You need strategy for Your Organization Prof. Michael Porter

Summary

The 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

00:00

📈 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.

05:02

🤔 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.

Keywords

💡Strategy

Strategy refers to a plan or method designed to achieve a specific goal or advantage. In the context of the video, it is about how businesses should approach their operations to succeed in a competitive market. The speaker emphasizes the need for a meaningful strategy that is sustainable over time, contrasting it with the common misconception that merely working hard is enough.

💡Competition

Competition is the rivalry between businesses striving for the same objective, such as market share or customer base. The script discusses how the perception of competition as striving to be the 'best' can be misleading and instead suggests that businesses should aim to be unique and offer something different to stand out.

💡Markets

Markets are the various customer groups or industries where businesses operate. The video mentions the Gulf region's opening markets, indicating an increased level of competition and the necessity for a robust strategy to navigate these evolving landscapes.

💡Success

Success in the video is portrayed as the achievement of a business's goals, particularly in a competitive environment. The speaker argues that success is not guaranteed by mere presence in the market but must be earned through effective strategies.

💡Leaders

Leaders in this context are the individuals responsible for guiding their organizations. The script highlights that many leaders are confused about how to build strategies, which is a critical issue since leadership is key to defining and executing a company's strategic direction.

💡Uniqueness

Uniqueness is the state of being the only one of its kind. The video stresses the importance of creating a unique company that offers something different from competitors. This is contrasted with the common but flawed approach of trying to be the best, suggesting that uniqueness can lead to more sustainable success.

💡Advantage

Advantage refers to the condition or circumstance that puts one in a favorable or superior position. The script uses this term to describe the benefits a company gains by offering something unique that competitors cannot match, which is a core part of a successful strategy.

💡Sustainability

Sustainability in the video pertains to the ability of a business strategy to maintain its effectiveness over time. The speaker questions whether current strategies are sustainable, implying that a good strategy should not only achieve short-term goals but also be viable in the long run.

💡Management Fads

Management fads are temporary, often trendy, approaches to business management. The script suggests that these fads have confused leaders, leading them astray from developing effective, long-term strategies.

💡Customer Needs

Customer needs are the requirements or desires of a company's target market. The video mentions understanding customer needs as a fundamental challenge of competition, indicating that a successful strategy must be grounded in meeting these needs.

💡Destructive Competition

Destructive competition is a form of rivalry that is harmful or counterproductive. The script warns against a mindset of competition that focuses on being the best, as it can lead to destructive competition where one company's success necessitates another's failure, which is not a sustainable or desirable approach.

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