What is Strategy?
What is Strategy?
July 5, 2011 by Taylor Studios
I recently facilitated a strategic planning meeting with my management team. I summarized this and sent it to my team prior to meeting in order to keep us on task. Hopefully, this isn’t helping the competition.
Operational Effectiveness is not Strategy
“Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise.
A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs.
Operational effectiveness means performing similar activities better than rivals perform them. Operational effectiveness includes but is not limited to efficiency. It refers to any number of practices that allow a company to better utilize its inputs by, for example, reducing defects in products or developing better products faster. In contrast, strategic positioning means performing different activities from rivals’ or performing similar activities in different ways.
Strategy requires you to make trade-offs in competing – to choose what not to do.
The more benchmarking companies do, the more they look alike.
Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.
The essence of strategy is in the activities-choosing to perform activities differently or to perform different activities than rivals.
Too often, efforts to grow blur uniqueness, create compromises, reduce fit, and ultimately undermine competitive advantage. In fact, the growth imperative is hazardous to strategy. Broadly, the prescription is to concentrate on deepening a strategic position rather than broadening and compromising it.
Deepening a position involves making the company’s activities more distinctive, strengthening fit, and communicating the strategy better to those customers who should value it.”
Porter, Michael E, “What is Strategy?,” Originally published in Nov. 1996 Harvard Business Review