Own the Future: 50 Ways to Win from The Boston Consulting Group

Chapter 31

Focusing Corporate Strategy on Value Creation

Jeffrey Kotzen, Eric Olsen, Frank Plaschke, Daniel Stelter, and Hady Farag

In theory, corporate strategy should define how a company will use its organizational capabilities, financial resources, and competitive advantages to create superior value for its investors. But in practice, what passes for corporate strategy at most companies does not achieve this goal because it does not include a detailed consideration of how the company actually creates value. Senior executives need a more comprehensive and more integrated approach, one that emphasizes delivering sustainable total shareholder return (TSR) over the medium to long term.

The Logic—and Limits—of Traditional Corporate Strategy

Every business needs its own individual business strategy—that is, a plan to create and exploit sustainable competitive advantage. The role of corporate strategy, however, is to define pathways for a company to generate value in excess of what its business units would create on their own and to make sure the company's portfolio sustains that superior shareholder value over time.

Ideally, a company's corporate strategy defines the fundamental portfolio logic that explains why a particular set of businesses are together in the first place. For example, it should identify the parenting advantages or financial and operational synergies that make the company the best owner of its particular set of businesses. And it should define the precise role ...