Sunday, December 25, 2011

Understanding Michael Porter: Notes to Self

Many concepts become victims to being 'buzz-word-ized'. What this essentially means is that the core idea behind the concept is lost some where along the line and the word or words alone remain, as an empty container. Or the concept takes an entirely different meaning. More successful the concept is, higher the probability of it becoming buzz-word-ized.  

I came across an introduction to a book called 'Understanding Michael Porter', in hbr blog. The premise of the book is quite interesting. Being as successful as Michael Porter's concepts are, these too have fallen into the 'buzz-word-ization' trap. Competitive advantage has come to mean 'anything people are good at'. Any plan or program is called a strategy. Managers confuse 'differentiation' with being different. The author of the book  tries to set the misunderstandings right, as the book provides Porter's ideas in a concise accessible summary.

Given below are a list of insights that the author maintained, as he worked on the book.
  • Competitive advantage is not about beating rivals; it's about creating unique value for customers. If you have a competitive advantage, it will show up on your P&L.
  • No strategy is meaningful unless it makes clear what the organization will not do. Making trade-offs is the linchpin that makes competitive advantage possible and sustainable.
  • There is no honor in size or growth if those are profit-less. Competition is about profits, not market share.
  • Don't overestimate or underestimate the importance of good execution. It's unlikely to be a source of a sustainable advantage, but without it even the most brilliant strategy will fail to produce superior performance.
  • Good strategies depend on many choices, not one, and on the connections among them. A core competence alone will rarely produce a sustainable competitive advantage.
  • Flexibility in the face of uncertainty may sound like a good idea, but it means that your organization will never stand for anything or become good at anything. Too much change can be just as disastrous for strategy as too little.
  • Committing to a strategy does not require heroic predictions about the future. Making that commitment actually improves your ability to innovate and to adapt to turbulence.
  • Vying to be the best is an intuitive but self-destructive approach to competition.
  • A distinctive value proposition is essential for strategy. But strategy is more than marketing. If your value proposition doesn't require a specifically tailored value chain to deliver it, it will have no strategic relevance.
  • Don't feel you have to "delight" every possible customer out there. The sign of a good strategy is that it deliberately makes some customers unhappy.
The list of insights are quite interesting and throw so much light on what is wrong with the way managers use Porter's concepts. I hope to get hold of the book some time in the future, but for now, i believe if a manager gets to remember the insights given above, that itself will do him/her lot of good.

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