Strategic Alignment

Volume 9 Letter 10

Poor wheel alignment on your car wears out your tires and can leave you stranded by the side of the road. Likewise poor strategy alignment will leave your product, and worse, your company equally broken down.

Remember Napster, the music download program that hit the market in 1999? In its heyday, Napster had more than eighty million users. It was easy to use software that allowed music lovers to freely share music across the internet. Napster was on to something and quickly developed a strong customer base. Their strategy was aligned with all stakeholders except one – the music industry itself.

Worried that their bottom line would evaporate the record labels approached Napster to work out a revenue sharing deal that would benefit both businesses. In what can only be described as callous indifference Napster spurned the record labels and turned down the opportunity to align their strategy with the stakeholder upon whom their very existence depended. Instead of building a win / win business proposition, Napster backed the record industry into a corner.

Fighting for their lives, the music industry went on the offensive, brought in the lawyers and shut Napster down citing music copyright infringement. Apple’s iTunes quickly moved into the music download space negotiating a deal with the music industry where the public would pay 99 cents per downloaded song. The rest is history – iTunes has taken off, fueling sales of Apple’s popular iPod music players at the same time.

WC Kim and R Mauborgne in an HBR article suggest that all strategies need to align along three axes or they are doomed to failure. To ensure success think like Apple and do the following:

  • Develop the Value Proposition: this is what attracts buyers. iTunes allows users to browse through more than 200,000 songs, listen to 30 second clips and buy songs for 99cents.
  • Build the Profit Proposition: this allows the value proposition to make money. iTunes makes money from selling music from its online store which also drives sales of more iPod music players.
  • Create the People Proposition: motivates those working for or with the company to execute the strategy. Unlike Napster, iTunes negotiated a deal with the music industry to protect their copyright allowing the record labels to earn 65 cents from each 99 cent download.

When launching a new product or redefining the direction of a business ensure your strategy is aligned with all the market stakeholders. Strategic alignment isn’t an option – it’s an absolute imperative for success!

 

For more info see:
“Taking Control of Your Market Space” W Kim & R Mauborgne HBR Sept 2009 pp73 – 80

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