Let me introduce the idea of the strategist's challenge. When one is doing a strategic analysis one needs to ask three fundamental questions. The first question is what are the values of the organization? By this I mean the values, the mission, the scope of the organization, how do they define themselves? One way to analyze a firm's values or it's mission is to look at mission statements. Most publicly traded companies have these explained on their website or in their corporate annual report. Here's a few that I'd like to share. One from the Walt Disney Company the mission of the Walt Disney Company is to be one of the world's leading producers, and providers of entertainment and information. First of all, it defines the industry in which Disney operates, entertainment and information. That's somewhat interesting. Second, they define their aspirations, they want to be one of the world's leading producers. A global company and one of the leaders producers within the entertainment and information segment. Consider Google's mission statement, to organize the world's information and make it universally accessible and useful. Very broad definition here, one in which they express very high aspirations here in terms of what they're looking to accomplish. Contrast that with Dell, Dell's mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. They define themselves as a computer company, they define how they're going to deliver value, by delivering the best customer experience. Consider Citigroup, Citigroup is to be the most respected global financial services company. Like any other public company, we're obligated to deliver profits and growth to our shareholders. Of equal importance is to deliver those profits and generate growth responsibly. What I find interesting here is now we've incorporated values explicitly into the mission statement. Their objective is beyond just delivering profits but it also delivered profits and generate growth in a responsible way, so you see these values starting to permeate their statement. Consider Chevron, one might think of Chevron as an oil company, but they define themselves at least as our vision is to be a global energy company most admired for it's people, partnership and performance. Again, starting to talk about the strategic plan by which they will deliver on this mission and vision. Like McKesson, our mission is to provide comprehensive pharmaceutical solutions that improve productivity, profitability and result in superior patient care and satisfaction. Again, defining the means by which they would deliver on their broader mission. Consider Ford Motor Company. We are global family with a proud heritage passionately committed to providing personal mobility for people around the world. I highlight the personal mobility not just cars, but personal mobility, a broader mandate there, and a proud heritage talking about some of their values. Then last but not least Facebook. Their mission is to give people the power to share and make the world more open and connected. Similar to Google's mission, a very broad and expansive mission statement here. Then you could imagine could go in a lot of different directions. Now, I think it's very tempting when looking at mission statements, to be tempted to say but these are just the verbage we put on the wall. Do they really have much meaning? But I think at the end of the day they do start to expose and reveal a lot of what the company thinks about their values. This is important. I think some are attempted to say that the mission of organizations in particular businesses is to maximize shareholder return. That's a premise that I think is both incorrect legally and also philosophically. At the end of the day, organizations, including publicly traded companies have an ability and some discretion to define what their mission and values are. Consider the following example, Bill Gates. One could argue that when Bill Gates started Microsoft, his goal was not to maximize investor's returns, his goal was to create the world's greatest software company. That's what motivated him, that was what inspired him, and that's what's inspired many others to join on and pursue that mission. Now, of course, profitability was an output of that activity. But again, that arguably was a secondary outcome from the broader mission of developing a world-class software company. I think you see in many high-performing organizations, that mission, first and foremost defines who they are and what they're trying to achieve. Values, again, a critical piece of the strategist's challenge, one of the questions one must ask when doing a strategic analysis. The second thing you must ask yourself is about opportunities. Opportunities are the external environment in which you operate in. What does the market value? What does the market demand? Are there others out in the space providing value in similar ways? The competitive effect here. Consider the following example. Kodak. For nearly a 100 years, Kodak was one of the leading companies in the world, producers of film, pioneers in film. They had both capabilities, and value, and a mission statement that allowed them to be highly successful. But the world changed, and as you might guess with the advent of digital technology, Kodak declared bankruptcy a few years back. What happened? Well, the opportunity set changed for them ultimately. Well, wonderful organization, great capabilities, wonderful mission and values; at the end of the day, opportunities were not available to them at least in the way they historically defined their business. Last but not least, our capabilities. This is where we take a more internal focus. What does the company do well? What are their capabilities? What are their assets that they might have that they can leverage to meet market opportunities. There's a few things you want to think about here, in particular we're going to introduce the idea of competitive advantage. Now, competitive advantage is a term you hear bantered about in the popular business press all the time. But it really has a very specific meaning that is one to be clear about. Competitive advantage is always relative to your competition. It's not sufficient to just be good at something or to be even great at something, if everyone else's great as well. If you have a high-quality product but everyone else in the market has a high-quality product, that's not a competitive advantage. We're really going to be interested in understanding those distinctive things that a firm does that differentiate it from it's peers. Taken together values, opportunities, and capabilities, define the strategist's challenge and the three main questions we need to ask? It's at the intersection of those three questions that reveals valuable competitive positions. Those positions within a market that an organization can take that will allow them to survive and thrive and create the most value for it's stakeholders.
