What is strategy?

(Summary of Michael E. Porter article in Harvard Business Review Nov-Dec 96)

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. Operational effectiveness means performing similar activities better than rivals performing them. In contrast, strategic positioning means performing different activities from rivals´ or performing similar activities in different ways.

Otherwise, a strategy is nothing more than a marketing slogan that will not withstand competition. Strategic positions can be based on customers´ needs, customers´ accessibility, or the variety of a company´s products or services.

Trade-offs are essential to strategy. They create the need for choice and purposefully limit what a company offers. The absence of trade-offs is a dangerous half-truth that managers must unlearn.

Quality is not always free. If there are no trade-offs companies will never achieve a sustainable advantage. They will have to run faster and faster just to stay in place. The essence of strategy is choosing what not to do.

It can be misleading to explain success by specifying individual strengths, core competencies or critical resources. The list of strengths cuts across many functions, and one strength blends into others. It is more useful to think in terms of themes that pervade many activities, such as low cost, a particular notion of customer service, or a particular conception of the value delivered.

Strategic positions should have a horizon of a decade or more, not of a single planning cycle.

Alternative views of Strategy :