More and more I’m enjoying The Strategy Paradox by Michael Raynor. I’m finding so much to wrestly with…maybe that’s not your goal, but I love looking for ways of thinking (and then acting) that moves my team forward. If you’re in that frame of mind, I think you’ll like this principle from The Strategy Paradox. Here it is:
Raynor points out that many business writers have pointed out that there is a kind of continuum along which all (business) strategies can be arranged. On one end is the idea of product differentiation like Nordstrom…what we make is high quality, very unique, not easily duplicated. On the other end is a kind of cost leadership strategy…like WalMart. at this end would be an effort to drive down costs and deliver a reasonable product, admittedly not the highest quality, but good enough, at the lowest cost.
See how those two concepts describe the two ends of the continuum?
Ok. Now here’s the next step in the thinking. Choosing one end or the other is the key to a profitable strategy. As Raynor explains, "The most profitable strategies are "extreme" strategies that commit companies to positions of either product differentiation or cost leadership."
Does that make sense so far?
Ok, now for the kicker. In business, organizations that try to do something in between are doomed to an also-ran experience. Why? Here’s the paragraph that makes the case:
"Becoming stuck in the middle is often a manifestation of a firm’s unwillingness to make choices about how to compete. It tries for competitive advantage through every means and achieves none, because achieving different types of competitive advantage usually requires inconsistent actions (p. 52)."
Now, I don’t know about your experience, but that is a little bit too close to the truth for lots of places. This kind of organization, what Michael Porter refers to as a hybrid between the two ideas, is everywhere! Is it doomed to fail? Not necessarily. But it is doomed to an also-ran experience.
So…the question might be, what are the ends of the continuum for your organization? Obviously, for some of us those two ends make perfect sense. But I can imagine many others might be saying, "huh? How does this apply to me?"
Want an example to prime the pump? Think about the airline industry. Got to be one end or the other. Think about investment firms. Got to be one end or the other. Think about the church that tries to put on a "blended" musical style that will appeal to both traditionalists and contemporary. Hmmmmm. Got to be one end or the other. Or it will be an also-ran experience.