Under pressure to improve productivity, quality, and speed, managers have embraced tools such as TQM, benchmarking, and re-engineering. Dramatic operational improvements have resulted, but rarely have these gains translated into sustainable profitability. And gradually, the tools have taken the place of strategy. In his five-part article, Michael Porter explores how that shift has led to the rise of mutually destructive competitive battles that damage the profitability of many companies.
As managers push to improve on all fronts, they move further away from viable competitive positions. Porter argues that operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate. In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match. Porter thus traces the economic basis of competitive advantage down to the level of the specific activities a company performs.
Using cases such as Ikea and Vanguard, he shows how making trade-offs among activities is critical to the sustainability of a strategy. While stressing the role of leadership in making and enforcing clear strategic choices, Porter also offers advice on how companies can reconnect with strategies that have become blurred over time.
For almost two decades, managers have been learning to play by a new set of rules. Companies must be flexible to respond rapidly to competitive and market changes. They must benchmark continuously to achieve best practice. They must outsource aggressively to gain efficiencies. And they must nurture a few core competencies in race to stay ahead of rivals. What Is Strategy? Read more on Strategy or related topics Competitive strategy , Innovation and Operations strategy.
For HBR Subscribers. Show Reading List. Michael E. His latest paper is The Role of Business in Society. He is an academic adviser to the Leadership Now Project. HBR Learning. Earn badges to share on LinkedIn and your resume.
