Strategy - Michael Porter

Key Moments:

• SWOT analysis Management thinking that no advantage can be sustained is complete and utter BS. Most great companies sustain their advantages for decades. Nobody’s been able to imitate them. Strategy is essentially about making choices; making trade-offs. What we’re trying to do with strategy is avoid a zero-sum competition. What we want to do instead is really create a positive-sum competition, where companies reach different groups of needs (hopefully) uniquely well. "Strategy by consensus is never a good strategy. Strategy is about making exquisitely clear choices — here’s what we’re going to do, here’s not what we’re going to do; here’s what our value is, here’s what our value is not; here’s what we’re not. He’s . It’s not a compromise, it’s clarity." Strategy is the ultimate job of leadership. Because the leader is the only one with the view of the whole; all others look at things from the perspective of their unique discipline. Therefore, leader has to be the ultimate architect of strategy and make the choice at the end of the day.” (CEO, general manager, senior management) Rebuttal to Jim Collins’ ‘Good To Great.’ Michael Porter identifies three core business strategies for creating sustainable competitive advantage:

1. Create a unique industry position by targeting either a) the few needs of many customers, b) the broad needs of few customers, or c) the broad needs of many customers in a narrow market. This allows a company to tailor its offerings to best serve a specific niche.

2. Make strategic trade-offs by saying no to some opportunities. This entrenches differentiation and prevents competitors from easily copying. For example, Southwest Airlines trades off seat assignments and meals for faster boarding.

3. Ensure strong fit between activities to make imitation difficult. Activities should reinforce one another to optimize strategy. Southwest's lack of seat assignments increases its aircraft utilization rate. In addition, operational effectiveness and productivity are prerequisites for success but not strategies in themselves. Companies can avoid destructive hypercompetition by not solely focusing on operational effectiveness. Finally, straddling occurs when a company tries to match a successful competitor while keeping its existing position. This often leads to failure as the company takes on too much. Continental's Continental Lite venture to compete with Southwest failed for this reason. In a nutshell... Great strategy comes from limiting products/services and focusing on sustainable differentiation. Companies must make trade-offs, target specific customer niches, and ensure activity alignment. Operational effectiveness is necessary but not sufficient. Straddling typically fails. With strong positioning and strategic fit, companies can establish hard-to-imitate competitive advantages.

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