HBR's 10 Must Reads on Strategy

Competition on dimensions other than price - on product features, support services, delivery time, or brand image, for instance - is less likely to erode profitability because it improves customer value and can support higher prices. p.32

Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.

Strategy is the creation of a unique and valuable position, involving a different set of activities.

Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time. P. 26

Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do.

Blue oceans are right next to you in every industry.

The strongest competitive force or forces determine the profitability of an industry and become the most important to strategy formulation. The most salient force, however, is not always obvious. P. 26

Managers must clearly distinguish operational effectiveness from strategy.

Operational effectiveness: necessary but not sufficient Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise. But they work in very different ways. 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 a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs. Ultimately, all differences between companies in cost or price derive from the hundreds of activities required to create, produce, sell, and deliver their products or services, such as calling on customers, assembling final products, and training employees. Cost is generated by performing activities, and cost advantage arises from performing particular activities more

Substitutes are always present, but they are easy to overlook because they may appear to be very different from the industry’s product p.31

In essence, the job of the strategist is to understand and cope with competition. P. 25

High rivalry limits the profitability of an industry P.32

Understanding industry structure is also essential to effective strategic positioning P. 26

Purpose (which should last at least 100 years) should not be confused with specific goals or business strategies (which should change many times in 100 years). Whereas you might achieve a goal or complete a strategy, you cannot fulfill a purpose; it is like a guiding star on the horizon—forever pursued but never reached. Yet although purpose itself does not change, it does inspire change. The very fact that purpose can never be fully realized means that an organization can never stop stimulating change and progress.

Managers at lower levels lack the perspective and the confidence to maintain a strategy. There will be constant pressures to compromise, relax trade-offs, and emulate rivals. One of the leader’s jobs is to teach others in the organization about strategy—and to say no. Strategy

The letters in RAPID stand for the primary roles in any decision-making process, although these roles are not performed exactly in this order: recommend, agree, perform, input, and decide—the “D.

A company that makes good decisions quickly has a higher metabolism, which allows it to act on opportunities and overcome obstacles.

In many industries, however, what some call hypercompetition is a self-inflicted wound, not the inevitable outcome of a changing paradigm of competition. The root of the problem is the failure to distinguish between operational effectiveness and strategy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management, benchmarking, time-based competition, outsourcing, partnering, reengineering, change management. Although the resulting operational improvements have often been dramatic, many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to improve on all fronts, they move farther away from viable competitive positions. Operational effectiveness: necessary

Although external changes can be the problem, the greater threat to strategy often comes from within. A sound strategy is undermined by a misguided view of competition, by organizational failures, and, especially, by the desire to grow. Managers

Strategy involves creating “fit” among a company’s activities. Fit has to do with the ways a company’s activities interact and reinforce one another. For example, Vanguard Group aligns all of its activities with a low-cost strategy; it distributes funds directly to consumers and minimizes portfolio turnover. Fit drives both competitive advantage and sustainability: when activities mutually reinforce each other, competitors can’t easily imitate them. When Continental Lite tried to match a few of Southwest Airlines’ activities, but not the whole interlocking system, the results were disastrous.

A true BHAG (Big, Hairy, Audacious Goals) is clear and compelling, serves as a unifying focal point of effort, and acts as a catalyst for team spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for finish lines. A BHAG engages people—it reaches out and grabs them. It is tangible, energizing, highly focused. People get it right away; it takes little or no explanation.

Indeed, one of the most important functions of an explicit, communicated strategy is to guide employees in making choices that arise because of trade-offs in their individual activities and in day-to-day decisions. Improving

General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company’s unique position, making trade-offs, and forging fit among activities.

As important as the dimensions of rivalry is whether rivals compete on the same dimensions. When all or many competitors aim to meet the same needs or compete on the same attributes, the result is zero-sum competition. P. 33

The envisioned future should be so exciting in its own right that it would continue to keep the organization motivated even if the leaders who set the goal disappeared.

To create an effective envisioned future requires a certain level of unreasonable confidence and commitment. Keep in mind that a BHAG is not just a goal; it is a Big, Hairy, Audacious Goal.

Our research suggests that companies on average deliver only 63% of the financial performance their strategies promise.

A successful company is one that has found a way to create value for customers—that is, a way to help customers get an important job done. By “job” we mean a fundamental problem in a given situation that needs a solution.

If the forces are intense, (..) almost no company earns attractive returns on investment.If the forces are benign, (..) many companies are profitable. P. 25

The point of industry analysis is not to declare the industry attractive or unattractive but to understand the underpinnings of competition and the root causes of profitability. P.29