I’ve always been a big fan of Michael Porter’s work and thought leadership on strategy. Whilst many management theories come and go, Porter’s central message has remained incredibly relevant…
Most organisations don’t have a strategy… they have goals.
The word strategy is used a lot and often in the wrong context. The surprising thing is, when I share Porters approach with experienced CEO’s, MD’s and business owners, they’ve never seen strategy explained in such a simple and insightful way before.
And one of the best ways to understand his work on strategy is to think about our relationship with cars.
The Myth of Being the Best
Ask any group of people, “What’s the best car on the market?” You’ll get dozens of different answers. Some will say Mercedes because of luxury and prestige. Others will choose BMW because of performance and driving experience. A family of five might choose a Skoda Superb because of practicality and value. An entrepreneur may share the car of their dreams, an Aston Martin. A city commuter might prefer a compact electric vehicle.
Who’s right?
They all are. Because there is no “best” car. There are simply vehicles designed to serve different customers with different needs.
Yet when I ask leadership teams, “what is the company strategy?” I usually hear things like:
- We want to be the market leader.
- We want to be the best.
- We want to be number one in our sector.
- We want to be the biggest in our market.
These aren’t strategies. They’re aspirations.
Porter argued that strategy is not about defining what you want to become. It’s about creating value for a specific set of customers and making strategic choices about how you will create value and be different.
Mercedes Doesn’t Try to Be Kia
Imagine if Mercedes suddenly decided it wanted to increase market share and appeal to every possible customer. It lowers prices. It starts producing economy cars. It copies features from budget manufacturers. It tries to become all things to all people.
What happens? The very thing that made Mercedes successful begins to disappear. The brand loses its identity. Customers become confused. Competitive advantage erodes.
Mercedes succeeds because it understands exactly who it serves and why those customers buy from them. Their typical customer are affluent professionals who value status, the latest technology and comfort.
Kia succeeds for exactly the same reason. They know their customer. Their customers are professionals and families who want tech and style but without the luxury price tag.
They both have different customers. Different needs. Different value proposition. Neither strategy or approach to positioning is inherently better. They’re simply different.
These businesses understand that positioning is the choice of where you play and the value you want to create. And strategy is how the business aligns behind delivering it.
Choosing Your Value Driver
Many companies want growth, but few are willing to make the choices required to achieve it.
A good strategy and approach to positioning begins with three fundamental questions:
- Who are we serving?
- What needs are we meeting?
- How will we create value differently from our competitors?
Think of Volvo. For years, Volvo built its reputation around safety. Whilst competitors focused heavily on speed, luxury or status, Volvo became synonymous with safety and protecting families.
That positioning influenced everything they did, from vehicle design to marketing to engineering investment. They didn’t try to out-Mercedes Mercedes. They didn’t try to out-BMW BMW. They chose their lane and stayed in it.
Great businesses do exactly the same.
Why So Many Businesses End Up in a Race to the Bottom
Imagine every car manufacturer built virtually identical vehicles. The same performance. The same features. The same quality. The same customer experience. How would customers choose? They are only left with price.
And that is where many industries find themselves today. Businesses copy competitors. Adopt identical best practices. Use similar marketing messages. Offer the same services.
Eventually the only remaining differentiator is cost. Margins shrink. Customers become less loyal. Growth becomes harder.
Porter warned that when businesses compete on the same dimensions, they often destroy profitability for everyone involved.
The Value Chain Is Like Building a Car
Porter also introduced the concept of the value chain. This is where many businesses miss the point. A strategy is not simply a clever marketing message. It must be supported by how the entire organisation operates.
Think about Toyota. Toyota’s success wasn’t built on one brilliant innovation. It was built on the Toyota Production System and hundreds of interconnected decisions about supplier relationships, production systems, quality controls, employee involvement, and continuous improvement.
Each individual element created some advantage. Together they created a system that competitors struggled to replicate. Porter called this “fit”. The power comes not from one thing but from multiple activities reinforcing one another.
Like an engine, gearbox, suspension and steering system, the individual components matter, but the real magic comes from how they work together.
There are so many businesses that compete internally with each other and don’t work well together. There is no overarching strategy being communicated effectively that brings all the functions together.
Why Copying Best Practice Isn’t Enough
Many leaders attend conferences and events looking for latest best practice.
“What are the best companies doing?” It’s a worthwhile question. But there’s a danger. If everybody adopts the same best practice, nobody gains a lasting advantage.
Imagine every car manufacturer copied every feature from Tesla. Eventually every vehicle becomes similar. The advantage disappears.
Competitive advantage rarely comes from copying. It comes from insight. Understanding customers in a way others don’t. Solving problems others haven’t recognised. Making choices others aren’t willing to make.
How much time does your organisation spend on understanding value from the customers perspective?
The Hardest Lesson of All
Perhaps the most powerful insight from Porter is that a great strategy requires saying no.
A Ferrari dealership doesn’t worry about people looking for the cheapest first car.
A Land Rover dealer doesn’t focus on customers seeking a two-seat sports car.
A Rolls-Royce showroom isn’t trying to attract budget-conscious buyers.
They know exactly who they’re for. And who they’re not for.
Many businesses fear narrowing their focus because it feels like they’re turning away opportunity. In reality, that focus is often what creates opportunity.
Porter argued that strong strategic positioning will inevitably make some customers unhappy because it deliberately prioritises others.
The Question Every Leader Should Ask
If Michael Porter walked into your business today, I suspect he wouldn’t start by asking about your goals. He would probably ask:
“Which customers have you chosen to serve?”
“What makes you different?”
“What do you do that competitors cannot easily copy?”
“What have you deliberately chosen not to do?”
Because strategy isn’t about becoming the best.
Just as there is no such thing as the best car, there is no such thing as the best business.
There are only businesses that deeply understand the customers they serve and make deliberate choices to create unique value for them.
The leaders who understand that don’t spend their time chasing competitors. They spend their time building something distinctive. And that is where sustainable advantage is found.
Final Reflection
The simple question I would leave you with is:
Do you have a strategy or simply a goal?
If your strategy is clear, your leadership team should be able to articulate who you choose to serve, the value you create for them, how you do that differently, and just as importantly, what you have chosen not to do.
If those answers aren’t immediately clear, there may be a valuable conversation to have.
I work with leadership teams to get underneath these questions, challenge the assumptions that have built up over time and create clarity around where they compete, how they create value and the choices that will move the business forward.
If this has made you question whether you have a strategy or simply a set of ambitions,
drop me a message for a chat. I’d be happy to explore some of these questions with you.
Or, if you’d like to stay connected, subscribe below for more thinking from The Alliance on leadership, people and purpose.
