Class 6: What is Strategy? Flashcards
Who is Michael Porter?
HBS, simplified the concepts of competitive advantage and created frameworks on how to achieve it
What is operational effectiveness not?
operational effectiveness is not strategy
What is operational effectiveness?
performing similar activities better than rivals perform them
What is strategic positioning?
Performing different activities from rivals or performing similar activities in different ways
What is a sustainable strategy?
A set of reinforcing activities (horizon of a decade or more)
How does a company outperform rivals?
If it can establish a difference that it can sustain
What is the result of benchmarking?
The more benchmarking companies do, the more they look alike
- The more that rivals outsource activities to efficient 3rd parties, often the same ones, the more generic those activities generally become
- the competitors left standing are often those that outlasted others, not companies with real advantage
What is the productivity frontier?
Sum of best practices, including: product features, service features, enabling technology, and low cost production
What is the essence of strategic positioning?
To choose activities that are different from rivals
What are common management practices? are those strategy?
CRM. surveys and benchmarking are used by 40%+ of companies, the things that everyone does are not differentiators
What is supercell’s strategy?
-best quality work comes from small teams in which every member is passionate about what they do
-supercell is a collection of these cells
-create game services with longevity
-made the tradeoff of platform flexibility
tradition of celebrating failures
What are the three origins of strategic positions?
Variety-based, Needs-based, Access-based
What is a variety-based strategic position and give me an example
(lack of) based on product, service, not customer segment.
vanguard and jiffy lube
What is a needs-based strategic position and give me an example
Based on most or all of the needs of a particular group, same customer can have different needs based on occasion
Ikea and Bessemer Trust
What is an access-based strategic position
Based on access to customers (geography or scale)
Carmike Cinemas
What is fit?
strategy involves a whole system of activities which reinforces a strategic position
What does fit drive?
Both competitive advantage and sustainability
- Virtuous cycle: consistency, reinforcement, optimization of activities with each other “well-oiled machine”
- locks out imitators: when activities complement one another, rivals will get little benefit from imitation unless they successfully match the whole system. difficult to replicate
What are southwest’s system of activities?
- Limited Service
- Short haul, point-to-point, mid-sized cities, secondary airports
- Low ticket prices
- High aircraft utilization
- Lean, highly productive ground and gate crews
- Frequent, reliable departures
Which is the first “domino” for southwest?
Short haul, point-to-point, mid-sized cities, secondary airports
What do straddlers do?
often try to imitate success without making necessary tradeoffs, and fail
What did southwest imitators fail at?
- inconsistency to reputation and image
- inability to match service levels
- no reduction in fixed costs
- culture, bureaucracy and confusion
Why do companies fail to choose, stick with a strategy?
failure to choose: far from the productivity frontier, tradeoffs appear unneccessary
the growth trap: pressure to grow leads managers to broaden the position
WHAT IS STRATEGY!!!!!!
A set of self-reinforcing actions a firm takes to create and sustain a competitive advantage
What are the parts of strategy?
performing different activities
same activities differently
goal-oriented; creating tradeoffs
economic moat that protects profits, difficult to imitate
