Olav Sorenson is an expert in the field of business and strategy and a prolific academic professor who has taught at the University of Chicago, University of California (Los Angeles), London Business School and is now teaching at the University of Toronto. His current research agenda sits at the intersection of organizational ecology and social networks. In particular, he is investigating how social networks affect transactions and shape the geography and evolution of industries.
Here are my 5 questions with Olav and his answers:
1) What is the most surprising successful strategy that you have ever seen implemented? In other words, a strategy that made you think, “I can’t believe they thought of that and it worked”?
Even though it is a well-known and a well-studied company I would have to say Starbucks. They were able to deploy a strategy that created a luxury brand out of a commodity. They did this in realizing that by educating their consumers about coffee they could, in the process, define their brand and create brand equity. They have been able to create — from what is essentially a take-out model — the feel of a lifestyle product. Their consumers have been trained that a cup of coffee is worth dollars (not cents) and that now translates into any given new establishment recouping their original investment within 18 to 24 months. It’s amazing.
2) If you are a small business or start-up that cannot afford the McKinsey & Companies or Baines of the world, what are some innovative ways you can ensure that you are still able to add the benefits of strategy in your overall business plan?
There are a few options if you get creative. Counselors to America’s Small Business is a nonprofit association that provides free/low-cost support to aspiring entrepreneurs. One can learn more about this group at www.score.org. Also, I would suggest reaching out to local business schools. University of California, Los Angeles for example has a program (The Applied Management Research (AMR) Program’s Management Field Study to be precise) that pairs student teams with executives from organizations around the world with the intent of helping the companies develop better strategies. To learn more about UCLA’s program you can go to https://www.anderson.ucla.edu/for-companies/applied-management-research-program. And this is just one of many programs, I also oversee one here at the University of Toronto. Do your homework and you will find there are a lot of reasonable resources out there if you look.
3) One of the biggest “strategy” barriers I see affecting bootstrapped entrepreneurs trying to develop strategic initiatives is access to sound data. What inventive ways have you witnessed and/or recommend to getting around this issue?
What I have seen work for my students is to go out there and simply ask. It sounds crazy or simplistic but it works. Just ask. You’ll be surprised at what you can find out and get — with regards to information and data — for free.
Some places to start:
- Conferences and Conventions – often times you can find high-level people at these events that are bored out of their minds and actually would welcome the chance to talk with you.
- Academic Outlets – this is basically an extension of my answer to question two.
- Free online resources such as www.census.gov, etc.
4) If one of your students were only able to remember three main takeaways from your general strategy course, what would they be?
Bar none, the first one is avoid competition — people forget this is how Wal-Mart became the juggernaut that they are. They basically would go to rural America where mom-and-pop shops could not compete (with Wal-Mart’s economies of scale and selection) and within ten years take over half of the retail trade of the surrounding area.
Second, is focus – Think In-N-Out Burger. If you are going to do something, do it well and do it simply. You can offer choice but do it without increasing cost. Taco Bell is a great example. You go in there thinking there are an exorbitant amount of items to choose from but they are really all made from the same limited amount of ingredients. The more complicated things get the higher the risk of failure.
Third, remember that almost everyone is over-confident, especially entrepreneurs. My favorite demonstration of this is that you give a group of aspiring MBAs a middle-of-the-road business model and about half of them will tell you it will be successful and the other half will tell you it will fail. You give the same group that model and ask them how it would do if they were to run the company and 85% will tell you it will succeed. Nothing has changed (in the model) and there is no information that the leadership is flawed. The results are telling. Make sure you get an outside sanity check before launching any idea.
5) For someone new to strategy, can you suggest any resources that can help someone achieve the benefits of strategy without a thorough knowledge of the subject? How can one learn more about strategy on their own?
Unfortunately most books are drafted in a manner that tell people what they want to hear and are less about strategy and more about implementation and/or history. A book I would recommend is Porter’s Competitive Strategy: Techniques for Analyzing Industries and Competitors. It is a balanced view of strategy and the book is not as academic as it sounds. Good to Great is also a good read.
If you want to understand why businesses succeed and/or fail, you are better off looking at why a business has failed than at a runaway success. Because they are interesting stories, we tend to focus way too much attention on why businesses succeed. It would be like you studying Lance Armstrong to become a better cyclist. The knowledge transfer is intriguing, but you will never be Lance — he was blessed with genetics and most likely following his training regimen would be a complete waste of time for an amateur athlete.
On the contrary, failure usually happens because something stupid or correctable took place. We can learn from this and ultimately these strategic lessons are more useful.
