How Cummins Has Established A Successful Strategy

Cummins' strategy of embracing the fluidity of their competitive market

23Mar

A global power leader whose sales hit $20 bn in 2017 and who work across 190 countries, Cummins have strategically defended their corner in the dozens of markets they have been a significant player in for decades. Ahead of our Chief Strategy Officer summit in San Francisco, May 7-8, we spoke with Robert Cochanski Rodriguez.

Robert Cochanski Rodriguez is the Director of Strategy for Cummins’ Components Business Unit. Cummins Inc. is a corporation of complementary business units that design, manufacture, distribute and service power technologies, including diesel and natural gas engines, electric and hybrid powertrains, and fuel cells. The Components Business unit alone generated sales of $6B in 2017. 

Robert joined Cummins in the Corporate Strategy group in 2014. Previously, Robert was a Consultant with The Boston Consulting Group (BCG) and a Project Manager with Daimler Trucks and Buses. He holds an MBA from Yale School of Management and a Bachelors in Business Administration from the University of Cooperative Education in Mannheim, Germany. Robert is fluent in English, German and Spanish. We spoke with him about Cummins' approach to strategy, the mistakes companies make when implementing a strategy, and the future of the industry:

What is unique about Cummins's strategy?

Cummins is one the world’s largest player in many of the markets where we play. That means that we have a lot of leverage and opportunities. As a company, we need to embrace creative destruction and adjust our strategy accordingly.

What are the challenges of creating a successful strategy as a global power leader?

The technology around us is changing fast. And with new technologies, new business models and value chains emerge. All companies in the field – Cummins, our customers, competitors, suppliers, etc. – are looking for new opportunities. The competitive landscape is very fluid.

McKinsey research suggests that as many as 70% of business strategies fall short of expectations. What do you think makes a successful business strategy?

For me, it is about the basic steps: setting an ambition and corresponding (financial) targets, developing different strategic paths how to get there, testing in specific areas, iterating, executing, and updating the strategy. It sounds easy. Yet I find two major failure modes. First, it is really difficult for an organization to remember all of these steps when the daily business needs to be run, and when fires need to be put out. Second, organizations tend to develop strategies, but forget to test the major assumptions with their customer, and fail to iterate. Let’s turn this around to answer your question. A successful business strategy is on every decision maker’s mind all the time, governs everything an organization does, is constantly tested in the market place, and is constantly iterated.

What traps do companies tend to fall into when creating and implementing a strategy?

I see two traps. Either strategies are planned top-down only, or bottom-up only. Both approaches make sense at first glance. And companies have set up their strategic planning groups and processes accordingly. But in my experience, a successful strategy is planned centrally by a relatively small group of people, and then trickled down through the organization, tested with the market-facing or technology-developing organizations, and then pushed back up to be iterated again. In my experience, many companies do not involve the different levels of the organization when developing the strategy. That leads to either incoherent strategies (when bottom-up only) or non-actionable strategies (when top-down only).

What changes can be made to corporate mentality in order to create a workforce more effective at embracing change, new strategies and innovation?

I think most organizations need more managers that constantly ask themselves and their teams: Is what we are doing here really advancing our strategy? What should we do more of, and what should we stop doing? I think that this simple filter would help.

How will you see your industry change over the next five years?

I believe that we will see many new technologies across vehicles and equipment. The emergence of new technologies is to be expected. What feels different is the amount of change and cycle time. I would divide it up into three areas: alternative power technologies, autonomous driving, and connectivity. We see ourselves and our customers spending investment dollars across all three areas. That is new. I don’t think that many players will be able to sustain high levels of investments across all three areas. Therefore, I believe that we will see some consolidation and more cooperation and partnerships across the industry. Fortunately, at Cummins, we have built our business on trusted long-term partnerships. We feel comfortable in that world.

Text small

Read next:

Is RCS Messaging The New SMS? What You Should Know About The Communication Platform

i