That's how star companies like Amazon, Apple, and Lego consistently leap ahead of competitors, say strategy experts Paul Leinwand and Cesare Mainardi in their new book, Strategy That Works.
The authors say that Amazon CEO Jeff Bezos's November 2012 fireside chat (watch it on YouTube) perfectly explains this strategy. Here's what Bezos said:
I very frequently get the question "What's gonna change in the next 10 years?" ... I almost never get the question "What's not going to change in the next 10 years?" And I submit to you that that second question is actually the more important of the two. Because you can build a business strategy around the things that are stable in time.
Bezos goes on to say that consumers will always want low prices, fast delivery, and vast selection. "It's impossible to imagine a future 10 years from now where a customer comes up to me and says: 'Jeff, I love Amazon, I just wish the prices were a little higher.... I just wish you delivered a little more slowly.' ... When you have something that you know is true even in the long term, you can afford to put a lot of energy in it."
Bezos's values have remained constant since Amazon's debut as an online book retailer in the late 1990s. What's more, sticking to those core values has not precluded Amazon from innovating rapidly. "Many of its innovative bets, including auctions, cloud-based services, Kindle e-books, online media distribution, automated logistics, and its rapid delivery options, have paid off," write Leinwand and Mainardi.
Leinwand is a global managing director with PwC's strategy consulting business. Mainardi is the former CEO of Booz & Company and Strategy&. Their book outlines a host of other recommendations--commit to what you do best, don't chase multiple opportunities, don't copy others--that they say highly successful companies follow.
But the idea of building a company identity from your enduring values, the way Amazon has, is one of the book's central themes. Once you've committed to your identity, you can build your value proposition around it--a value proposition that corresponds to your company's capabilities and differentiates you from competitors.
In Strategy That Works, the authors create "identity profiles" for Amazon, Apple, and Lego. The profiles encapsulate the value proposition, capabilities, and services of each company. Each profile, in effect, acts as a succinct cheat sheet describing how the company executes its identity-based growth strategy.
For example, the authors articulate Amazon's value proposition as: "Amazon is a super-aggregator of vendors and customers, giving people a compelling, one-stop online shopping experience with easy access to products, information, and friction-free delivery." Amazon's capabilities include retail interface design, back-end supply-chain management, and advanced technical innovation.
What stands out about all of the above? Simple as it sounds, the statements all pertain to Amazon--with strong, almost unassailable specificity. You couldn't apply the value proposition or capabilities to any other company.
If you want to commit to a comparably strong and distinct identity for your own company--an identity that can become the backbone of your strategy--the first step is taking a long, hard look at which beliefs and capabilities differentiate your company from the competition.
What you don't want, says Leinwand in an interview, is a generic description about making customers happy or treating people fairly. Leinwand sees companies making this mistake all too often. Frequently, he says, "You can't tell the companies apart if you blot out the company name."
In other words, your identity must be unique. For example, the authors define Apple's value proposition as: "Apple combines the role of innovator, aggregator, and experience provider. Its computers, tablets, and smartphones form the hub of a single digital system enabling consumers to easily manage media production, consumption, and communication." They define Apple's capabilities as intuitively accessible design and technological integration, among others.
What other company would or could describe itself that way? The upshot is this: When you're thinking through how to articulate your own value proposition and capabilities, think of the traits that are bona fide hallmarks of your company. Your best capabilities, says Leinwand, will always be cross-functional. That is, they won't reside in only one or two company functions or departments: They will be cultural attributes, habits and behaviors you can find throughout the organization. "You have to get out of the functional mindset," he says. "And it's hard to do that when people and budgets are drawn functionally."
As for Lego's value proposition, the authors define it as: "Lego is a platform and experience provider focused on the development of children's play and learning. The company also fosters online and in-person communities of enthusiasts of all ages." Lego's capabilities include design of compelling blocks, operations oriented toward complexity at a reasonable cost, and learning-oriented brand development.
You can see how Lego's identity is anchored in specifics. It mentions blocks, play, and learning. Is it complex? No. It's detailed and straightforward. And it has kept Lego anchored as it has rebounded from a vast deficit in 2004 to become the world's most profitable toymaker in 2014, with $4.5 billion in sales. Lego employees have become adept at keeping the big picture in mind. Like Amazon, they've learned to execute their strategy on the basis of what won't change over the next 10 years--children playing and learning from compelling block toys--as opposed to what will change.
Is that a difficult concept to understand? No. And that's the point. As Bezos notes (starting at about the 4:30 mark of his fireside chat, embedded below): "The big ideas in business are often very obvious. But it's very hard to maintain a firm grasp of the obvious at all times."