I've always been fascinated by Michael Porter's 1996 classic Harvard Business Review article 'What is Strategy?' However, it's in need of a refresh given todays fast-paced tech innovation and shift to the digital economy. So, I've decided to break down the article into digestible parts, adapt them to the digital age, and hopefully provide readers with some strategic insights and guidance. Part 1 of my adaptation focuses on operational effectiveness and creating a sustainable strategic advantage. Here you go…
What is Strategy? Part 1: Operational Effectiveness
Operational effectiveness is not strategy.
What does this mean? It means although you do something well, this doesn’t signify it’s strategically impactful for your business. You can offer a high-quality product or service, reduce inefficiencies in your business, and be more productive, but those things won’t necessarily translate into driving more revenue or providing you with a sustainable competitive advantage in the marketplace. Businesses need both operational efficiency and strategy to create advantage and “superior performance.” As Michael Porter, founder of the modern strategy field and one of the world’s most influential thinkers on management and competitiveness, notes,
“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.”
For example, you could have a library of high-quality, high-level video content for your social media channels that you post every week at the same time and to the same audience; however without an overarching vision of what you’re trying to accomplish or what you’re measuring to determine success, these posts are not necessarily going to help you to strategically grow your business. Simply managing your social media channels is not enough. You must set clear KPI’s, track the data, and adapt accordingly. Your competitors are also probably posting high-quality content to their digital channels, so, what makes your content unique? What additional value can your content provide to audiences? Where are the gaps? How can you leverage your content to build trust, dialogue, brand identity, and engagement?
Adapting to feedback and data and constantly improving your business’s operational effectiveness is imperative to stay ahead of your rivals and generate profitability. However, these tasks get harder everyday as technology allows for all companies to have easy, fast, and cheap access to data tracking and reporting. No longer do large companies have exclusive access to data analytics. This means that competition will get stiffer and response times will need to be faster – raising the overall bar for operational effectiveness. “The more benchmarking companies do, the more they look alike. The more that rivals outsource activities to efficient third parties, often the same ones, the more generic those activities become,” writes Porter in his original What is Strategy? article. In effect, best practices in operational effectiveness can be easily copied and adapted to any business, and as technology accelerates, the barriers that stand in the way of achieving these capabilities are stripped away.
Strategy is all about finding and leveraging your business’s unique points of differentiation and then, clearly and concisely, communicating those points of differentiation to your customers. Strategy is about providing unique value. Strategy is about setting priorities. Strategy is about creating “fit” among your company’s activities that are difficult for competitors to replicate and that reinforce your internal activities – more on these later.
Social media provides both big and small businesses the ability to reach vast numbers of people at an extremely low cost. It’s why Facebook, despite all of the current backlash its receiving, will never go away. (This is a discussion for another time.) However, simply throwing content against the great social media wall to see what sticks is both operationally and strategically reckless. Businesses must create a detailed digital plan that envelopes its short and long-term goals, messaging, KPI’s, and synergies that will flesh out its digital eco-system.
So, the questions you need to answer right now are, What can I do better? and What can I do differently than my rivals?