When Marketing Is Strategy Hbr Pdf
Operational Effectiveness Is Not StrategyAccording to Porter, various management tools like total quality management, benchmarking, time-based competition,outsourcing, partnering, reengineering, that are used today, do enhance and dramatically improve the operational effectiveness of a company but fail toprovide the company with sustainable profitability. Thus, the root cause of the problem seems to be failure of management to distinguish between operationaleffectiveness and strategy: Management tools have taken the place of strategy.Operational Effectiveness: Necessary but Not SufficientAlthough both operational effectiveness and strategy are necessary for the superior performance of an organization, theyoperate in different ways.Operational Effectiveness: Performing similar activities better than rivals perform them.Operational effectiveness includes but is not limited to efficiency. It refers to many practices that allow a company to better utilize its inputs.Strategy: Performing different activities from rivals’ or performing similar activities in different ways.Porter states that a company can outperform rivals only if it can establish a difference it can preserve. It must deliver greater value to customers orcreate comparable value at a lower cost, or do both. However, Porter argues that most companies today compete on the basis of operational effectiveness.This concept of competition based on operational effectiveness is illustrated via the productivity frontier, depicted in the figure below.The productivity frontier is the sum of all existing best practices at any given time or the maximum value that a companycan create at a given cost, using the best available technologies, skills, management techniques, and purchased inputs. Thus, when a company improves itsoperational effectiveness, it moves toward the frontier. The frontier is constantly shifting outward as new technologies and management approaches aredeveloped and as new inputs become available.
To keep up with the continuous shifts in the productivity frontier, managers have adopted techniques likecontinuous improvement, empowerment, learning organization, etc. Although companies improve on multiple dimensions of performance at the same time as theymove toward the frontier, most of them fail to compete successfully on the basis of operational effectiveness over an extended period. The reason for this beingthat competitors are quickly able to imitate best practices like management techniques, new technologies, input improvements, etc. Thus, competition basedon operational effectiveness shifts the frontier outward and effectively raises the bar for everyone. But such competition only produces absolute improvementin operational effectiveness and no relative improvement for anyone.' Competition based on operational effectiveness alone is mutually destructive, leading to wars of attrition that can be arrested only limitingcompetition'(p. Such competition can be witnessed in Japanese companies, which started the global revolution inoperational effectiveness in the 1970s and 1980s.
However, now companies (including the Japanese) competing solely on operational effectiveness arefacing diminishing returns, zero-sum competition, static or declining prices, and pressures on costs that compromise companies’ ability to invest in thebusiness for the long term. Strategy Rests on Unique Activities'Competitive strategy is about being different. It means deliberately choosing a different set of activities todeliver a unique mix of value' (p. Moreover, the essence of strategy, according to Porter, is choosing to perform activities differently than rivals.Strategy is the creation of a unique and valuable position, involving a different set of activities.The Origins of Strategic PositionsStrategic positions emerge from three sources, which are not mutually exclusive and often overlap.1. Variety-based positioning: Produce a subset of an industry’s products or services. It is based on the choice ofproduct or service varieties rather than customer segments. Thus, for most customers, this type of positioning will only meet a subset of their needs.
Itis economically feasibly only when a company can best produce particular products or services using distinctive sets of activities.2. Needs-based positioning: Serves most or all the needs of a particular group of customers. It is based ontargeting a segment of customers. It arises when there are a group of customers with differing needs, and when a tailored set of activities canserve those needs best.3. Access-based positioning: Segmenting customers who are accessible in different ways. Although theirneeds are similar to those of other customers, the best configuration of activities to reach them is different. Access can be a function of customergeography or customer scale or of anything that requires a different set of activities to reach customers in the best way.Whatever the basis (variety, needs, access, or some combination of the three), positioning requires a tailored set of activitiesbecause it is always a function of differences in activities (or differences on the supply side).
Positioning, moreover, is not always a function of differenceon the demand (or customer) side. For instance, variety and access positionings do not rely on any customer differences.III. A Sustainable Strategic Position Requires Trade-offsAccording to Porter, a sustainable advantage cannot be guaranteed by simply choosing a unique position, as competitors willimitate a valuable position in one of the two following ways:1. A competitor can choose to reposition itself to match the superior performer.2. A competitor can seek to match the benefits of a successful position while maintaining its existing position (known as straddling).Thus, in order for a strategic position to be sustainable there must be trade-offs with other positions. 'A trade-offmeans that more of one thing necessitates less of another' (p. 68).Trade-offs occur when activities are incompatible and arise for three reasons:1.
A company known for delivering one kind of value may lack credibility and confuse customers or undermine its own reputation by deliveringanother kind of value or attempting to deliver two inconsistent things at thesame time.2. Trade-offs arise from activities themselves. Different positions require different product configurations, different equipment, differentemployee behavior, different skills, and different management systems. In general, value is destroyed if an activity is over designed or under designed.3. Trade-offs arise from limits on internal coordination and control.
By choosing to compete in one way and not the other, management is makingits organizational priorities clear. In contrast, companies that try to be all things to all customers, often risk confusion amongst its employees, who thenattempt to make day-to-day operating decisions without a clear framework.Moreover, trade-offs create the need for choice and protect against repositioners and straddlers. Thus, strategy can alsobe defined as making trade-offs in competing. The essence of strategy is choosing what not to do.IV. Fit Drives Both Competitive Advantage and SustainabilityPositioning choices determine not only which activities a company will perform and how it will configure individualactivities but also how activities relate to one another. While operational effectiveness focuses on individual activities, strategy concentrates oncombining activities.' Fit locks out imitators by creating a chain that is as strong as its strongest link' (p.
Fit, as per Porter,is the central component of competitive advantage because discrete activities often affect one another.Although fit among activities is generic and applies to many companies, the most valuable fit is strategy-specific because itenhances a position’s uniqueness and amplifies trade-offs. There are three types of fit, which are not mutually exclusive:1. First-order fit: Simple consistency between each activity (function) and the overall strategy. Consistency ensures that the competitiveadvantages of activities cumulate and do not erode or cancel themselves out.
Further, consistency makes it easier to communicate the strategy to customers, employees, andshareholders, and improves implementation through single-mindedness in the corporation.2. Second-order fit: Occurs when activities are reinforcing.3. Third-order fit: Goes beyond activity reinforcement to what Porter refers to as optimization of effort. Coordination and informationexchange across activities to eliminate redundancy and minimize wasted effort are the most basic types of effort optimization.In all three types of fit, the whole matters more than any individual part. Competitive advantage stems from the activitiesof the entire system.
The fit among activities substantially reduces cost or increases differentiation. Moreover, according to Porter, companies should thinkin terms of themes that pervade many activities (i.e., low cost) instead of specifying individual strengths, core competencies or critical resources, asstrengths cut across many functions, and one strength blends into others.Fit and SustainabilityStrategic fit is fundamental not only to competitive advantage but also to the sustainability of that advantage becauseit is harder for a competitor to match an array of interlocked activities than it is merely to replicate an individual activity. Thus, 'positions built onsystems of activities are far more sustainable than those built on individual activities' (p. The more a company’s positioning rests on activitysystems with second- and third-order fit, the more sustainable its advantage will be. Such systems are difficult to untangle and imitate even if thecompetitors are able to identify the interconnections. Further, a competitor benefits very little by imitating only a few activities within the whole system.Thus, achieving fit is an arduous task as it means integrating decisions and actions across many independent subunits.Additionally, fit among activities creates pressures and incentives to improve operational effectiveness, which makesimitation even harder.
Fit means that poor performance in one activity will degrade the performance in others, so that weaknesses are exposed and more proneto get attention. On the other hand, improvements in one activity will 'pay dividends in others' (p.
74).Strategic positions should have a horizon of a decade or more, not of a single planning cycle, as continuity promotesimprovements in individual activities and the fit across activities, allowing an organization to build unique capabilities and skills custom-fitted to itsstrategy. Continuity also reinforces a company’s identity. Frequent shifts in strategy are not only costly but inevitably leads to hedged activityconfigurations, inconsistencies across functions, and organizational dissonance.Thus, strategy can also be defined as creating fit among a company’s activities as the success of a strategy dependson doing many things well - not just a few - and integrating among them.
If there is no fit among activities, there is no distinctive strategy and littlesustainability.
. 'The sole purpose of marketing is to sell more to more people, more often and at higher prices.' (Sergio Zyman, marketing executive and former Coca-Cola and JC Penney marketer). 'Marketing is no longer about the stuff that you make, but about the stories you tell.'
(Seth Godin, former business executive, and entrepreneur). 'The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.'
When Marketing Is Strategy Hbr Pdf Example
(Peter Drucker, credited as founding modern management). “Marketing’s job is never done. It’s about perpetual motion. We must continue to innovate every day.” (former vice chair and chief marketing officer, GE). 'Take two ideas and put them together to make one new idea. After all, what is a Snuggie but the mutation of a blanket and a robe?'
(Jim Kukral, speaker and author of 'Attention!'