Can You Say What Your Strategy Is?
By now it should be apparent how a careful description of the unique activities a firm performs to generate a distinctive customer value proposition effectively captures its strat- egy. A relatively simple description in a strategy statement provides an incisive characteriza- tion that could not belong to any other firm. This is the goal. When that statement has been internalized by all employees, they can easily understand how their daily activities contribute to the overall success of the firm and how to correctly make the difficult choices they confront in their jobs. Developing a Strategy Statement How, then, should a firm go about crafting its strategy statement? Obviously, the first step is to create a great strategy, which requires care- ful evaluation of the industry landscape.
LPL Financial. Different again is LPL Finan- cial, with offices in Boston, San Diego, and Charlotte, North Carolina. LPL sees its brokers (all of whom are independent financial advisers affiliated with the firm) rather than consumers as its clients and has configured all of its activ- ities to provide individualized solutions and the highest payouts to its brokers. This means that the vast majority of the activities per- formed by the corporate headquarters staff are services, such as training, that brokers choose and pay for on an à la carte basis. As a result, LPL’s headquarters staff is very small (0.20 people per broker) compared with that of Edward Jones (1.45 people per broker). Low overhead allows LPL to offer a higher payout to brokers than Jones and Merrill do, which is its distinctive value proposition to its chosen customer: the broker.
Leaving No Room for Misinterpretation Executives at Edward Jones have developed a detailed understanding of every element of the firm’s strategy. Here is an example.
”conservative“ Our investment philosophy is long-term buy and hold. We do not sell penny stocks, commodities, or other high-risk instruments. As a result we do not serve day traders and see no need to offer online trading. We charge commissions on trades because this is the cheapest way to buy stocks (compared with a wrap fee, which charges an- nually as a percentage of assets) when the average length of time the investor holds the stock or mutual fund is over 10 years. We do not segment according to wealth, age, or other demo- graphics. The company will serve all customers that fit its conser- vative investment philosophy. Brokers will call on any and every potential customer. Stories abound within Jones of millionaires who live in trailers—people all the other brokerages would never think of approaching. ”investors“ Our basic service is investment. We do not seek to offer services such as checking accounts for their own sake, but only as part of the management of a client’s assets. ”who delegate their financial decisions“ We do not target self-directed do-it-yourselfers, who are comfort- able making their own investment decisions. We are also unlikely to serve validators, who are merely looking for reassurance that their decisions are correct. ”individual“ We do not advise institutions or companies.
Edward Jones’s Strategy Statement
To grow to 17,000 financial advis- ers by 2012 by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of one-financial- adviser offices.
harvard business review • april 2008
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