On a recent flight to Penang (a biz trip and not a vacation!), I was thumbing through a special edition of HBR – Essential reads for Global leaders” and came across this interesting and old HBR article “What is Strategy?” by Michel Porter. While this was published in HBR Nov-Dec 1996 issue, it reflected so much of today’s biz world, especially the hot competition amongst the smart phone and now the tablet vendors that I wanted to share it here.
First the article outlines the difference between Operational Excellence (OE) and Strategy – something that is so often confused in today’s biz arena. OE means performing similar activities better than rivals. Strategy is the creation of a unique and a valuable position, involving a different set of activities. It is creating a fit among its activities. The essence of strategy is not just of what and how to do but very much of what NOT to do.
Some statements from the article, which resonate so well in today’s market of smart phones and tablets –
“Gradually managers have let operational effectiveness supplant strategy resulting into zero-sum competition, static or declining prices ad cost pressures”
Take the example of Mediatek. By providing a cheap reference design and a complete system, it became a game changer for the shanzhai market in China. However, this was more of an OE coupled with targeting the right market. With Spreadtrum making inroads in the same space at even more competitive prices, Mediatek is now losing ground to such rivals and is tweaking its strategy.
“Competitive convergence is one reason why OE is insufficient. As rivals imitate one another’s improvements in quality, cycle times, or supplier partnerships, strategies converge and competition becomes a series of races down identical paths that no one can win”
“Strategic fit among activities is fundamental. It is harder for a rival to match an array of interlocked activities than it is merely to match a process technology or replicate a set of product features” – Now is this not exactly what Apple is doing (user experience pervades all activities within the company. Everything Apple does just re-enforces this and it has a close end-to-end system to ensure this)? The others are following it with a “me-too” approach, which can provide an explosive growth for an interim but not last long.
On approaches to preserve growth and re-enforce strategy – “One approach is to look for extensions of the strategy that leverage the existing activity system”
I look at RIM and its foray into tablets with Playbook here. RIM’s strength with its Blackberry phones has been enterprise. Analysts attribute RIM’s decreasing influence to the growing trend of CIO’s decisions on smart devices to be used by the enterprise employees as being increasingly based on what the employee uses as a consumer – thus skewing it away from the enterprise world which had always been RIM’s strength and essential to its strategy.
But then look at it from another perspective. Tablets are not just being used as a general consumer product – for the consumer to be connected. It has a tremendous potential (and is already being used thus) for enterprise productivity. RIM needs to see how to connect or rather leverage on this fit and communicate the strategy better to the customers who value this enterprise productivity.