Choosing the right competitive strategy

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Competitive strategies

There are lots of theories on Competitive Strategies. Possibly the best known are Michael Porter’s in 1985 in his book "Competitive Advantage: Creating and Sustaining Superior Performance."

Porter identified generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market).

The counter-argument to this idea of focus on price (Lidl) or quality (M&S) is the increasing demand from customers to do both “..Good food costs less at Sainsbury’s..”

The challenge is: Can you be both low cost and high quality without trade-off? Some argue to be “stuck in the middle” is the worst scenario, others that “ticking all the boxes” is the best.

This is interesting because choosing the right strategy for your organisation is important. As a Commonwealth Games triathlete my experience is that you need to balance swim, bike and run to achieve success. Excellence in one at the expense of the others will be sub-optimal. I believe the same is true in business and so the need to manage the trade-off is essential. This leads me to Apple and another argument about Competitive Strategies.

Authors Michael Treacy and Fred Wiersma describe three generic competitive strategies, or value disciplines: operational excellence, customer intimacy and product leadership. These are described in their book, The Discipline of Market Leaders (1997).

I would argue that Apple have great products (ipad, iphone,etc.) and are examples of Product leadership and this is at the expense of Customer intimacy, in-so-far as you can only “customise” using after-market products the Apple products are standardised and pretty locked-down.

Similarly would suggest buying a burger at MacDonalds is an example of Operational excellence. You know what you are getting and it is cheap, fast, efficient and standard. Note that operational excellence is not just about the product, it is about the entire value chain from sourcing, logistics, premises, people, and production. This is a marked difference from buying anything bespoke or customised to the customer’s particular requirement.

So what?

Rather like the argument “..Good food costs less at Sainsbury’s..” I wonder if pursuing an exclusive approach of operational excellence, customer intimacy or product leadership is a wise move or putting yourself into a corner.

Here the trade-offs appear to be less about the product (price, quality, functionality) and more about organisational design and core competency. The difference between a factory produced product and a craftsman produced product may be debatable but there is a big difference in the organisational design and core competency.

I suggest that you may be able to modify a product (price, quality, functionality) much more quickly than you can change organisational design and core competency.

This is interesting because choosing the right organisational design and core competency for your organisation may be a much longer-term and committing decision.

MORE INFORMATION

More information on Michael Porter and Competitive strategies
http://www.mindtools.com/pages/article/newSTR_82.htm

More information on The Discipline of Market Leaders (1997).
http://www.marsdd.com/mars-library/competitive-strategies-in-operational-excellence-customer-intimacy-and-product-leadership/




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THE AUTHOR

Tim Rogers is an experienced Project and Change Leader. He is founder of www.ciChange.org and curator for www.TEDxStHelier.Com . He is Programme Manager for the commercialization of Jersey Harbours and Jersey Airport. He is also Commonwealth Triathlete and World Championships Rower with a passion for teaching and learning and is a Tutor/Mentor on the Chartered Management Institute courses.

Email: TimHJRogers@AdaptConsultingGroup.com
Mob: 07797762051 | Twitter @timhjrogers | Skype timhjrogers