Streamline Training & Documentation: Michael Porter on Strategy

Wednesday, November 01, 2006

Michael Porter on Strategy

As a follow-on to my post on "Goals, Strategies, Tactics," I'd like to call attention to what strategy guru Michael Porter has said recently on where managers go wrong in their efforts to "be strategic."

As reported today in a Knowledge@Wharton article, one problem is misunderstanding what exactly strategy is. As I suggested in my earlier post, all too often managers conflate goals and strategy. "We're going to achieve X" is not a strategy. As Porter points out, it's an aspiration, whereas "strategy has to do with what makes you unique."

Porter cites four key principles that underlie success in establishing and maintaining a unique postioning for your business:

a unique value proposition

a tailored value chain

clear tradeoffs in choosing what not to do

strategic continuation, i.e., ongoing improvement

Another distinction that Porter emphasizes is between economic performance — the long-run value creation a company achieves — and shareholder value — a noisy measure that picks up all the transitory influences that cause a company's stock price to fluctuate. As Porter puts it,

We have had this horrendous decade where people thought the goal of a company is shareholder value. Shareholder value is a result. Shareholder value comes from creating superior econmic performance.

There is much else of interest in the Wharton article, so I recommend reading the whole thing. In closing, I'd just highlight the article's final note on Porter's thinking:

Years ago, corporate strategy was considered a secret known only by top executives for fear competitors might use the information to their advantage ... Now it is important for everyone in the organization to understand the strategy and align everything they do with that strategy every day. Openness and clarity even help when coping with competition. [Porter says,] "It's good for a competitor to know what the strategy is. The chances are better that the competitor will find something else to be unique at, instead of creating a zero-sum competition."

Trainers should take the initiative in suggesting to management the best ways to communicate a company's strategy and to guide employee activities so they are aligned with the strategy.

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Labels: Strategy

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