Michael E. Porter. What is Strategy? Harvard Business Review (Nov-Dec 1996)

Bookmark and Share

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.

Posted by Mikael

This entry was posted in Journal article and tagged . Bookmark the permalink.

2 Responses to Michael E. Porter. What is Strategy? Harvard Business Review (Nov-Dec 1996)

  1. Petri says:

    side note:
    I noticed some resemblance between Porter’s activity system maps and Kamppuri’s value map (https://blogs.aalto.fi/stratusreader/2012/03/30/kamppuri-m-2012-because-deep-down-we-are-not-the-same-values-in-cross-cultural-design-interactions-19-2/)
    Unfortunatelly neither of them describes how to create the maps nor cite’s the other.

  2. Petri says:

    For me, the core message of the article was the definition of strategy and strategy work in companies. Porter’s definition has three corner stones: position, trade-offs, and fit. In the article he states:
    “Startegy is the creation of a unique and valuable position, involving a different set of activities.”, “Strategy is making trade-offs in competing.”, and “Strategy is creating fit among a company’s activities.”

    Unique and valuable position can be based on variety, needs, or access. Variety-based positioning means focusing on certain products or parts of customer needs instead of trying to serve certain customer segments fully. Needs-based positioning means focusing on certain (special) customers who have needs that differ from mainstream. Access-based positioning means focusing on certain ways, channels or activities to reach customers. Trade-offs are linked to strategic positions. A good and sustainable strategic position is one that includes trade-offs with other positions.

    Porter also has an interesting message about the role of leadership and communicating company strategies to company workers. Porter says: “Indeed, one of the most important functions of an explicit, communicated strategy is to guide employees in making choices that arise because of trade-offs in their individual activities and in day-today decisions.” This seems to almost in contradiction to many recent intentionally vague strategic slogans of companies. The aim in fuzzy tag lines is to push the employees towards new and creative approaches. Porter seems to aim to the opposite direction.

Leave a Reply