“You can call any plan or program a strategy, and that’s how most people use the word. But a good strategy, one that will result in superior economic performance, is something else. More simply put, you have found a way to perform better by being different.”–Joan Magretta
How Silicon Valley Can Help Pinellas Schools introduced Pinellas County School’s (PSC) fundamental inability to negotiate the accelerating social changes driven by technology.
One of the reasons – for PSC and for Florida and the US as well – is a misunderstanding of the concepts ‘competition’ and ‘strategy.’
‘Competition’ according to Michael Porter is a race to be unique, not a race to be “the best.” As Joan Margretta explaines in Understanding Michael Porter, (A summary can be found here.) only by competing to be unique can an organization achieve sustained performance.
- Competition is always a struggle for the biggest share of the value an industry creates. It’s not about who is biggest, but who is most profitable.
- Competitive advantage is not about what you’re good at. Rather, competitive advantage is derived from having a better value chain and a superior P&L (profit and loss) than others.
- Focusing on being unique is a healthy way to think about competition because it means competition is going to be multidimensional and more complex than doing just one thing well.
- The best way to achieve and maintain a competitive advantage is to work towards being different from your rivals. Build your value chain around a unique configuration of activities and then work toward capturing the maximum amount of created value that you can.
‘Strategy’ in practical terms is the antidote to competition. Great strategies are defined by their ability to pass five tests:
- Do you offer customers unique value?
- Do you perform activities differently?
- Have you made smart tradeoffs?
- Is what you do a good fit with your organization?
- Is there continuity and consistency in what you do?
The 10 practical implications which come from revisiting Michael Porter’s works are:
1. Vying to be the best in your industry is an intuitive approach to competition but it always ends up being self-destructive over the long haul.
2. Size or growth in and of themselves are meaningless because they are profitless. The whole aim of competing is to be profitable, not to maximize your market share.
3. Gaining competitive advantage is not really about beating your rivals. Rather, it’s about how you create and deliver unique value to your customers. If you have a competitive advantage, it will show up in your P&L.
4. A distinctive value proposition is essential for strategy, but strategy is more than just marketing. If your value proposition doesn’t require a specialized value chain to deliver it, it will have no real strategic relevance.
5. It isn’t necessary or even feasible that you “delight” every potential customer that exists. In practice the sign of a good strategy is that you deliberately make some customers unhappy.
6. No strategy means much until you make clear what your organization will not do. Making these trade-offs is the linchpin that makes competitive advantage feasible and also sustainable.
7. Never underestimate nor overestimate the importance of good execution. Executing well is unlikely to be the source of a sustainable advantage but without it, even the most brilliant strategy imaginable will fail to produce superior performance.
8. Good strategies always depend on many choices rather than just one, and on the connections among them. A core competence in and of itself will rarely generate a sustainable competitive advantage.
9. While flexibility in the face of uncertainty sounds good, the reality is an organization which stands for nothing will never excel at anything. Too much change can be just as dangerous for strategy as too little.
10. Committing to a strategy does not require that you make heroic predictions about the future. Instead, making a commitment improves your ability to innovate and ultimately your capacity to adapt to turbulence.