270Managing the Business
❏
Next time an employee comes to you with a complaint about a controversial
assignment, put on your coaching hat. Instead of jumping in with solutions
or gearing up your pep talk, ask: “What are your priorities here? What pos-
sible courses of action do you see?”
❏
Make your company’s competitive situation an agenda item for your next
team meeting. Invite your boss or another higher-up to deliver an update
and fi eld questions from the group.
Navigating the schools of strategic thought
In this HBR article, editor Andrea Ovans lays out the evolution of strategic
thought and its best-known thinkers, most persistent ideas, and most in-
fl uential articles and books.
If you read what Peter Drucker had to say about competition back in the
late fi fties and early sixties, he really only talked about one thing: compe-
tition on price. He was hardly alone; that was evidently how most econo-
mists thought about competition, too.
It was this received opinion Michael Porter was questioning when, in
1979, he mapped out four additional competitive forces in his seminal ar-
ticle “How Competitive Forces Shape Strategy.” “Price competition can’t
be all there is to it,” he explained to a Harvard Business Review editor
when asked about the origins of the fi ve forces framework.
So, after much theoretical and empirical labor, he famously argued,
in addition to the fi erceness of price competition among industry ri-
vals, the degree of competitiveness in an industry (that is, the degree to
which players are free to set their own prices) depends on the bargain-
ing power of buyers and of suppliers, as well as how threatening substi-
tute products and new entrants are. When these forces are weak, as in
software and soft drinks, many companies are profi table. When they are
strong, as in the airline and hotel industries, almost no company earns
Strategy: A Primer271
an attractive return on investment. Strategy, for Porter, is a matter of
working out your company’s best position relative not just to pricing pres-
sures from rivals but to all the forces in your competitive environment.
For many, it seemed, that was pretty much the last word on the sub-
ject. But that wasn’t exactly so.
In “What Is Strategy?”—published seventeen years after he burst
on the scene with his original fi ve forces article—Porter argues against
a bevy of alternate views, both old and then new, that were circulating
in the intervening years. In particular, he takes issue with the views that
strategy is a matter of:
• Seeking a single ideal competitive position in an industry (as the
dot-com wannabes were apparently doing at the time he was
writing)
• Benchmarking and adopting best practices (a veiled reference to
the book In Search of Excellence)
• Aggressive outsourcing and partnering to improve effi ciencies
(perhaps a reference to “The Origin of Strategy,” published in 1989
by Boston Consulting Group founder Bruce Henderson)
• Focusing on a few key success factors, critical resources, and
core competencies (maybe a reference to C. K. Prahalad and Gary
Hamel’s 1990 article, “The Core Competence of the Organization”)
• Rapidly responding to ever-evolving competitive and market
changes (perhaps a reference to Rita McGrath and Ian MacMillan’s
1995 article on innovation strategy “Discovery-Driven Planning”)
At a fundamental level, all strategies for Porter boil down to two very
broad options: Do what everyone else is doing (but spend less money
doing it), or Do something no one else can do. While either approach can
be successful, the two are for him not economically (or, one might say,
morally) equivalent. Competing by doing what everyone else is doing
means, he says, competing on price (that is, learning to be more effi cient
272Managing the Business
than your rivals). But that just shrinks the pie as, in the rush to the bottom,
profi tability declines for the entire industry.
Alternatively, you could expand the pie by staking out some sus-
tainable position based on a unique advantage you create with a clever,
preferably complicated, and interdependent set of activities (which some
thinkers also call a value chain or a business model). This choice is easy to
see in the airline industry, where most airlines “compete to be the best,”
as Porter puts it, fi ghting over a very stingy pie indeed, while Southwest,
among a handful of other airlines, built far more profi table businesses
with a completely diff erent approach, which targeted a diff erent cus-
tomer (people who might otherwise drive, for example) with a cleverly
effi cient set of interdependent activities, thereby expanding the entire
market.
A tour de force by any measure, “What Is Strategy?” is certainly re-
quired reading for all strategists. But it is far from the fi nal word. One
could perhaps usefully divide the vast universe of subsequent strategy
ideas into those that focus on:
• Doing something new
• Building on what you already do well
• Reacting opportunistically to emerging possibilities
In the do something new camp, then, would be W. Chan Kim and
Renée Mauborgne’s work on fi nding or creating uncontested new mar-
kets, fi rst articulated in 1999 in “Creating New Market Space,” and further
fl eshed out in 2004 in the now-classic “Blue Ocean Strategy,” as well Alvin
Roth’s seminal 2007 work on “The Art of Designing Markets,” and Mark
Johnson, Clayton Christensen, and Henning Kagermann’s “Reinventing
Your Business Model.” So, too, would be transformation strategies based
on reconsidering your company or your industry’s value chain. These in-
clude not only much of Porter’s work but Ian MacMillan and Rita McGrath’s
“Discovering New Points of Diff erentiation.”
Strategy: A Primer273
In the building on what you already do well camp are “Finding Your
Next Core Business,” by Bain consultant Chris Zook, and “Growth Outside
the Core” (about adjacency moves) by Zook and colleague James Allen,
as well as the classic “Competing on Resources,” by David Collis and
Cynthia Montgomery. Also in this category are the myriad of articles on
competitive responses, which include George Stalk and Rob Lachenauer’s
“Hardball: Five Killer Strategies for Trouncing the Competition,” and its
companion “Curveball: Strategies to Fool the Competition.” Here, too,
can be found articles on how to defend yourself against disruptors, like
Richard D’Aveni’s “The Empire Strikes Back: Counterrevolutionary Strate-
gies for Industry Leaders,” and “Surviving Disruption,” in which Maxwell
Wessel and Clayton Christensen detail a systematic way to determine
when it’s too soon to abandon your business to a disruptor.
It’s tempting to think the third camp—reacting opportunistically to
emerging possibilities—represents the fi eld’s most recent thinking. But,
in fact, McGrath and MacMillan’s work on discovery-driven planning was
fi rst introduced twenty years ago, and this camp includes other clas-
sic fl exibility-as-strategy pieces that date from the 1990s, including Tim
Luehr man’s “Strategy as a Portfolio of Real Options,” and David Yoffi e and
Michael Cusumano’s “Judo Strategy.” It also includes Michael Mankins
and Richard Steele’s more recent “Stop Making Plans; Start Making De-
cisions,” which made the case for continuous strategic planning cycles.
And, fi nally, it includes various approaches to running established com-
panies as if they were startups, such as Steve Blank’s “Why the Lean
Start-Up Changes Everything.”
Take a look at the richness of the ideas in all three camps, and it’s hard
to agree that strategy boils down to a discouraging choice between “do
something so dauntingly original that no one can copy you” and “fi ght to
the death with your rivals over the pie.” Taken in all of its variety and com-
plexity, this body of work suggests not the terrifying terrain of competitive
jeopardy but a broad expanse of opportunity; in the face of rapidly chang-
ing technologies, globalization, and the inexorably accelerating
274Managing the Business
pace of change, there remain endlessly clever new ways to make money,
beat the competition, and nudge Adam Smith’s invisible hand toward truly
productive and profi table enterprises.
Source: Adapted from Andrea Ovans, “What Is Strategy, Again?” HBR.org, May 12, 2015.
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