Sam Keller's TEC Blog

Thursday, December 29, 2011

The Most Common Strategic Mistakes

In her new book, "Understanding Michael Porter: The Essential Guide to Competition and Strategy", Joan Magretta, Senior Associate at the Institute for Strategy and Competitiveness at Harvard Business School, distills Porter's core concepts and frameworks into a concise guide for us who run businesses.

In an interview with Professor Porter, Ms. Magretta asked him what he sees as the common strategic mistakes that companies make.  Here is a summary of his response:
  1.  Trying to compete to be the best by going down the same path as everybody else and thinking that somehow you can achieve better results. This is caused by confusing operational effectiveness with strategy.
  2. Confusing marketing with strategy by building strategy around the demand side of the equation and focusing on the value proposition. A robust strategy requires a tailored value chain or supply side element as well. Strategy links choices on the demand side with the unique choices about the value chain or supply side. You can't have competitive advantage without both.
  3. Overestimating your strengths. This creates an inward-looking bias. For example, you might perceive customer service as a strong area. So that becomes the "strength" on which you attempt to build a strategy. But today, everyone has good customer service or they parish.  The same can be said for quality.  So a real strength for strategy purposes has to be something you can do better than your rivals. And ‘better’ because you are performing different activities than they perform because you've chosen a different model than they have.
  4. Getting the definition of the business wrong, or getting the geographic scope wrong.
  5. The worst mistake—and the most common one—is not having a strategy at all. Most executives think they have a strategy when they really don’t, at least not a strategy that meets any kind of rigorous, economically grounded definition.

Click here to read the full article.