Translating Strategy into Shareholder Value: A Company-Wide Approach to Value Creation

In conclusion, this chapter discussed the strategic filter of the Step-Wise Approach to Value. Two tools can be used to make this assessment, the Porter Model and the Balanced Scorecard. The Porter Model identifies how industry forces impact the business. These forces are: 1) competitive rivalry, 2) pressure from suppliers, 3) pressure from buyers, 4) substitute products, and 5) threat of entry. Its strengths lie in the discipline it creates to benchmark your company to its competitors, buyers, and suppliers and to identify competitive threats and substitute products. Its weakness is that the model is industry-focused and does not look outside your particular industry for new ideas.

The Balanced Scorecard creates a measurement system used to monitor and create strategy. It looks at strategy from a more focused perspective in that it takes a company-specific view. The scorecard for a company should measure success in the following areas: 1) financial, 2) customer, 3) internal business process, and 4) learning and growth. The measurement and process orientation of the Balanced Scorecard are its greatest strengths. The problem with the scorecard is that it does not use value-driven metrics to measure the effectiveness of strategy.

Both tools are widely accepted methods of understanding business strategy. The selection of a tool is driven by the best fit of the method to your business and which tool provides you with an understanding of how to improve your company's competitive advantage.