Competitive strategy is about being different from your rivals; it rests on unique activities, choosing to perform differently or to perform different activities from your competitors. It differs significantly from operational excellence, which is about performing the same activities better than the competition. Being operationally excellent is a requirement but it is not enough. Productivity gains, increased levels of service, superior management techniques, product improvements, all of these can be copied and will be copied by rivals. This is readily apparent in more mature markets I heard it said by a leading system company chief exec that having an excellent product just bought you the entry ticket to the game, it didn’t mean you had a winning hand and he was absolutely right.
Strategy requires a company to take a position, sometimes these overlap but the theorists basically cite three strategic positions:-
The first and very common position is to specialise in a particular subset of a product or service and provide that product or service better than the generalists. Sometimes called variety based positioning because at it’s heart is product or service rather than customer. For example the trade manufacturer who specialises in say vertical sliding windows or woodgrain rather than sell a complete range of trade frames. Just look at the successful large fabricators, they are specialists that do not provide everything for everyone.
Secondly you can serve all or most of the needs of a specific group of customers, sometimes called needs based positioning. This is about picking a specific customer and meeting all or most of what they want, one stop shop if you like, take the conservatory buyer, a needs based strategy would give the trade conservatory buyer everything they need from technical backup to frames, glass, roofs, building materials fixings and fittings etc.
Thirdly we can see segmenting, sometimes called access based positioning these strategies rely on serving customers in a different way because of say the customer’s geography or scale. The growth of trade counters is a result of this approach, local businesses that are better able to deal with and make profit from small trade and DIY buyers of PVCu frames.
Operational excellence is seductive and is one of the reasons so many companies do not have a strategy other than ‘me too’. As the pressure increases managers are required to deliver concrete tangible improvements and these are available through operational excellence. Worried by competition managers fall in to the trap of trying to copy everything about the competition and they fail to ‘trade off’. By that I mean that mangers often mistake ‘customer focus’ and flexibility to mean that they must serve every need and respond to every request from a customer. Try phoning Dell and asking to buy an electrical component like a washing machine, they will say no but many trade window companies will say yes to blue black green, curved vertical sliding patio doors if they think you have a cheque book.
It can be argued that any strategy can be copied but there are a couple of factors that make this more difficult than it sounds. Firstly interlocking a set of activities makes it much harder for a rival to copy. For example take the low cost airlines, few have been truly successfully copied as they are about low cost, limited service, frequent reliable departures, lean processes, high aircraft utilisation and short haul to smaller city destinations. Secondly, to quote Fortune magazine “ less than 10% of strategies effectively formulated are effectively executed” a view endorsed by Dr David Norton often called the worlds leading authority on strategic execution. Strategies are not defined or described or measured or very often not even shared with the people who are supposed to execute them!
And maybe the final word should go to Jack Welch who took GE from a $13 billion to a $550 billion company - “Getting the right people in the right jobs is a lot more important than strategy.”…”Change doesn’t come from a slogan or a speech, It happens because you put the right people in place…”