Repeat after me: Strategy is about difference

Nov 28, 2008 Business Daily, Strategy

“A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at lower cost, or do both.
…Operational effectiveness means performing similar activities better than rivals perform them…in contrast, strategic positioning means performing different activities from rivals’ or performing similar activities in different ways.
…Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.”

Michael E. Porter, Harvard Business Review, Nov-Dec 1996

I was forced to look for my dusty copy of Michael Porter’s classic HBR article last week. The impetus was provided by comments I read in the Business Daily from a Kenyan organisation that recently received an award.

This company’s response to the disarmingly simple question, “What is your competitive advantage?” seemed to be the following list: one, we have vast local and international experience; two, we have invested in all sorts of logistical and security process improvements; three, we offer superior quality service; and lastly, we have been awarded several certifications, such as ISO 9001:2000.

If you read Professor Porter’s words in the excerpt I have quoted, you will know that NONE of those things constitutes a competitive advantage in itself!

Why so? Competitive advantage is about difference, about scarcity, about uniqueness. It is about doing things that others cannot do, or about doing things that they can do, but in different ways. It is NOT about having a list of achievements or simply focusing on the things that are ‘par for the course’ in your market. The strategic winner is the one who routinely sinks birdies and eagles, not keeps par.

To elaborate: experience is by itself nothing, unless it helps you lower costs, understand customers or motivate staff in ways that others cannot. Customer service is by itself nothing, unless it is remarkably better than that provided by your rivals and greatly valued by customers. Processes, similarly, must add great value to customers in ways that competitors’ processes simply cannot. And certifications? Don’t even go there. Those awards that we all seem to be so proud of are freely available to all, and rarely mean a damn thing to customers. There is nothing at all strategic there.

You do not outpace competitors by doing things a little better than them; you beat them by doing things in a way that they simply cannot match. Serena Hotels motivates its employees to care for its guests in ways that others struggle to understand. East African Breweries has a formidable supply chain that is difficult for any rival to replicate or break. Safaricom holds the trump card of network incumbency: you have to be with the company simply because most people you call will also be. That is why all those companies are market leaders: they have competitive advantages that, thus far, they have been able to protect over time. To unseat them, rivals will have to change the rules of engagement, not try to match them.

More of our companies need to learn the lesson of strategy. It is not enough to compete by being more efficient in what we do. We must re-imagine the battlefield.