Porter 1996: What is strategy

1
Porter (1996) What is strategy?

• Heres what it is NOT
• Operational effectiveness ? strategy!
• Customer focus alone ? strategy!
• Being all things to all customers ? strategy!
• Growth outside ones market position ? strategy!
• Short-term focus ? strategy!

2
The lure of operational effectiveness

• OE performing similar activities better than
  competitors
• Lower defects
• RD effectiveness
• JIT inventory management
• Higher employee motivation

• Strategy performing different activities OR
  performing similar activities in different ways

3
OE vs strategy

• Constant improvements in OE are necessary but not
  sufficient Why?
• Rapid diffusion for OE best practices
  innovations make it unsustainable as SCA over
  long-term
• Movement toward generic-ness as others use best
  practices
• Witness Japanese companies 1980s vs. now
• Massive industry consolidations

4
Strategy means actions

• Activities focus in lieu of constantly changing
  customer focus
• SW Air
• Ikea

• Positioning has been lost
• Variety-based subset of industrys products
  services
• Needs-based serving a particular group of
  customers
• Access-based getting to particular customers
  differently

5
Strategy means choices trade-offs

• Who are you??
• Who arent you??
• What do you do better than anyone else??
• What activities will dilute your value??
• What activities will confuse your customers??

• Trade-offs..create the need for choice and
  purposefully limit what a company offers (p.
  69).
• This concept is critical for success in Capstone
  simulation

6
Strategy means alignment

• Strategically sustainable activities fit and
  reinforce each other
• Fit understands that discrete activities affect
  one another
• Consider .9 X .9 X .9 X .9

• Simple consistency
• Each activity aligns with overall strategy
• Reinforcing
• Synergies occur
• Optimization
• Eliminates wasteful systemic elements

7
Strategy means resisting prevailing business
culture

• Planning horizon ? 10 years
• Macho idea that making choices is a weakness
• Chasing the Next Big Thing dont get left
  behind!
• OE concrete, actionable
• The Teflon phenomenon getting blamed for bad
  decisions is taboo
• Making choices perceived as bad for growth
• ..strategic agenda demands discipline
  continuity..
• How can strategy surmount these????? Is Porter on
  a different planet???