Corporate strategy answers the big questions about a company's purpose and direction. Typically, a company devises corporate strategy, then business strategy -- the competitive plans for a company's product lines or divisions -- and then, finally, operational strategy, which gives day-to-day support for the other two. The triangle of corporate strategy provides a different approach, one that emphasizes the interconnectedness of the corporate, business and operational strategies. A small business assigns its major strategic elements -- resources, divisions and organization -- to the sides of a triangle, considers their interactions and then aligns them to best advantage.
Alignment
The strategy triangle helps a small business owner see the company holistically. Viewing the company's components as one interconnected system, owners can coordinate divisions that might seem far-removed from one another. Points on the triangle represent interactions between resources, divisions and the organization. An owner aligns these elements so that their interactions help fulfill the company's corporate strategy. The proper alignment maximizes competitiveness, relying on day-to-day operations. For instance, a company might discover that centralizing distribution resources scattered between divisions could accelerate delivery while saving money. This would support a corporate goal of becoming an industry's customer service leader.
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Resources
A small business's resources -- its assets, skills and capabilities -- establish that company's limits. Resources are also used to seize opportunities. Because resources determine both the limits and possibilities of a company, resources shape the other two sides of the triangle. David Collis and Cynthia Montgomery, who devised the strategy triangle, found that resources fall along a continuum of general to specialized. Determining where a company's resources fall on that continuum provides insight into the business's limits and possibilities. For instance, highly specialized resources limit the range of product lines and, therefore, divisions that a company might add.
Businesses
The business side of the triangle refers to the businesses or markets in which a company participates. For instance, a company might have two divisions, each focusing on different product lines. According to the triangle approach, a new product line would need to fit with existing resources. If the line would use the same or similar resources to those the company already possesses, it's likely that the new line will add to the company's value.
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Organization
To be of use to business divisions, resources must be properly deployed. The administrative side of an organization sees to that, especially through organizational structure and control. Control provides incentives, and sets and measures performance standards. Organizational structure groups people and the resources they need to do their jobs. Structure follows from the other sides of the triangle. For instance, when company resources -- say, research facilities -- are specialized, they're likely to be in a fixed location. This means that all the people that need to use those resources must work in the same place.
References
- Management: Meeting and Exceeding Expectations; Warren R. Plunkett, et al.
- Corporate Level Strategy: Theory and Applications; Olivier Furrer
- Harvard Business Review: Creating Corporate Advantage
