Wal-Mart's Corporate Identity Crisis
Although Michael Porter's Five Forces Model is the most well-known of strategic management theories, there is a reason that it is only one of four or five that I teach. That reason is that like all theories, there are issues of importance that it does not address either in part or in full. Point in case is the role of corporate identity, or the lack thereof, in determining firm performance. Whether or not one thinks the role is minimal or substantial, it is clear that this issue does not fall neatly within the purview of Buyers, Suppliers, Barriers to Entry, Substitutes, or Rivalry. One theory that does posit a central role for corporate identity is Gary Hamel's Business Concept Innovation framework, as outlined in Chapter 3 of his most interesting and overlooked book from 2000, Leading the Revolution.
The four major components of BCI are Core Strategy, Strategic Resources, Customer Interface, and Value Network. The Core Strategy is defined as "the essence of how the firm chooses to compete" and its three aspects are:
Mission: the overall objective of the strategy- what the business model is designed to accomplish or deliver.
Product/Market Scope: where the firm does and does not compete, i.e. which customers, geographies, and product segments.
Basis for Differentiation: how the firm competes and, in particular, how it competes differently than its competitors.
Though the words "corporate identity" are not mentioned explicitly, it is clear that these three factors are important, if not central to it. Below is an example from a recent article in The Street.com about the role of corporate identity in explaining how Wal-Mart lost its way:
There's wasn't much love going around for Wal-Mart Tuesday after the retail giant reported a lackluster first quarter and said the second quarter doesn't look much better. ... While CEO Lee Scott pointed out that revenue and earnings were at record levels, he admitted that "there was an opportunity to have done better."Indeed. The company's sales remained sluggish, and the retailing giant appears to be trying to figure out what it wants to be, even though it's all grown up. ...The stock is trading at a historically low multiple of 16.5 times earnings, but now isn't the time to pile into the shares. There are certainly too many problems -- and too much confusion.
Those lines about "trying to figure out what it wants to be..." and "too many problems" and "much confusion" are, of course debatable. What is clear for our purposes is that vague though they are, the statements map well onto the three dimensions of the core strategy construct. And you don't have to be a strategy prof to know that identity crises are as bad for a corporation's attempts to create shareholder wealth as they are for an individual's mental health.
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