Developing Strategic Fit

By M. Isi Eromosele

The activities that a company performs, how it will configure individual activities into a whole system and how it will make them relate to one another is determined by the fit it engenders in strategically positioning itself. While excellence in operational effectiveness involves individual functions, strategy is about combining activities.

Strategic fit locks out imitators by creating a chain that is as strong as its strongest link. A company with good strategies will engender activities that complement one another in ways that create real economic value.

When one activity is performing well, the cost of implementing another is dynamically reduced. Similarly, one activity’s value to customers can be enhanced by a company’s other activities. This is the way strategic fit creates competitive advantage and superior profitability.

The importance of fit among functional policies is one of the most persistent concepts in strategy. However, this has been displaced by new concepts in the management strategy programs.

In developing strategies today, companies are no longer seen as a whole. Instead, it is viewed in components such as core competencies, key resources and critical success factors. All these components will have to fit together in order for competitive advantage can be realized.

There are three types of strategic fit, although they are not mutually exclusive.

• The first is simple consistency between each functions and the overall strategy. Some companies, for example, align all their activities with their cost strategies. Consistency ensures that the competitive advantages of activities accumulate and does not erode. It makes the strategy easier to communicate to customers, employees and shareholders and improves implementation through single-minded focus in the corporation.
• The second fit occurs when activities are reinforcing. A company can go beyond simple consistency because its activities are reinforcing. A company may use point-of-sales displays and frequent packaging changes to reinforce and stimulate impulse buying, for example.
• The third fit goes beyond activity reinforcement to what is called optimization of effort. Coordination and information exchanges across activities eliminate redundancy and minimize wasted efforts are the most basic types of effort optimization.

In all three types of fit, the whole matters more than any individual parts. Competitive advantage grows out of the entire system of activities. The fit among the activities substantially reduces costs or increases differentiation.

Additionally, competitive value of the individual activities or the associated skills, competencies and resources cannot be separated from the strategy. The lists of strengths in a company cuts across several functions and one strength blends into another.

Strategic fit among many activities is fundamental not only to competitive advantage but also to the sustainability of that advantage. It is harder for a rival to match an array of interlocked activities than it is merely to imitate a particular one, such as a sales force approach, match a process technology or replicate a set of product features.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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