Michael E. Porter. What is Strategy? Harvard Business Review (Nov-Dec 1996)
Porter explains modern (from 1996 point of view) strategy with a light grip. He goes through different drawbacks in businesses using a few examples. Porter goes to great lengths showing how it is not enough for a company to optimize its individual processes (operational effectiveness). This optimization leads only to companies that are copies of each other and kill their profits in non-beneficial rivalry.
In order to be profitable and sustainable, a company should perform different activities altogether and be in tune with those activities only, meaning that all parts of the company carry out that same strategy. This is supposed to create a position that cannot be easily copied by existing competitors because of differences in execution.
Many of the principles introduced in the article are sound and very much valid at this moment still, making it a great read. There are ideas that still live, even if with different names. For example, Porter uses different terms but in essence, he says that all parts of the company should tell the same story. It’s hard to avoid thinking in present day’s service design principles. However, some of the examples are getting obsolete as the companies in question do not exist anymore or the business environment has changed altogether. A couple of things are interesting in particular, though: Porter recommends taking strategic positions that arch over a decade or more and warns about too much measuring. In reflection to present day interims and requirements set by shareholders, this is thought-provoking.
The author uses examples to show that if one thing applies to one company, it must be true, which is unfortunate. Even though the article is well-respected, it’s surprisingly poorly written, even for a magazine article. Porter uses mathematical gimmicks to prove a point, uses terms like ‘value’ very sloppily and makes many dubious generalizations.