I published the following post in 2010. Since then there have been substantial changes in the way we think about business strategy. Creativity and design (thinking) have finally gained full recognition in business thinking. The transition from ‘being the best’ to ‘be unique’ is a timeless lesson and creativity and design offer us a way to go about it.
This blog post marks the start of our journey into the fascinating world of strategic thinking. Here I'd like to introduce first the important shift in mentality that is required if strategic thinking is to be applied within companies and organisations.
Over the last thirty years the primary area of concern of company leaders has been the implementation of best practices in their companies. The main urge of most managers has been to find and apply the best operating methods throughout all of their various departments. As a consequence of this way of thinking companies get involved in a head to head race with one another, each trying to be the first to achieve maximum operational effectiveness. In so doing, these companies compete in a game that it is very difficult to win. More importantly, it is a game in which ultimately they are unable to capture the value that they create. Competition based only on the implementation of best practices shifts competition onto price. It drives companies against one another and fosters the idea of business competition as zero sum competition, whereby a company's success only comes at the expense of another company. Thirty years of this type of competition is responsible for the phenomena of hyper-competition that exists in many industries today. This incredible level of rivalry is, as Prof. Michael E. Porter explained in his 2006 article for Harvard Business Review entitled 'What is strategy' a self-inflicted wound rather than a changing paradigm of competition. In modern business competition being operationally efficient is necessary but it is not the be all and end all. It is no longer sufficient to merely be an efficiently run company. Today a company needs to be unique if it is to flourish. The main point here is the need for a shift in the mentality of managers away from the need to be the best and towards the need to be unique!
Instead of competing head to head and trying to meet the same needs of the same customers, companies must specialise and provide a unique good or service to a unique set of customers. In so doing they will be better able to cater to more customers, thereby expanding the overall pool of profit available to the industry. As a consequence the level of rivalry present within the industry will decrease dramatically as competition moves away from price (zero sum competition) and becomes competition based on strategy (positive sum competition) whereby companies work to expand the total value generated by the industry. Business and management consultants also share responsibility for this phenomena of competitive convergence. By replicating generic techniques within company after company, they served to accelerate the proliferation of best practices, causing all companies in the industry to appear to be alike, and set them down a path in a race that no company can win. The job now is to build a distinctive means of competing. To do so, a new dialogue between company managers is needed; a dialogue centred on the choices their business has to make and on the direction in which the company is going to innovate. Companies are not alone in this challenge. The strategy discipline has developed an array of strategic tools that will assist you in this process. Ultimately consultants will still have a central role in this transition, but this time in a more strategic way, highlighting and strengthening companies' unique competitive advantages and not making them all appear indistinct from one another.