Strategy is one of the most used words and this has also resulted in it being one of the most misunderstood words. Familiarity to a subject often leads to a complete misunderstanding of it. Everyone talks of strategy, my career strategy, my marketing strategy, this year’s strategy, or worse the strategy for this quarter. And when you scrutinize most, they tend to conflate plans for strategies. There’s a starting point, such as this Harvard Business School video.
But the worst in the school of misunderstanding strategies are those who think ‘benchmarking’ or looking like your competitor is a strategy. In this school, you also find people who believe operational efficiency is a strategy. It’s not.
The father of competitive strategy, Michael Porter addressed this in his Summa de Strategy aka ‘What is Strategy?’ It’s an article that changed the world of strategy, it was a point of inflexion, the kind that defines an error.
In this article, Porter talks about the productivity frontier. The point when organizations operating in the same industry benchmark each other, adopt best practices, and they all achieve the same efficiencies until such a point when no further differentiation is possible. Porter writes:
“But from a competitive standpoint, the problem with operational effectiveness is that best practices are easily emulated. As all competitors in an industry adopt them, the productivity frontier—the maximum value a company can deliver at a given cost, given the best available technology, skills, and management techniques—shifts outward, lowering costs and improving value at the same time. Such competition produces absolute improvement in operational effectiveness, but relative improvement for no one. And the more benchmarking that companies do, the more competitive convergence you have—that is, the more indistinguishable companies are from one another.”
What is Strategy? – Michael Porter
Again, let’s bring this message home in Uganda and take the case of the restaurant industry. In the past years, several restaurants in the dining space have emerged in Kampala and in the suburbs. The principle has rotated around a proper interior decoration that exudes fine dining, waiting staff that are refined and well-educated. The menu items have also been perfected in such a way to reflect this dining experience. And yes, the locations are all instagrammable or tiktokable, since an experience these days is not one unless it can be shared on one’s socials to arouse appetite in the status viewers. The pricing has also taken on the same range, menu items are priced within the UGX 35K range to UGX 75K range. And when the brunch trend appeared, most of these restaurants jumped onto it, and so did they on the band trend. You could say, that all these restaurants have succeeded in benchmarking each other, have achieved operational effectiveness and are now arriving at the dreaded productivity frontier.
This is to illustrate the point that setting out to be the best or better than your competition is itself not a strategy, because that can easily be replicated. Every new restaurant can set out to hire the same interior design firm, scout for the same chef, scout for the same band, and set up the same brunch. In the end, nothing accrues from such a claim to strategy. It’s not strategy.
What is Strategy?
What is strategy then? Strategy is a set of unique integrated and mutually reinforcing choices about where to operate or play (position on the landscape) and how to play (the advantage with which you will hold that position). Because it’s a set of choices, it immediately implies that strategy is also making trade-offs. It’s not just knowing where you will play and how you will play but ultimately deciding where you won’t play and how you won’t play.
That could mean, a restaurant such as Chuan Yu Xiang at Garden City Kampala that’s committed to exclusively Chinese dishes. They are not trying to accommodate anyone outside this cuisine, it’s a deliberate choice. But it’s also a choice that gets them to focus on what they do best, offering Chinese meals and indulging people in the Chinese cuisine experience. They have made a trade-off. From the teas they serve here to the pastries, everything is purely Chinese. You could say that such a restaurant has strategically positioned itself in the dining space.
One of the exercises that’s recommended in strategy is the activity analysis and review, making a map of an organization’s activities from start to finish and organizing them in such a way that gives a competitive advantage. Strategy is the ability to also achieve fit in one’s activities (it’s the concept of mutual reinforcement). Not to overkill you with the review of Café Javas, but all activities at this restaurant have been organized in such a way that delivers activity fit. When you observe them, you realize that everything there reinforces itself. That’s a big reason why they couldn’t risk their food delivery experience to a third-party. They see the food delivery to communicate their customer obsession, they couldn’t risk creating a dissonance in the customer experience.
A case in point, I ordered a Café Javas meal and then in the middle of the delivery, I had an emergency to address. Thus, I now had to leave home. When the CJs bike delivery person called me, I explained my situation and requested them to catch with me at a new point. This required extra effort on them, yet they willingly did it with a smile. It’s now written in their DNA, to ensure that customer experience always lands right. But I am also sure, somewhere in the costing of their delivery fees, they have factored in such unforeseen moments. Again, this is a trade-off to say, I will charge a delivery fee of UGX 7K to Naalya, but I will make it right to you. The food will arrive as perfect as it would have arrived had you dined in. Strategy involves these kinds of trade-offs, without trade-offs, you can’t achieve activity fit.
What’s the point here? It’s to warn all great students and practitioners of strategy, that not everything that passes off as strategy is strategy. Benchmarking is one of those things, operational effectiveness is another, and your annual plans too are not strategies. They are plans but not strategy.