It’s easy to dismiss strategy as being a thing of the past. It was after all an eternity ago now that a then young economist and Harvard associate professor by the name of Michael E. Porter published his infamous ‘‘How Competitive Forces Shape Strategy”. The five competitive forces he continued to iterate in Competitive Strategy and Competitive Advantage remain, yes, ”classics”. Yet, the too-often quick assumption is that ”strategic positioning” is simply too slow for modern businesses to remain competitive.
In a global economy, it is believed that companies need to remain flexible so they can respond more quickly to market changes, what some have described as the new competitive advantage: adaptability. Developing complex strategies is anathema to this lean type of fluid-moving business model.
There are numerous traps that cause people to dismiss strategy as being not just important, but effective in modern business climates. On this, Henry Mintzberg’s 1994 Harvard Business Review article, The Fall and Rise of Strategic Planning, remains foundational. Some of the common traps involve operational effectiveness, assuming strategic planning is already dead and there’s no point in pursuing it, and even modelling companies that threw strategy out the window and found success.
We dissect these common traps to discover the truth about strategy.
Common Trap #1: Thinking Strategy is Operational Effectiveness
While strategic positioning may be considered too static for today’s business climate, operational effectiveness has been the go-to focus for more than a few decades. Because of rapidly changing technologies that can totally disrupt a given market, it becomes too easy for competitors to copy and market their position in a way that completely takes away the advantage from the traditional leaders.
By focusing on operational effectiveness without a strategy in place, it may allow a business to excel for a while, but eventually, competitors catch up and when they do, it erodes whatever advantage the original business had.
Operational effectiveness won’t sustain a company long-term
In short, operational effectiveness, or OE, simply means that a company performs similar activities to their competitors, but in a more efficient manner. They do it better than their competitors.
This certainly can provide a valuable edge in the short run, but as many companies that were successful in the 1980s and 1990s are discovering, it won’t sustain them over the decades. For example, Japanese technology and car manufacturers that were so successful with their operational effectiveness during these decades are finding no sustained or distinguishable competitive edge based on the models developed originally.
Impressive starts don’t equal long-term results
As those Japanese companies discovered, they found impressive results early on that gave them an operational edge over their counterparts, but as technology shifted, other manufacturers and technology companies copied what they were doing, and that lead narrowed and now is effectively gone.
Focusing on operational effectiveness can certainly provide a burst of energy to jump out of the gates and gain a significant advantage, but it simply will not maintain that lead without other changes being implemented and that requires diligence, paying attention to the competition, and developing a strategy.
In short, strategy or strategic positioning and operational effectiveness together is a far better model for long-term success than simply focusing on operational effectiveness alone.
Common Trap #2: Assuming Strategic Planning Is Dead
As noted, there are some business leaders who believe strategic positioning or strategic planning is simply dead in the water. That is a narrow view of a much bigger puzzle.
Strategy helps a company determine how it can best position itself in the market and sustain success over a long duration of time. There are those businesses that narrow their focus and provide a service or product their competitors simply don’t or can’t offer.
Take Jiffy Lube, for example. They focus on oil and other fluid changes and don’t provide other automotive repair services. That provides them a specific niche and while other auto service centers and repair companies do provide oil changes, they can’t match Jiffy Lube’s pricing and speed of service. This kind of strategy focuses on separating itself from other providers in the marketplace.
However, other companies have grown out based on Jiffy Lube’s model, forcing it to find other ways to separate itself and maintain a competitive edge.
Its focus remains on activity
Relying on strategy, a company focuses on activity. It focuses on the things it can do, products it can offer, and services it can provide that would be different and marketable to its target base.
In order to be successful, companies must be different
As the global economy continues to shrink thanks to the Internet, companies need to find other ways to separate themselves from their competitors. They must find ways to be different.
Because of the speed of information and communication, the traditional models of relying on operational efficiency provide shorter-lived results, which demands even greater importance being placed on strategy.
Traditional strategic planning may be viewed as too slow
While traditional strategic positioning might be viewed as too static or slow, there needs to be a better system in place within a corporate structure to not only strategize but to be limber and flexible.
The larger the corporation, the more decision-makers there are, the slower change will happen. Learning to be nimble in a highly competitive global marketplace requires hard choices at times, which may not always please everyone. It also demands a different team structure and more independence to departments, individuals, or districts.
Common Trap #3: Modeling Japanese Companies of the 1980s Misses Out on a Key Factor
It’s easy to focus on past successes of certain companies or industries, but that is often too shortsighted. The business climate today moves faster and with greater efficiency so that comparing a business model today with one 40 years ago does a disservice to the one seeking to remain competitive in today’s economy.
Japanese companies were highly effective during the 1980s at becoming leaders in global industry. They rarely ever developed specific strategic positions. Those that did were actually the exception rather than the rule.
The culture in Japan is such that not only did many of these companies emulate and imitate one another, there was also a sincere desire to mediate differences among employees as quickly as possible.
Strong strategic planning requires hard choices, which may leave some feeling disgruntled, frustrated, or in stern disagreement over specific decisions.
Strategy requires hard choices.
The entire Japanese culture is rooted in consensus. They have long taken a stance of seeking ways to mediate disagreements and find resolution as quickly as possible, bringing everyone into unity.
While unity may very well be a positive focal point, it can also lead to a slower ability to make changes and adjustments, as needed. Trying to assuage everyone usually means slow, methodical progress that doesn’t move all that much.
To employ strategic positioning, somebody has to step up and make difficult choices. Those choices will often be viewed by some as catastrophic, a serious mistake, or possibly even visionary. They must rely on valuable insight, guidance, information, and resources and tune out the disagreement, initiate strategy, and stay the course.
Learning hard lessons
Those same companies that were highly successful in the 1980s are struggling to separate themselves from competitors today. Some are struggling just to survive. Because of that operational efficiency model, they ultimately blurred the lines that separated them from competitors.
Many of these successful companies from decades ago were attempting to please everyone all the time. That opened the door for competitors to focus on specific needs and wants and desires of their target market.
By narrowing their focus, these smaller companies were able to begin chipping away at the high success these other firms had enjoyed in the 1980s. These are hard lessons to learn, but extremely important for any company looking forward and trying to figure out where to draw the line when it comes to strategic positioning.
Three Main Strategic Positions
Quality strategic positions will essentially be derived from three sources. Michael E. Porter highlights these in his 1996 essay, What Is Strategy? published by Harvard Business Review. He notes that these three distinct sources are variety-based positioning, needs-based positioning, and access-based positioning.
In this particular strategic planning model, the company is going to focus on a very narrow niche of products or services. Instead of focusing on a specific target audience or customer base, they already understand their primary demographic and decide to offer products or services of a very narrow segment.
Jiffy Lube, again, is a good example of this. While they could have tried competing against the thousands of auto repair service centers and shops around the country, instead they focused on one key service: oil changes.
Other examples may include Stikbox. This product is basically a smartphone case with a built-in selfie stick. A narrow focus isn’t going to appeal to the same demographic as most smartphones.
With needs-based positioning, the focus is on a particular group of consumer. For example, a company invested in travel supplies may certainly develop luggage or amenities that could appeal to a broader range of vacationers, families heading out to reunions, or business travellers, but if they focus their specific energies on business travellers, for example, they have narrowed the market.
It becomes far more effective to market to a needs-based audience than trying to be overly broad in its scope. Could a company that develops a particular product for business travellers find success with average vacationers or sightseeing groups? Probably, but that will complicate strategic positioning.
A bit more complicated is access-based positioning. A good example of this involves a cinema company that has since merged with AMC. Carmike Cinemas focused on running theatres in cities and towns that had a population under 200,000.
Because of their access-based strategic positioning, they developed ways to target these less urban areas and were able to show the same movies larger cities enjoyed but at a lower price. Some of the ways they managed this was not focusing on the same advanced projection technologies and having fewer screens.
By focusing on rural versus urban consumers, this company was able to position itself in a unique manner compared to its larger companies that were more focused on the bigger cities.
All in all, strategic positioning may not be the most popular focal point of modern companies today, but it is still essential. It is, essentially, the focus on providing a unique and valuable position that tends to involve various activities.
In some cases, a company might decide to serve fewer needs of numerous customers. Another company may decide to serve the broader needs of fewer customers. Still another company may focus on a target market based on population or demographic.
In order to develop successful strategic positioning, there is going to have to be trade-offs. This means there will be things a company has to let go of and not do. That can be a difficult model to follow, especially in a climate that is determined to maximize sales and reach as large a potential customer base as possible.
In order to develop a successful strategic positioning model, a company needs to find ways to merge its various offerings in an effective way. Jiffy Lube, for example, offers primarily oil changes, but they also do other fluid changes, but they set a low price point.
Another competitor may decide to focus on the same offering, charge slightly higher prices, but provide a more comfortable waiting area, complimentary beverages or snacks, or even a reservation option online.
When strategic planning and positioning is utilized along with operational efficiency, it’s essential for company leaders to make sure team members understand the focus and stay the course.
Joseph is a senior advisor at the Senate of Canada. Joseph enjoys writing, blogging and teaching. You can follow Joseph via Twitter @josephsoares.