Volkswagen, Porsche’s parent company, is planning to take Porsche public. Investors expect it to be one of Europe’s largest-ever listings; the IPOs could raise more than $10B. What a stock market debut this could become for Porsche!
At the same time, news about Boeing tends to be less exciting, to say the least. The company has been struggling. Over the past 5 years, Boeing shares have lost about 40%.
The reasons for Porsche’s continued success and Boeing’s corrosion can be found in the companies’ respective business strategies. We’ll examine them in a moment.
What Is Strategy Anyway?
If you asked three of your colleagues what a business strategy is, the odds are that you would receive four different answers. They likely include “a plan of how we create value” and “our priorities for the next few years” or “our approach to winning against our competitors” and “a framework against which we make decisions”.
I would accept any definition of business strategy as long as it captured some of these ideas, given it was used consistently in an organization. This is where it gets difficult: the term strategy is used so wildly differently and in all aspects of life, from the world of sports to business and beyond, that it is no wonder many find it difficult to fathom.
In the corporate world, the term strategy is typically used to describe an organization’s business or competitive strategy. Porsche and Boeing represent two particularly notable examples – let’s take a look at their 2025 strategy.
Porsche
“The company’s main objective is to achieve value-generating growth. Only by achieving such growth can we make sustainable investments in innovative technologies, new products, and most importantly, in our team (…). With this approach we are already on our way towards rethinking sporty mobility. We want to excite customers with our products and services. We are also aiming to consolidate our reputation as an excellent employer and business partner that fulfills its social and environmental responsibilities. And the return needs to be sufficient too.(…).”
Boeing
“Enterprise Strategy:
- Operate as One Boeing
- Build Strength on Strength
- Sharpen and Accelerate to Win
2025 Goals:
- Market Leadership
- Top-quartile Performance and Returns
- Growth Fuelled by Productivity
- Design, Manufacturing, Services Excellence
- Accelerated Innovation
- Global Scale and Depth
- Best Team, Talent and Leaders
- Top Corporate Citizen”
Porsche’s strategy consists of four key pillars: Excellent employer and business partner, Inspiring customers with a unique product and brand experience, excellent profitability with RoS >15%, innovation and sustainable business practices. The pillars are specific and we understand their theme and direction.
The pillars are interlinked: Porsche sets the pillars into a relation to each other; they require each other, no pillar is self-sustaining, and each pillar contributes to a central objective of value-generating growth. Also, the pillars actually make sense: anyone reading them can comprehend what Porsche is talking about and quickly develop an idea of what the pillars potentially contain.
Porsche has seen increasing vehicle sales year on year, strengthening its brand on a global scale, last but not least due to this solid strategy.
Unlike Porsche, the Boeing’s strategy explanation does not consist of proper sentences and instead lists three very short bullet points: Operate as One Boeing, Build Strength on Strength, Sharpen and Accelerate to Win. Following these three points, Boeing lists eight goals for 2025, again in a short bullet-pointed list.
Needless to say that this can barely qualify as a strategy. The three main bullet points couldn’t be more generic. They resemble internal corporate marketing lingo. The content and direction of the three strategic themes stay largely in the dark and leave maximum room for interpretation. In addition, it is unclear how themes and goals are connected and how the three themes support reaching the goals listed underneath.
Boeing’s business strategies had resulted in a creeping loss of market share over decades to its major rival Airbus.
In the 2000’s, Boeing didn’t develop more fuel efficient passenger planes, a strategic mistake that became evident when Airbus introduced the A320 neo that became a best-seller. Boeing didn’t have an aircraft ready to compete. Because of the cost and time involved to design a new aircraft from scratch, they decided to instead update its existing 737 model with larger and more fuel efficient engines and related design additions.
In October 2018 and March 2019, two of these updated 737 MAX aircrafts crashed leaving 346 people dead. The company lost trust of regulators and the public. The total direct costs of the 737 MAX groundings are an estimated US$20 billion and indirect costs over US$60 billion.
While I’m not suggesting that it was only because of their strategy – culture and leadership appear to have played a role as well – Boeing paid a high toll for their mistakes.
I chose these two examples to illustrate how differently business strategies can look and how differently companies communicate their strategies. I’m sure internally both Porsche and Boeing espouse a better defined and a more substantial version of their strategy. My point is that publicly this is what Boeing and Porsche are declaring as their strategy.
Senior leadership teams typically consist of accomplished professionals with years of experience. They would have seen different strategies and would have had exciting and sometimes long and tiring discussions about strategy. And now these individuals are tasked to define a new business strategy based on the variety of experiences and ideas about what a strategy is, and what it should contain, in their views.
As a result of this misalignment, discussions about strategy are difficult and every individual bases their thoughts on their individual understanding.
Over time, I understood that before I could start strategizing with clients we needed to form a common understanding of what the ‘business strategy’ meant, and how they would use the term going forward. What we often achieved was a common understanding that looks like this:
“A strategy is the framework against which we make decisions in order to sustainably deliver unique value to customers. It is a plan describing how we win in our chosen marketplace, where the unique value of our offering is repeatedly chosen over our competition’s offering.”
So what is strategy – and what is it not?
What strategy is
- A set of key priorities to achieve a desired vision, i.e. a desired state in the future
- A way to achieve results that will make your customers go “wow!” and leave your competition baffled asking “how did they do that?”
- A framework against which business decision are being taken
- An initial guide to the next three to five years
- The big picture
- A map helping you maneuver the business through partly unchartered territory
What strategy is not
- A rigid and detailed plan that doesn’t change
- A magical formula that guarantees future business success
- A formulated answer to questions of all disciplines in your company
- A plan coping with every aspect of your business over the coming ten years
- Tactics
- A bold statement about the future
Find additional resources about business strategy in the resource section and discover how I can help you create a winning business strategy.
Main image by Valdermaras Januska on Unsplash
Share this: