What is strategy? … its certainly more than just doing things cheaper or better than your competitors
April 8, 2018
Michael Porter’s “What Is Strategy”takes issue with the views that strategy is a matter of:
- Seeking a single ideal competitive position in an industry (as the dot-com wannabes were apparently doing at the time he was writing).
- Benchmarking and adopting best practices (a veiled reference to everyone’s favorite punching bag, In Search of Excellence).
- Aggressive outsourcing and partnering to improve efficiencies (perhaps a reference to “The Origins of Strategy, published in 1989 by the granddaddy of strategy consulting, BCG founder Bruce Henderson).
- Focusing on a few key success factors, critical resources, and core competencies (maybe a reference to C. K. Prahalad and Gary Hamel’s 1990 article, “The Core Competence of the Organization”).
- Rapidly responding to ever-evolving competitive and market changes (perhaps a reference to Rita McGrath and Ian McMillan’s 1995 article on innovation strategy “Discovery Driven Planning”).
Porter believes all strategy reduces to two things: Do what everyone else is doing (but spend less money doing it), or do something no one else can do. Competing by doing what everyone else is doing means, he says, competing on price (that is, learning to be more efficient than your rivals). But that just shrinks the pie and profitability declines for the entire industry.
Alternatively, you could expand the pie by staking out some sustainable position based on a unique advantage you create with a clever, preferably complicated and interdependent set of activities (which some thinkers also call a value chain or a business model).
Another way to think about it is that strategies typically focus on
- Doing something new.
- Building on what you already do.
- Reacting opportunistically to emerging possibilities.
In the do something new camp, then, would be found Chan Kim and Renée Mauborgne’s work on finding or creating uncontested new markets, first articulated in 1999 in “Creating New Market Space,” and further fleshed out in 2004 in the now-classic “Blue Ocean Strategy,” as well Alvin Roth’s seminal 2007 work on “The Art of Designing Markets,“ and Clay Christensen, Henning Kagermann, and Mark Johnson’s “Reinventing Your Business Model.” So too would transformation strategies based on reconsidering your company or your industry’s value chain. These include not only much of Porter’s work but Ian MacMillan and Rita McGrath’s “Discovering New Points of Differentiation.”
In the building on what you already do well camp are “Finding Your Next Core Business,” by Bain consultant Chris Zook and “Growth Outside the Core,” (about adjacency moves) by Zook and colleague James Allen, as well as the classic “Competing on Resources,” by David Collis and Cynthia Montgomery. Also in this category are the myriad of articles on competitive responses, which include Rob Lachenauer and George Stalk’s “Hardball: Five Killer Strategies for Trouncing the Competition,” and its companion “Curveball: Strategies to Fool the Competition.” And here too can be found articles on how to defend yourself against disruptors, like Richard D’Aveni’s “The Empire Strikes Back: Counterrevolutionary Strategies for Industry Leaders,” and “Surviving Disruption,” in which Clay Christensen and Max Wessel detail a systematic way to determine when it’s too soon to abandon your business to a disruptor.
It’s tempting to think the third camp — reacting opportunistically to emerging possibilities — represents the field’s most recent thinking. But in fact McGrath and McMillan’s work on discovery-driven planning was first introduced 20 years ago, and this camp includes other classic flexibility-as-strategy pieces that date from the 1990s, including Tim Luehrman’s “Strategy as a Portfolio of Real Options,” and David Yoffie and Michael Cusomano’s “Judo Strategy.” It also includes Michael Mankins and Richard Steel’s more recent “Stop Making Plans: Start Making Decisions,” which made the case for continuous strategic planning cycles. And finally it includes various approaches to running established companies as if they were start-ups, such as Steven Blank’s “Why the Lean Start-Up Changes Everything” from last year.