What is the theory of your firm?

Posted on June 11, 2013 ยท Posted in Competitive Strategy

“What is the theory of your firm?” is a title in the June 2013 issue of the Harvard Business Review by Todd Zenger. And it is a zinger.

Early in the article he quotes Michael Porter. “Efforts to grow blur uniqueness, create compromises, reduce fit and ultimately undermine competitive advantage.” And yet growth is a key means to create value.

Clearly a leader’s key challenge is not just obtaining or sustaining a competitive advantage, but rather finding new ways to create value, hopefully respectful of what the author calls the “theory of your firm.”

He gives a great example with Walt Disney’s 1957 “map” of what has proven to be the company’s “theory” based on animation.

After Disney’s death the company lost sight of this “theory.” By 1984 it was in trouble. Michael Eisner however rediscovered the theory and returned the company to its position. It has once again lost sight of the theory with much of its talent leaving for Pixar. Robert Inger has once again returned to the “theory” repairing a relationship with Pixar and purchasing Marvel and Lucas Film.

Theory goes deeper than competitive advantage. Theory suggests the direction of future competitive advantage. It is indeed “strategy for turbulent times” the cover title of the May 2013 Harvard Business Review magazine when “all advantage is fleeting.