BIQ: Books I Quote: What is Strategy? by Michael E. Porter

What is strategy? by Michael E.Porter.

Not a book I quote, but an HBR Article.

I read this for the second time because I was attending a Strategy Day-Workshop with other Entrepreneurs.

Below are some of the quotes I will keep from this book:?

"Operational Effectiveness is NOT Strategy:

The root of the problem is the failure to distinguish between operational effectiveness and strategy. […] And bit by bit, management tools have taken the place of strategy."

?

"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 lower cost, or do both.?[...]

In contrast, strategic positioning means, performing different activities from rivals' or performing similar activities in different ways."

"What is strategy? We can now complete the answer to this question. Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well –not just a few– and integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability. Management reverts to the simpler task of overseeing independent functions, and operational effectiveness determines an organisation’s relative performance."

"Commonly, the threats to strategy are seen to emanate from outside a company because of changes in technology or the behavior of competitors. Although external changes can be the problem, the greater threat to strategy often comes from within. A sound strategy is undermined by a misguided view of competition, by organizational failures, and, especially, by the desire to grow."

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"Reconnecting with strategy:

A number of approaches can help a company reconnect with strategy. The first is a careful look at what it already does. Within most well-established companies is a core of uniqueness. It is identified by answering questions, such as the following:

• Which of our product or service varieties of the most distinctive?
• Which of our product or service varieties are the most profitable?
• Which of our customers are the most satisfied?
• Which customers, channels, I’ll purchase occasions are the most profitable?
• Which of the activities in a value chain are the most different and effective?

What was the vision of the founder? What were the products and customers that made the company?

[…] A company’s history can also be instructive. What was the vision of the founder? What were the products and customers that made the company? Looking backward one can re-examine the original strategy to see if it is still valid. Can the historical positioning be implemented in a modern way, one consistent with today’s technologies and practices? This sort of thinking may lead to a commitment to renew the strategy and made challenge the organization to recover it’s distinctiveness. Such a challenge can be galvanizing again, and still the confidence to make the needed trade-offs."

"The growth trap:

Among all other influences, the desire to grow has perhaps the most perverse effect on strategy. Trade-offs and limits appear to constrain growth. Serving one group of customers and excluding others, for instance, places are real or imagined limits on revenue growth. Broadly targeted strategies emphasizing low price result in lost sales with customers sensitive to features or service. Differentiators lose sales to price-sensitive customers.

Managers are constantly tempted to take incremental steps that surplus those limits but blur a company’s strategic position. Eventually, pressures to grow or apparent saturation of the target market lead managers to broaden the position by extending product lines, adding new features, imitating competitors’ popular services, matching processes, and even making acquisitions."

"Profitable growth:

Too often, efforts to grow blur, uniqueness, create compromises, reduce fit, and ultimately undermine competitive advantage. […]

Broadly, the prescription is to concentrate on deepening a strategic position, rather than broadening and compromising it."

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"The role of leadership:

In many companies, leadership has degenerated into orchestrating operational improvements and making deals. But the leaders role is broader in far more important. General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company’s unique position, making trade-offs, and forging fits among activities. The leader must provide the discipline to decide which industry changes and customer needs the company will respond to, while avoiding organizational distractions and maintaining the company’s distinctiveness. Managers of lower levels lack the perspective and the confidence to maintain a strategy. There will be constant pressures to compromise, relax trade-offs, and emulate rivals. One of the leaders job is to teach others in their organization about strategy- and to say no.

Strategy renders choices about what not to do as important as choices about what to do. Indeed, setting limits is another function of leader ship. Deciding which target group of customers, varieties, and needs the company should serve is fundamental to developing a strategy, but so is deciding not to serve other customers or needs, and not to offer certain features or services."