Michael Porter (HBS) - Business & Corporate Strategy, Be Unique.

Read also: 👴🏻Michael Porter - Founder of Monitor Strategy (Harvard, HBS)

Diamond Model - An amazing Harvard Class summary

The Challenge of Communicating Strategy

• Strategy involves thinking about how the entire company works together in harmony.
• It requires understanding the whole environment in which the company operates.
• Strategy is often misunderstood within organizations, leading to confusion about its role and importance.
• Strategy and Project Management should work hand-in-hand to drive successful outcomes.

How Do We Win?

• Saying "We want to be the best" is misguided.
• If you're always chasing "the best," you constantly ask, what is the best?—a disastrous way of thinking because there is no absolute best. Success depends on who you're aiming to serve and what goals you want to achieve.

What is Strategy? Strategy is the HOW.

• Strategy is how you’re going to deliver unique value better than competitors.
• You cannot meet all customer needs—focus on where you can be the best.
• The goal is to compete by being unique, not by trying to be better at everything.
• Think about how to differentiate yourself in a way that makes you irreplaceable.

What Do We Mean by Strategy?

• Strategy is about choosing to do things differently.
• Many leaders confuse strategy with goals.
• Goals are what you want to achieve.
• Strategy is the how—how you will achieve it.
• Strategy is fundamentally about choice:
• Deciding what to do and what not to do.
• A great strategy is holistic—it defines how the business positions itself to gain a competitive advantage.
• Strategy is about making things happen to bring your vision to life.
• It’s more than just a mission or vision statement—it’s about how to compete, involving a series of choices that define your unique position in the market.

Principles of a Great Strategy

• A successful strategy is about making certain customers unhappy—so that you can identify which customers you truly want to make extremely happy.

Strategy Exists on Multiple Levels

1. Business Strategy:
• This is how a company competes within its specific market.
• If a company operates more than one business, each business needs its own distinct strategy to compete effectively in its market.
2. Corporate Strategy:
• Corporate strategy focuses on how to bring together different businesses to amplify synergies and advantages.
• This involves discussions on how various business units can work together to create a greater impact than they could achieve independently.

Business Strategy

Business strategy is mainly divided into two core components:

1. Industry Structure & External Environment:
• Every industry has its own unique profitability characteristics.
• To analyze industries, Michael Porter’s Five Forces framework is extremely useful for understanding competitive dynamics.
• Michael Porter - Founder of Monitor Strategy (Harvard, HBS)
• Understanding the average profitability of the industry helps set expectations and benchmarks.
2. Positioning:
• Positioning is about how we decide to compete within the industry.
• It focuses on gaining a competitive advantage by being distinct in how you operate.
• Profitability comes from differentiating your business. When your business is unique, it tends to have higher profitability due to better positioning in the market.
• There are two main ways to lead in positioning:
1. Increase price by offering uniqueness, which drives higher margins.
2. Decrease costs through operational efficiency, which leads to improved profitability.

Challenges of Industry and Positioning

• Industry analysis requires a holistic way of thinking.
• Analyzing industries can be deep and complex, involving multiple factors such as competition, market forces, and external conditions.
• Leaders in project management often lack depth in engaging with the industry's strategic dialogue.
• The key question remains: How do we position ourselves within the industry?

The Value Chain

Breaking Down Business Activities

• All competitive advantage stems from the value chain—a series of activities that a company performs to deliver value to its customers.
• To gain a competitive edge, businesses must decide between two key strategies: price leadership or cost leadership.
• Operational effectiveness is about doing things efficiently and delivering high-quality outputs.
• Implementing best practices helps optimize the value chain and improve operations.
• However, improving best practices alone is not a strategy; it's about execution, not positioning.

• What sucessfull Strategy Looks like?

What is a Value Proposition?

• Specific Customers: Who are we really targeting?
• Specific Needs: What specific customer needs are we trying to address?
• Price Translation: How do these customer needs and our target market translate into a pricing strategy?

If you’re targeting the same customer, with the same needs, and at the same price as your competitors, you don't have a strategy. In this case, you're simply competing on operational effectiveness, which isn't enough to stand out in the market.

Powerful strategies approach customer needs differently than traditional companies. To think differently is to strategize. Strategy is about continuity—you need to educate your entire team and consistently communicate the strategy across the organization.

Don’t change your strategy simply because it doesn't deliver immediate results. Instead, take the time to analyze deeply before making adjustments.

A value proposition on its own is not enough; it needs to be supported by a micro value chain to make it a reality.

In order to define a clear value proposition, you must be equally clear about what you are not going to deliver.

Example: IKEA's Strategic Innovation

IKEA revolutionized its business model by changing how customers interact with their products. Instead of selling fully assembled furniture, IKEA introduced the concept of flat-pack furniture, where customers pick up products in a box and assemble them at home. This approach allowed IKEA to keep its modern design while reducing costs, as customers effectively traded their time for a lower price.

IKEA's strategy was to differentiate itself by offering high-quality design at affordable prices. To achieve this, they adapted their value chain to make production and distribution more efficient, aligning the entire process—from manufacturing to customer assembly—around this innovative approach. By shifting the assembly process to the customer, IKEA was able to lower prices, increase accessibility, and maintain their design-forward product offering, creating a unique competitive advantage.

Final Points - Benefits of Strategy

• Transparency in Strategy: Strategy should not be a secret. If only a few people know it, the approach is wrong. While new features can remain confidential, the value proposition and positioning must be deeply understood across the entire organization.
• Leadership’s Role in Strategy: Leaders are essentially strategy professors—their responsibility is to ensure everyone knows who we are targeting, understands the value proposition, and is clear on positioning. Communicating strategy effectively and consistently is crucial for success.
• Shared Responsibility: Strategy is the responsibility of leadership at every level, both up and down the organization. Leaders must ensure that operational implementation and strategic thinking are aligned, as these are the two pillars of success.
• Consistent Communication: Communicate the strategy with discipline and consistency. Strategy is an everyday practice—it’s about understanding the choices you make daily and how they align with the broader goals.
• Embedded Project Management: Project management is deeply embedded in strategy, ensuring that the execution aligns with the strategic direction.
• Two-Way Process: Strategy should be a two-way process that empowers the team by being clear on expectations and performance measures, driving accountability and results.