The main idea that is mentioned by Zenger (2013) is that successful corporations attain their power by creating unique competitive advantages that can be well-protected without being replicated by rivals. The rationale behind this thesis is that the corporate landscape is not perfect, and it is going to depend on investors and the amount of value the company is able to create from the existing assets. Therefore, a corporate theory is what backs up the company’s success and helps the management reveal the possible next steps.
The central idea that cannot be overlooked is that an effective corporate theory can be defined as a strategic experiment that is, however, based on past evidence and a thorough risk assessment that paved the way for the creation of new value. According to Zenger (2013), there are three specific areas that one has to look into in order to generate more value for the company. The first one is the market demand and the ability to predict rivals’ responses to the updated strategies. The second is the presence of insights into the unique elements of the company’s operations that could increase its distinctiveness. The ultimate element to be considered is the generation of cross-sights that could help the management take a different approach to the existing assets.
The second important idea shared by Zenger (2013) was that the company’s portfolio is always going to precede its image and set the bar of expectations for the rivals, consumers, and shareholders. There should be a definite hierarchy that would separate the assets depending on their importance for the company. It could be much easier to manage corporate resources when knowing the implications. Zenger’s (2013) outlook on corporate theories revolves around the idea that differentiation and cost reduction will never be available to organizations that do not prioritize resources or accumulate evidence and competitive advantages.
The last idea mentioned by Zenger (2013) was that many companies would resort to obsolete strategies instead of looking into the direction of dynamic or agile approaches. This is a damaging trend that creates additional challenges for smaller competitors that often capitalize on the replication of strategies employed by bigger players in the market. The essential task for the company should be to collect all kinds of feedback from all the stakeholders prior to implementing a new strategy (Zenger, 2013). Without knowing what actually works as expected, the company is going to be affected by the need to experiment under the condition of absent evidence, exposing every stakeholder to even more threats than before. Therefore, a strong corporate strategy is what makes future experiments safer and unlocks additional room for investment.
Zenger’s (2013) article is an important source of evidence for future managers because it validates the need for experimentation and motivates the executives to incline toward lean startups. Even though the solutions proposed by the team are not always the fastest or the cheapest, the best way for the company is to innovate continuously without looking back at budget-saving operations. Despite the fact that the outcomes of experiments may be hard to predict, the manager should be prepared for dynamic evaluations and on-the-fly changes that could increase the corporate value. Additionally, innovations cannot be stemming from rapid trials, as there should be a well-crafted strategy defining the company’s actions. Zenger (2013) makes it evident that stagnation is a damaging factor that negatively affects organizations of all shapes and sizes.
Zenger, T. (2013). What is the theory of your firm? Harvard Business Review, 91(6), 73-78.