The Gospel According To Michael Porter

Michael Porter is the darling of most business schools, and rightfully so. Porter is an academic and leader in the subject of business strategy.

In his article, What Is Strategy, Porter offers managers nuggets of gold.

Here are a few insights that marketing managers will find valuable.

1. Porter says strategy is the creation of a unique and valuable position, involving a different set of activities.

• This positioning comes from three distinct sources:
• Serving few needs of many customers. Think of Jiffy Lube and how it provides only auto lubricants.
• Serving broad needs of a few customers. Porter gives the example of Bessemer Trust, which targets only very high-wealth clients.
• Serving broad needs of many customers in a narrow market. Porter uses the example of Carmike Cinemas, which operates only in cities with a population of under 200,000. Carmike Cinemas was bought out by AMC.

2. Strategy is about choosing what not to do—it requires trade-offs.

• Not all competitive activities are compatible. Gains in one area can be achieved at the expense of another area.
• For example, Maytag’s decision to extend its product line and buy out other brands was a failure in making difficult trade-offs.
• Maytag’s boost in revenues came at the expense of return on sales.

3. Strategy involves creating “fit” among a company’s activities.

• By fit, Porter means how a company’s activities interact and reinforce one another.
• When activities mutually reinforce each other, competitors can’t easily imitate them.
• A great example of this was when Continental Lite tried to match a few of Southwest Airlines’ activities, but not the whole interlocking system. It goes without saying that Continental Lite failed.

Deepening a position involves making the company's activities more distinctive, strengthening fit, and communicating the strategy better to those customers who should value it. But many companies succumb to the temptation to chase "easy" growth by adding hot features, products, or services without screening them or adapting them to their strategy.
~Michael Porter

Porter argues that organizational realities also work against strategy.

“Trade-offs are frightening, and making no choice is sometimes preferred to risking blame for a bad choice. Companies imitate one another in a type of herd behavior, each assuming rivals know something they do not,” he says.

As a marketing manager, don’t be afraid of making trade-offs. And be wary of following the herd out of fear of making a bad choice.

You can read the entire article here (subscription only).