance. Anyone who’s ever studied business strategy can attest to how complex and intricate a subject it can be, which makes any claim about its simplicity border on scandalous.

Yet Oberholzer-Gee simplifies matters by looking at strategy through the lens of value. More specifically, he conceives of strategy as simply a matter of creating more value.

Consider a good or service. To the extent that its price is a proxy of its market value, then a business can only do two things to unlock more value from it. For one, it can find ways to increase the public’s willingness to pay (WTP) for the good or service, which should translate to a price level increase the price. Alternatively, it can find ways to lower the willingness to sell (WTS) of the various suppliers of its inputs, which sometimes (not always) results in lower costs to produce the item.

Thought about in this manner, Oberholzer-Gee’s concept of strategy can be visualized as a continuum much like a stacked bar, with upper part of the bar representing WTP, the lower part representing WTS, and the overall bar depicting the overall value created by the good or service. Business should find ways of increasing WTP to create more value and lower WTS to likewise capture a greater share of it. How to go about this is what constitutes strategy and defines exceptional performance.

Not many perspectives on strategy relate it to value creation and value capture, and in that regard Better, Simpler Strategy is insightful. Where so much material on the topic focuses on outperforming our outlasting competition, it’s refreshing to find someone like Oberholzer-Gee remind executives about what’s really important in business: the creation of value. “Think value, not profit,” he reminds his readers, “and profit will follow.”

That said, it’s unfortunate that the central metaphor/instrument/imagery used in Better, Simpler Strategy, the “value stick” doesn’t lend itself to an intuitive interpretation. It’s easy enough to understand that the stick represents the entire value created by a business or product and that increasing WTP increases overall value. But what about decreasing WTS? In Oberhholzer-Gee paradigm this should cause the value stick to expand at the bottom; but this is a poor visual as it doesn’t capture the concept of a “reduction,” leaving aside the objections about whether it’s reasonable to lump WTP and WTS together in this manner. Some might find this an unusual nit to pick; the more visually inclined, however, may not be so easily persuaded.