Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance

Better Simpler Strategy is a terrific book. It describes how a variety of companies can simplify the design of their corporate strategies by focusing on value levers that impact willingness-to-pay (or -to-sell). The book offers many examples and is quick to the punchline with the insights; it is neither dense nor verbose and long-winding. I am sure the book will have a tremendous impact in corporate boardrooms and among senior executives who take time to distill its principles. I think it can be read in a course on strategy, substituting long and dense textbooks or for business people to learn and apply the frameworks.

On the desirable side, a few in-depth examples of applications in companies (as opposed to post-hoc retrofitting of the framework to explain success) would have made the book even better. In my experience, application of even the most solid business frameworks is an art and typical pitfalls are common.

I agree with Albert Einstein: "Make everything as simple as possible but no simpler." He also suggests, "if you can't explain what you think is a great idea to a six year-old, you really don't understand it."

For example, as I concluded many years ago, marketing creates or increases demand for the given offering so formulate and execute a strategy that will be a "hammer" that drives "nails" (i.e. tactics) to achieve the given objective. In essence, this continues tobe the secret sauce of all successful businesses, whatever their size and nature may be.

Felix Oberholzer-Gee also agrees with Einstein. In his new book, the strategy he recommends could not be simpler: "create substantial value for customers, employees, or suppliers" and do so consistently, year after year after year. The idea is best illustrated in a simple graph that he calls a "value stick."

"Willingness-to-pay (WTP) sits at the top of the value stick. It represents the customer's point of view. More specifically, it is the most a customer would pay for a product or service. If companies find ways to improve their product, WTP will increase.

"Willingness-to-sell (WTS), at the bottom of the value stick, refers to employees and suppliers.  For employees, WTS is the minimum compensation they require to accept a job offer. If companies may work more attractive, WTS declines. If a job is particularly dangerous, WTS increases and workers require more compensation. In the case of suppliers, WTS is the lowest price at which they are willing to sell products and services. If companies make it easier for suppliers to produce and ship products, supplier WTS will fall.

"The difference between WTP and WTS, the length of the stick, is the value that a firm creates. Research shows that extraordinary financial performance (returns in excess of a firm's cost of capital) is rooted in greater value creation. And there are only two ways to create additional value: increase WTP, or lower WTS. Strategy is conceptually simple, and simpler strategic thinking, I am convinced, will lead to better outcomes."

It is important to understand that this value-based guide to exceptional performance is relevant to almost any organization, whatever its size and nature may be. Also, that when introducing value-based strategy, it is helpful -- in some instances imperative -- to ask/discuss/answer these three questions:

"What do we now do to move WTP?"
"How do we change WTS?
"What are the connections between/among our value drivers, prices, and costs?"

Check out what Felix Oberholzer-Gee has to say about these issues in Chapter 19, Pages 231-237.

According to Michael Porter, "The essence of strategy is choosing what [begin italics] not [end italics] to do."

Formulating and then executing a value-based strategy include many substantial benefits such as recognizing value, identifying value drivers, seeing various connections, coordinating investments and aligning activities. Another is having a strategy that is (as Einstein's suggests) "as simple as possible but no simpler."

Here is a final point iprovided by Peter Drucker: "There is surely nothing quite so useless as doing with great efficiency what should not be done at all."

Professor Felix is a gifted narrator, loved the way he combined his theories with practical examples from the industry. This style of explanation is really helpful for a beginner like me without any leadership/management background to peek into that world and build a mental model related to value creation. I've started seeing the businesses he mentioned in the book with a different perspective after reading this, thank you Professor.

The writing is clear and enjoyable to read. The concepts of increasing willingness to pay and decreasing willingness to sell are powerful and general, which is ideal for talking about strategy. This book offers insights for beginners as well as senior leaders. Definitely recommend.

You should listen to HBR Afterbours if you like this book, I love them!

This book by Professor Felix Oberholzer-Gee presents us the value stick tool and framework to measure the two fundamental forces that lead to value creation and to improving economic and financial success: customer willingness to pay and employee or supplier willingness to sell their work, services or goods to our company. This framework shows us that it is possible to increase value for all stakeholders, on both sides of the stick. It is an amazing book with exceptional insights, great elevating reading and a nice sense of humour.