“Understanding Michael Porter: The Essential Guide to Competition and Strategy” by Joan Magretta (Harvard Business Review Press, $24.95).
Michael Porter is to competitive strategy as Peter Drucker is to management. Drawing from Porter’s writings, speeches and lectures, Magretta shows how competition really works and dispels misleading misconceptions that undermine successful strategy.
The key misconception: “Being the best.” It’s not a strategy because it “doesn’t explain how an organization, faced with competition, will achieve superior performance.” In most industries, there is no “best;” there are only customers with various needs. Yet when companies compete with “best” in mind, all they do is cannibalize each other’s profits.
One-upmanship fits into the same non-strategy category as “best.” Matching what your competition does means you’re part of the herd, not breaking trail. Example: How many travelers pick a hotel based upon the bed they’ll sleep in versus a hotel in close proximity to their event/meeting schedule? Yet, when Westin introduced its Heavenly Bed, rivals quickly introduced their versions and the “bed” wars were on. Other chains invested heavily in outfitting their establishments with “special” beds. But, in their quest not to be one-upped they imitated and forgot to do the ROI math. Upgraded beds don’t translate into increased room or occupancy rates.
“Being unique”, on the other hand, plays well in strategy. “One company’s success does not require its rivals to fail.” Walmart is unique in its market; Target is, too. You’ll never mistake a Fiat for a Ferrari. Motel 6 and Hyatt cater to very different demographics.
Defining a unique value proposition allows a firm to focus on profits, not market share. It recognizes that there can be multiple winners — which creates innovation within target niches.
Porter’s bottom line: A good competitive strategy based upon “unique” drives “sustainably superior performance.”
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“The Little Black Book of Innovation — How It Works, How to Do It” by Scott Anthony (Harvard Business Review Press, $25).
Instead of starting with Chapter 1, start with Chapter 4; its “Seven Deadly Sins” show how an arrogant, intolerant organizational culture kills innovation. Here’s a snapshot:
Pride — Forcing your view on the marketplace won’t work. You need a customer-centric starting point to ensure an understanding of what customers want now and a broad understanding of what may affect the market’s future.
Sloth — Paying lip service to innovation by not giving people the resources and room they need to create something different. “Genius is 1 percent inspiration and 99 percent perspiration.”
Gluttony — Being the market leader often leads resting on your laurels. Anthony advocates employing “selective scarcity” in various areas to get people thinking “what if.”
Lust — Pursuing too many bright, shiny ideas generally means that resources will be spread too thin to turn any of them into reality. You must prioritize; but, don’t just think short-term.
Envy — Creating an “us vs. them” relationship between core business and growth opportunities makes it difficult for either to focus on their business. Encourage both by celebrating their wins together.
Wrath — Innovation involves risk. Without failure there can be no success. Punishing the risk takers keeps people in their comfort zones (i.e. their box).
Greed — Putting profits first in the innovative process usually “leads to prioritizing low-potential markets.” Growth requires patience.
The bottom line: Commit any of the sins and your penance will be the inability to get to Point B.
Jim Pawlak is a nationally syndicated book reviewer.
