You need strategy for Your Organization Prof. Michael Porter
Summary
TLDRThe speaker emphasizes the importance of having a strategy in today's competitive business environment, particularly in regions like the Gulf where markets are opening up. They argue that many companies lack a true strategy, often confusing it with simply working hard or following management fads. The key to success lies not in being 'the best' in an industry, but in creating a unique offering that differentiates the company from competitors. Businesses should focus on meeting specific customer needs, as there's no universal 'best' in competition, only distinctive value.
Takeaways
- 📊 Most business leaders agree that a strategy is essential for organizational success, especially in competitive markets.
- 📈 Competition is intensifying, particularly in the Gulf region, requiring companies to earn their success rather than relying on history.
- ⚙️ Many companies do not have a clear strategy despite working hard and doing many activities, leading to confusion.
- ❓ There is widespread confusion about what constitutes a strategy, with many leaders following management fads.
- 🔍 One of the core issues with strategy is how leaders think about competition; many mistakenly focus on being the 'best.'
- 🚫 There is no 'best' in business competition because different companies serve different customer needs, making it subjective.
- 🚗 Companies like BMW and Volkswagen aren't better or worse; they serve different market needs and customer preferences.
- 🏆 Thinking of competition like a sports competition—trying to be 'the best'—can lead to destructive outcomes in business.
- 💡 The proper way to approach competition is by aiming to create a unique value proposition that sets a company apart.
- 🔑 Sustainable success comes from differentiation, where companies focus on offering something unique rather than competing head-to-head.
Q & A
Why is having a strategy important for organizations?
-A strategy is crucial because competition is getting stronger, and organizations must earn their success. Without a clear strategy, it becomes challenging to sustain success in competitive markets.
What is the main issue most companies face regarding strategy?
-Many companies lack a real, meaningful strategy despite hard work and daily operations. There's confusion about what strategy truly means, and many organizations don't have a clear, sustainable strategy in place.
Why is there confusion about strategy among business leaders?
-Confusion arises because many leaders misunderstand competition and the marketplace. They often focus on being the 'best' in their industry, which leads to ineffective strategies.
What is the common way managers think about competition?
-Managers often think of competition as a race to be the best company in their industry, similar to sports competition where athletes aim to be the best.
Why is the idea of competing to be the 'best' a dangerous mindset?
-In business, there is no single 'best' because different companies meet different customer needs. Competing to be the best can lead to destructive competition where one company's success requires another's failure.
What is the proper way to think about competition in business?
-Instead of aiming to be the best, companies should focus on creating something unique and different that offers a competitive advantage. This approach fosters innovation and benefits both the company and society.
Can you give an example of why there is no 'best' company in business competition?
-For example, BMW and Volkswagen both make good cars, but they serve different customer needs. BMW might excel in luxury, while Volkswagen focuses on affordability, so neither is objectively the 'best.'
What happens if a company competes only to be the best?
-Competing only to be the best often leads to destructive competition, making it hard for companies to win. This approach doesn't foster long-term success and may harm the overall industry.
What should companies focus on instead of being the best?
-Companies should focus on being unique, offering different value propositions than their competitors. This creates healthier competition and helps meet diverse customer needs more effectively.
How does focusing on uniqueness benefit both companies and society?
-When companies focus on being unique, they create products and services that stand out in the market, which leads to innovation. This benefits the company through competitive advantage and benefits society by providing diverse and valuable products.
Outlines
📈 The Importance of Strategy in Modern Business
In this opening, the speaker emphasizes the critical need for organizations to have a strategy, especially in today's competitive market. The speaker acknowledges the heightened competition in regions like the Gulf, where businesses can no longer rely solely on their history for success. Companies must now 'earn' their success by developing a solid strategy. Despite this necessity, many companies operate without a real strategy, leading to confusion. The speaker aims to address this by exploring the principles of creating a sustainable and successful strategy.
🤔 Misconceptions About Competition and Business Strategy
This paragraph highlights a common misconception among managers, who often view competition as a race to be 'the best' in their industry. The speaker explains that this mindset is misguided since, unlike sports, there is no singular 'best' company in business. Instead, different companies cater to different customer needs, such as BMW and Volkswagen serving distinct market segments. Rather than striving to be the best, companies should focus on creating a unique value proposition that differentiates them from their competitors. This shift in perspective fosters healthier competition and increases the likelihood of long-term success.
Mindmap
Keywords
💡Strategy
💡Competition
💡Markets
💡Success
💡Leaders
💡Uniqueness
💡Advantage
💡Sustainability
💡Management Fads
💡Customer Needs
💡Destructive Competition
Highlights
Most business leaders agree that a strategy is necessary for success in today's competitive market.
Competition in markets is getting stronger, especially in regions like the Gulf, where businesses must earn their success rather than relying on history.
The need for strategy is greater today than ever before due to increased market competition.
Despite the general understanding of strategy's importance, many companies lack a well-defined strategy.
There is confusion around what a strategy truly entails, with many organizations focusing on management fads rather than meaningful strategy.
A key question every organization must answer is: 'Do you have a sustainable strategy for your organization?'
One reason companies struggle with strategy is confusion about how to think about competition.
Many managers mistakenly believe that the goal of competition is to be the 'best' company in their industry.
In business, unlike in sports, there is no clear 'best' because different companies serve different customer needs.
The right approach to competition is not to be the best, but to create a unique company that offers something different from competitors.
Thinking about competition as a battle to be the best leads to destructive outcomes, where one company’s success requires another’s failure.
Successful companies focus on making their business unique and delivering something competitors cannot.
Creating unique value for customers leads to both company success and broader benefits to society.
An example is comparing BMW and Volkswagen—both are good cars, but each meets different customer needs.
Unique competition fosters innovation and is more likely to lead to sustainable company success.
Transcripts
now I would guess that most all of you
would agree that you need a strategy in
your
organization most most Business Leaders
agree with this
statement I think you would also agree
that competition is getting
stronger that's very true here in the
Gulf region where markets are
opening where competition is r
ring uh where uh it's not so easy
anymore just to be successful because
you're here because you have a history
you have to earn your success and in
order to earn your success again you
need a
strategy and probably the need for
strategy is greater today than ever
before I think we would all probably
agree with
that but I have found as I work with
companies all around the
world I found something very remarkable
I found that actually most
companies don't have a
strategy everybody works hard everybody
goes to the office every day everybody
does many many
things but there's really no strategy in
any meaningful sense of that word
there's a lot of confusion today about
strategy there's a lot of management
fads that have
confused leaders as they think about how
to build a strategy for their
organization so what I'd like to do
today in this very little amount of time
is to talk about this very very basic
question do you have a strategy for your
organization
how do you
tell on what principles should the
strategy be
based is the strategy sustainable is it
something that you're going to be able
to maintain over time and maintain your
success it's these very basic questions
that every one of us has to answer in
our own
organization uh they're in some sense
the essence of management
now if we can uh move our slides forward
um uh let's let's start
here why do companies have difficulty
with
strategy well I think that the probably
the first reason that there's so much
confusion about strategy is actually
that many managers have a confusion
about how to think about competition
itself the way you think about strategy
has a lot to do with how you think about
competition and the
marketplace now what I found as I've
worked with companies around the world
in in in many Industries is that the the
most common way of thinking about
competition is on the left of the slide
managers think about competition as
competing to be the
best it's very natural for managers to
want to be the best company in their
industry the best real estate group the
best bank the best uh distributor the
best automobile
company many managers think that that's
the job of competition how to be the
best to understand what the customers's
real needs are to understand how to best
organized production that's the
fundamental challenge of competition how
to be the best
this is a very natural way to think
about
competition it's very natural because it
kind of fits with many of the uh the
things that we often talk about like
sports you know when you're when you
have a sports competition you want to be
the best you want to be the best
football player you want to be the best
tennis player so it's quite natural to
think of competition in business as
competition to be the best
however what we found is that that's a
very dangerous way to think about
competition why is that well first of
all in business
competition there is no
best there is no best way to be a
bank there is no best way to be an
automobile
company it all depends on what needs
you're trying to serve
is BMW the best
car well it's a good car it meets a
certain set of customer
needs but uh Volkswagen is is a good car
too it meets a different set of needs
for a different
customer there is no best in business
competition that's the wrong
question in business competition instead
of thinking about the fact that your job
is to be the best
company the the proper way of thinking
about competition is that your job is to
create a unique
company a company that offers something
different a company that offers
something unique in which it has an
advantage over its
competitors if you think about
competition as just trying to be the
best that often leads you to have have a
very destructive
competition where in order for you to
succeed your competitor has to
fail we find that any competition which
is like that is a very dangerous
competition it's very very hard to
win instead if you think about
competition is how to make your
organization unique and different and to
deliver something that the competitors
can't offer that creates a form of
competition actually that's much more
likely to lead to Company Success uh as
well as uh to benefit Society to produce
unique products to create unique value
uh for the customer
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