Companies that demonstrate high coherence scores tend to outperform their industry peers in terms of total shareholder return.
Select a few core competencies and mature them effectively to ensure business coherence: A company becomes coherent when its capabilities system is consciously chosen and implemented to support a focused strategic purpose or "way to play." This requires directing strategic investments toward developing and enhancing the organization's key differentiating capabilities. Coherent companies limit their core capabilities to a few key areas at most. By mastering core competencies and ensuring their coherence, these companies become leaders in their respective markets.
Understand the coherence scoring methodology in-depth, and select KPIs scientifically: .Business coherence is achieved by tightly aligning internal resources and processes with a focused external strategy, mastering a few key capabilities, and making strategic choices that reinforce this coherence over time. Key factors that contribute to a high business coherence score are:
-Aligning internal capabilities (strategic resources) with the right external market position (strategy)
-Developing a few core capabilities to a "best-in-class" level and ensuring they work together as an interlocked system
-Consciously choosing and implementing the capabilities system to support a focused strategic purpose or "way to play"
-Directing strategic investments toward developing and enhancing the organization's key differentiating capabilities
-Limiting the number of business model types pursued - companies with the highest coherence scores adhere to a single dominant business model type rather than pursuing multiple models simultaneously
-Making acquisition decisions that strengthen the overall capabilities system and preserve business model alignment
-Identifying potential incoherence issues early in the acquisition process and establishing mitigation strategies to maintain coherence
Coherent companies are more selective and intentional about the investments they make to preserve or enhance their unique business model and competitive positioning: Besides organic business growth, companies with high business model coherence are more deliberate in their acquisition strategies. In fact, business model coherence is a key consideration for companies when making strategic investments, particularly in the context of mergers, acquisitions, and capability development. Highly coherent companies are about two times more likely to acquire a target with a similar or congruent business model compared to companies with low coherence scores. This suggests that coherent companies prioritize preserving business model alignment during business acquisition. They tend to identify potential incoherence issues early in the acquisition process and establish mitigation strategies to maintain or create coherence after the acquisition.
More details would be needed on the data sources, variables considered, and statistical methods employed to develop a coherence scoring system. Companies that demonstrate high coherence scores tend to outperform their industry peers in terms of total shareholder return. The challenge for organizations is to manage their portfolio of relevant cross-border strategic synergies and organizational interdependence, fine-tune the structure to achieve business coherence and manage risks to improve organizational resilience.
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