A recently published book, Understanding Michael Porter: The essential guide to competition and strategy (Magretta, 2012), compiles and applies the work of management guru, Michael Porter. Full of useful insights, here are five pearls of wisdom that can, if applied, create a more robust, more profitable and sustainable business.
Tip 1: “Strategy explains how an organization, faced with competition, will achieve superior performance. The definition is deceptively simple”
Performance is not about your competition, it is about achieving superior performance, every day, regardless of what is happening with your competitors or markets.
Tip 2: “Competitive advantage is not about beating rivals; it’s about creating unique value for customers. If you have a competitive advantage, it will show up on your P & L”
To create unique value is not about you beating your competitors, it is about you delivering (through superior performance) the unique value by focusing on your customers’ needs.
Tip 3: “Strategic competition means choosing a path different from that of others”
If you accept that the competitive goal is superior performance, then it makes sense to achieve that performance using methods different to the competitors. You have to be able to differentiate yourself not only in the customer’s eyes, but in how you achieve that differentiation – in how you deliver value to the customer.
Tip 4: “The value proposition is the element of strategy that looks outward at customers, at the demand side of the business. The value chain focuses internally on operations. Strategy is fundamentally integrative, bringing the demand and supply sides together”
Strategy is about achieving a position. Here it is to achieve superior performance whilst delivering superior value to the customer. You need to be able to focus on how you will drive that superior performance, and what this means in terms of superior customer value. In this you need to continuously improve the efficiency of your internal operations.
Tip 5: “There is no honor in size or growth if those are profitless. Competition is about profit, not market share”
This tip serves as a reminder that we need to be the most profitable, not the biggest in top-line revenue or head-count.
Consider these five tips in context of your own organization. What should you do to meet the requirements of all five? Is your current strategy going to work for you in the coming next few years?
What has worked or not worked for you? Share your knowledge, share the wealth!