What is strategy?

If you want the best piece of writing about strategy, read the great works of Michael Porter, found on HBR.org or in one of

If you want the best piece of writing about strategy, read the great works of Michael Porter, found on HBR.org or in one of the best books I read about the man himself by Joan Magretta titled “ Understanding Michael Porter – the Essential Guide to Competition and Strategy.”

The book features a FAQs, featuring a Q&A with Michael Porter. Below I reproduce an extract. To read more, buy the book from Amazon or Harvard. And if you have a student ID, I am free to share a digital copy with you thanks to my membership with Ebscohost – in box or WhatsApp me with a photo of your ID. I will send you the e-book.

Here we go:

Magretta: What are the most common strategy mistakes you see?

Porter: The granddaddy of all mistakes is competing to be the best, going down the same path as everybody else and thinking that somehow you can achieve better results.

This is a hard race to win.

So many managers confuse operational effectiveness with strategy. Click To Tweet

Another common mistake is confusing marketing with strategy. It’s natural for strategy to arise from a focus on customers and their needs.

So in many companies, strategy is built around the value proposition, which is the demand side of the equation. But a robust strategy requires a tailored value chain—it’s about the supply side as well, the unique configuration of activities that delivers value. Strategy links choices on the demand side with the unique choices about the value chain (the supply side). You can’t have competitive advantage without both.

Another mistake is to overestimate strengths. There’s an inward-looking bias in many organizations. You might perceive customer service as a strong area. So that becomes the “strength” on which you attempt to build a strategy. But a real strength for strategy purposes has to be something the company can do better than any of its rivals.

And “better” because you are performing different activities than they perform, because you’ve chosen a different configuration than they have. Another common mistake is getting the definition of the business wrong orgetting the geographic scope wrong. There has been a tendency to define industries broadly, following the influential work of Theodore Levitt some decades ago.

His famous example was railroads that failed to see that they were in the transportation business, and so they missed the threat posed by trucks and airfreight. The problem with defining the business as transportation, however, is that railroads are clearly a distinct industry with distinct economics and a separate value chain. Any sound strategy in railroads must take these differences into account. Defining the industry as transportation can be dangerous if it leads managers to conclude that they need to acquire an airfreight company so they can compete in multiple forms of transportation. Similarly, there has been a tendency to define industries as global when they are national or encompass only groups of neighbouring countries.

Companies, mindful of the drumbeat about globalization, internationalize without understanding the true economics of their business. The value chain is the principal tool to delineate the geographic boundaries of competition, to determine how local or how global that business is.

In a local business, every local area will require a complete and largely separate value chain. At the other extreme, a global industry is one where important activities in the value chain can be shared across all countries.

Reflecting on my experience, however, I’d have to say that the worst mistake —and the most common one—is not having a strategy at all. Most executives think they have a strategy when they really don’t, at least not a strategy that meets any kind of rigorous, economically grounded definition.

Well comeback.

If you want to win as an executive, I invite you to read the works of Michael Porter, and many great books from Harvard Business Press. In fact, I provide a list of books to all executives and managers in my private mentorship program to read and appreciate.

Does your company have a strategy? What is the strategy in your strategic plan? Click To Tweet

For private accountability support and mentorship, contact me via WhatsApp, +256782610333. We shall agree on your growth ambitions, define the choices and action to take to thrive. I will act as your accountability partner, checking in with you weekly to examine progress and make corrective interventions. You will win.

Copyright Mustapha B Mugisa, 2020. All rights reserved.

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