The Dangers of the Conventional Definition of Strategy
Strategy as Rivalry
Enrique R. Suarez
Until now, the prevailing view – shared by most practicing managers and academics – has been to define the goal of strategy as achieving sustainable competitive advantage.
Most, if not all, of the most respected and popular frameworks that guide the strategy development process are anchored in this concept. According to professor Hax, this is a mindset likely to cause severe problems moving forward.
First, it puts our competitors at the center of our management process. Competitors become our driving force, our relevant benchmark. We look at strategy, and consequently at management, as rivalry. In order for us to succeed, we have to beat someone.
Strategy is destructive; strategy is war. As recent history has confirmed, again, wars do not have victors.
Second, and equally troublesome, using our competitors as a way to define our course of action basically anchors us in the past.
On reflection, this is an approach that seems counterproductive in a time of revolutionary change, when we want to create discontinuities, not reaffirm old practices.
Often, companies seem obsessed with their competition, studying and watching it intensely to detect anything that could signal a way to operate more effectively.
To separate ourselves from our competitors, we must offer our customers something that is truly unique and distinctive. How do we do that?
Third, the excessive concern about competitors can lead us, consciously or otherwise, into imitating their behavior. Our products begin to take on similar characteristics of those of the leaders.
The development of our new products adheres to the prevailing standard of the industry, the channels of distribution that access our customer base are indistinguishable – in other words, the industry begins to converge into a well-established set of norms and standards.
The result of this congruency leads toward the commoditization of our business, which is the worst possible outcome for all players.
Reject Commoditization – The Essence of Strategy Is to Achieve Costumer Bonding
A large percentage of businesses have become commoditized. One of the fundamental objectives of any firm as a whole, as well as the individual businesses of the firm, is to achieve superior and sustainable financial performance as measured by long-term profitability.
In order to achieve this outcome, we need to differentiate ourselves through leadership and a sense that our business is distinctive, which is exactly the opposite of a commodity. Commodities, by their nature, are ordinary and undifferentiated.
It is not realistic to expect that a lackluster, commoditized business could generate any superior performance, let alone sustain it.
The commoditization of an industry tends to erode everyone’s profitability because it exacerbates the rivalry among competitors primarily by driving down prices for standardized products.
For superior financial performance to be sustainable, not only should the business aim at achieving a solid leadership position, but this position should be long-lasting, unassailable, and able to endure the inevitable changes that the environment will generate.
This calls for flexible adaptation to new circumstances and the will and ability to transform the organization continuously.
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