Tag Archives: strategy

Succeed in Business– Build Better Mousetrap: Hugh Myth– Being Better Is Not Good Enough Anymore…

Ah: Build a better mouse-trap; not a ‘different mouse-trap’, but a ‘better mouse trap’… But; What does ‘better’ mean? According to Seth Godin; this is a hard lesson for marketing and business development people to learn– they don’t get to decide what’s better, the customer does! If you look at the decisions made about– features, benefits, pricing… how many of them are obviously ‘better’ and how many people might disagree? Build a better mousetrap and the world will beat a path to your door is one of the most quoted innovation credo: Yet it’s a myth…

Innovation experts call this the ‘better mousetrap fallacy’, because the credo focuses solely on technology and not on consumers… Consumers really don’t really care about a better mousetrap; they care about fewer mice… According to Ted Levitt; consumers don’t want to buy a quarter-inch drill; they want a quarter-inch hole. But many organizations still seem to take this credo literally…

Even though it’s can damage the business– it gives the impression that building ‘better’ things is all that it takes to build a successful business… According to John Seiffer; it’s just not true, yet the comfort of believing it forces countless organizations to endure pain of failure despite having something better. So yes build ‘better’ mousetrap if so inclined, but if you are looking to build successful organization: Innovate or Die…

In the article Build Better Mousetrap by Corbett Barr writes: It’s a trap many organizations fall into: They believe that if they just come up with the elusive ‘better’ mousetrap, i.e.; product, service, widget, app… then they can build a successful organization… But just being ‘better’ will not get customers beating a path to your door… There are few big problems with idea of ‘better’: First, ‘better’ is worthless on its own– its only a multiplier of execution– it needs entire value support system…

Second, ‘better’ is rarely new: Often what you think is ‘better’ isn’t really ‘better’ at all… Your ‘better’ may have actually led others with the same definition of ‘better’ down a path to failure… Hence the issue is not ‘better’, but ‘different’ like innovative– and it does not necessarily have to be completely your own original idea. It’s what you ‘add’ and ‘do’ that makes you ‘better’; different, unique, relevant, valued…

In the article Myth: Just Build Better Mousetrap by Steve Denning writes: Most people know the saying; build ‘better’ mousetrap. Its become quite a popular maxim. It’s a catchy line but it’s really bad advice and can be a disaster for organizations that follows its logic:

  • Building ‘better’ mousetrap embodies an ‘inside-out’ mindset: It means that your thinking is oriented from ‘inside-out’, rather than from ‘outside-in’ the organization… The ‘inside-out’ perspective characterizes the 20th Century thinking, whereas the ‘outside-in’ represents the shift in power from seller-to-buyer and characterizes the new business reality… According to Professor Ranjay Gulati; firms with an ‘inside-out’ mindset are much less resilient than those that adopt an ‘outside-in’ mindset… The logic is simple; know and understand the customer, rather than just guessing…
  • Building ‘better’ mousetrap is a continuous improvement mindset: It means the task of management is simply to focus on efficiency and continuous improvement. In effect, the mousetrap must keep getting better for customers to be delighted… But there are limits to ‘better’, and at some point ‘better’ becomes obsolete… Hence, organizations must move beyond continuous improvement and beyond just making things better… They must do things different by disrupting the value of ‘better’ through innovation…

In the article Build Better Mousetrap by Claude Whitacre writes: Build a better’ mousetrap is metaphor for; an organization knows what customers want better than customers themselves… an organization knows how to delight customers better than customers themselves…  The ‘better’ mousetrap approach makes the assumptions that key factors are aligned– customer expectation, competitive advantage, valued-added, price/performance…

However, in a highly disruptive and innovative market environment, basic assumptions may not be correct, e.g.; Do consumers really want ‘better’ mousetrap? Is the mousetrap market growing or shrinking? Do consumers still want to trap mice? A credo built into ‘better mousetrap’ scenario is– technology in search of market. The notion of technology alone is ‘better’ can be expensive risk that an organization can avoid by answering few simple questions: Who is the customer? What is the problem to be solved? How big is the market? What is the added value? What support and service do customer expect?

The notion that an organization can offer same, or nearly the same, thing as competition but only a little bit ‘better’ is a tough strategy and it will definitely face a struggle to survive. According to Robert E. Johnston; when challenged to build ‘better’ mousetrap the typically approach is to find ways to make it– stronger, lighter, quieter, faster, cheaper, nicer design, less visible… among other obvious low-hanging improvements. This approach, done well, will produce incremental innovation, but seldom anything more...

However, it’s interesting to observe that when organizations are challenged to imagine beyond non-incremental (beyond ‘better’) to breakthrough innovation, it seems that many organizations often just start with the safety that comes from something that they know and already works. Hence the logic is very straight forward, e.g.; since this new innovative idea’s is already proven to be feasible, all the organization need to do is innovate new value into something that is already known, proven…

The logic is simple, less risk, good to go: Right? Yes perhaps, if what you are looking for is just incremental or modest innovation… But if objective is inflict major disruption in market(s), then a more disruptive non-incremental innovative (or breakthrough) approach is required– but initially its feasibility may be in question… It’s easier to build feasibility into innovation, than to build innovation into feasibilityHence, the biggest challenge in a highly competitive disruptive market environment is to breakthrough existing mindset of how something is currently conceived, and embrace ideas that are more innovative than feasible…

Creating Strategy Without a Strategy– It’s Business Without a Plan: Choosing ‘Right’ Strategy is Biggest Challenge…

Business strategy is all about decision-making… If there are no decisions, there is no strategy; if there’s no strategic decision-making, there is no success. According to Roger Martin; business won’t survive without a strategy…

When a strategy succeeds, it seems a little like magic; unknowable, unexplainable… then it becomes obvious in retrospect… But actually, it’s not really– strategy is about making choices to win in the marketplace…

According to Tara Gentile; creating a business strategy that breaks through the noise is about declaring ‘yes’ to some things and ‘no’ to others. And as you might guess; ‘yes’ and ‘no’ are not about right and wrong…

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Making a decision to drive the business in a different direction is to make a choice, and the more intentional you are with decisions, the stronger the strategy… However not every strategy works, but to even have chance at success it must be based on– focus and intentional decision-making… Every intentional decision provides an opportunity to put the business in the best possible position for success…

When thinking about a strategy, most businesses tend to follow classical rules, e.g.; study the market and competitive situation, define goals and draw-up step-by-step tactics to get there… typically strategies sort into five categories– Be Big, Be Fast, Be First, Be Orchestrator, Be Viable… But in today’s business environment, which is characterized by; fast change and uncertainty… ‘one size’ does not fit all…

Getting a strategy ‘right’ depends on the critical components of a business environment, which includes;  predictability, malleability, harshness… A classical approach assumes that an industry environment is relatively; ‘predictable’, e.g.; the Oil Industry holds few surprises for strategists; its relatively predictable and changes very little, over time… whereas, the Internet Software Industry is highly volatile and very susceptible to disruptive change, over time…

Clearly, strategies that work in the Oil Industry are highly unlikely to work in a far less predictable and highly disruptive tendencies of the Internet Software Industry… Hence companies in dissimilar competitive environments must– plan, develop, deploy… strategies in very different ways… but, research shows that all too often, they do not…

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In the article Which Strategy When? by Christopher B. Bingham, Kathleen M. Eisenhardt, Nathan R. Furr write: Just when a business thinks it has settled on the right strategy… then markets change, competition shifts… and business is forced to rethink its strategy… By understanding the forces shaping a company’s competitiveness, business must choose the most appropriate strategic framework…

Hence, whatever business circumstances, managers must forever ask the same questions: Where do we go from here, and which strategy will get us there? Do we fortify our strategic position, or move into nearby markets, or branch out into radically new territory? To help guide through these decisions; business must– know, understand, explore… the smorgasbord of strategic frameworks and decide which one is the ‘right’ one, and when…

It’s a continual process, including; jumble of strategic ideas, market analyses and hefty binders of information and data of; 5-forces analysis, 3-Cs analysis, review of core competencies, examination of profit and loss, competitive landscape, and so on… But inevitably the question is– Which strategy is most effective for business right now? Most managers recognize that not all strategies work equally well in every setting, but how do you choose the right one, at the right time…

An analysis can provide some insight: First, different strategic frameworks break into three models; strategies of position, strategies of leverage, strategies of opportunity… And the right strategy for a company depends on its– circumstances, available resources, and management ability to combine resources effectively… Second, many assumptions about competitive advantage simply don’t hold, e.g.; although some strategy gurus talk about strategically valuable resources, sometimes ordinary resources when assembled well can provide the required competitive advantage…

Or, sometimes it makes good sense to bypass the largest markets and focus instead on markets where resources fit best… Or, in other circumstances, it may be preferable to ignore existing resources and attack an emergent market… Or, in some situations basic rules of thumb work better than detailed plans Surprisingly often simple strategies can be more effective than complex ones…

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In the Your Strategy Needs a Strategy by Martin Reeves, Knut Haanaes, Janmejaya Sinha write: Most businesses lack a systematic way to match their strategy-making style to the particular circumstances of their– industry, markets, core competencies… According to BCG survey of 120 companies around the world in 10 major industry sectors; executives are well aware of the need to match the strategic processes to the specific demands of the competitive environments… However many executives still rely on a classical approach,  which assumes the business environment is– predictable, stable… even though their own environment is known to be highly volatile or mutable…

Fully three out of four executives understood that they need to employ different strategic styles in different circumstances. Yet judging by the practices that they actually adopted, the estimate was that the same percentage are using only two strategic styles and they were the Classic and Visionary– which are best suited for predictable environments… And that means only one in four are prepared, in practice, to adapt to– unforeseeable events, or to seize opportunity that could shape an industry to their company advantage…

Understanding how different the various approaches are and in which environment each best applies can go a long way toward correcting mismatches between strategic style and business environment…

Setting strategy is an art, and perhaps you could use a palette, i.e., a ‘strategic palette’ acting as a unifying framework of choice for strategic formulation, and it could provide various ways to approach strategy in this complicated, turbulent world… According to Martin Reeves; it’s not that we lack powerful ways to approach strategy; it’s that we lack a robust way to select the right one for the right circumstances… The ‘strategic palette’ can be applied to different parts of a business, it includes:

ClassicalI can predict it, but I can’t change it…

AdaptiveI can’t predict it, and I can’t change it…

VisionaryI can predict it, and I can change it…

ShapingI can’t predict it, but I can change it…

RenewalResources are severely constrained…

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In the article Have You Tested Your Strategy Lately? by Chris Bradley, Martin Hirt, Sven Smit writes: What’s the next new thing in strategy? According to Phil Rosenzweig; that’s the wrong question: Rather than looking for the next musing, it’s probably better to full understand what you already know is true, and make sure you do that well… Let’s face it: the basic principles that make for good strategy often get obscured… Sometimes the culprit is torrents of data, reams of analysis, piles of documents that can be more distracting than enlightening… but ultimately strategy is a way of thinking…

To stimulate that thinking and the dialogue that goes along with it, there should be a set of tests aimed at helping executives assess the strength of their strategies– testing the strategy itself (i.e., outcome of the strategic process), rather than just frameworks, tools, approaches that generate strategies… There are two issues; first, companies develop strategy in many different ways, often idiosyncratic to their organizations, people, markets… Second, many strategies emerge over time rather than from a process of deliberate formulation…

This may sound more complicated than validation using, e.g.; the 3-Cs (competitors, customers, company), or the 5-forces (barriers to entry, buyer power, supplier power, threat of substitutes, degree of rivalry)… But pressure-testing can help pinpoint more precisely where a strategy needs work, while generating a deeper, more fruitful strategic dialogue… The ability to pressure-test is especially timely in this highly competitive environment, where business only get one chance in the marketplace– testing can help expose– obsolesces, or reveal weaknesses, or force companies to confront choices and trade-offs that are delayed…

But than: What is the biggest mistake companies make with strategy? According to Henry Mintzberg; there is a very human bias towards perceiving business environments as more predictable and more controllable than they actually are… It’s very comforting to believe that one can control and predict the surroundings… Also, a big trap is to be stuck in one way of doing strategy; most often business implement the Classical approach, i.e., analyze, plan, execute… and it may very well be best the approach under ‘right’ circumstances, but it can also be the ‘wrong’ approach…

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In highly volatile markets, there are a couple of capabilities that companies need to have to succeed:

First, adaptive capability— ability to undertake disciplined experimentation…

Second, shaping capability— ability not just to participate in their environments– but actually to shape them to their advantage…

Third, capability of ambidexterity— ability to run different approaches to strategy in different parts of the organization…

Hence, it’s time to ‘kick the tires’ and possibly rethink your business strategy…

Strategic Planning; Waste of Time, Obsolete: Dead as a Roadmap for Shaping the Future of Business…

Strategic planning is a waste of time: Oh, it might do good for some business but the idea should be scrapped in favor of business practices that embrace; flexibility, agility… that’s because most strategic plans just don’t work… strategic planning has become a ritualistic process where discussions are held in thoughtful tones, while most participants secretly suspect that nothing will really be decided or changed…

According to J. Brian Quinn; a good deal of the strategic planning is like a primitive ritual rain dance– there is a lot of dancing, waving of feathers, beating of drums… there is an almost mystical hope that something good will come out of it– you pretend to make strategy and then pretend to implement it… the process involves too much paper, too much time, too many nodding heads, and far too many poorly informed so-called experts… it’s anathema to even question the validity of the strategic planning process, but it’s time to challenge reality.

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According to Henry Mintzberg; strategic planning discourages change, narrows a company’s vision, limits flexibility and it’s, in fact, oxymoronic. The process fails more often than not; it just doesn’t work anymore, and it can be downright dangerous… However, many experts believe that planning is fundamental to success, but it’s naive and counter-productive to assume that traditional strategic planning, as we know it, is the answer… Flexibility, agility, fluidity, and not strategic plans are the keys to success in the modern business world… It’s a digital world: The Internet and affordable high-speed technology have radically reduced time lines, and profoundly changed the way you need to operate, and the way you need to plan…

In the article Can Strategic Planning Pay Off? by Louis V. Gerstner, Jr. writes: One of the most intriguing management phenomena of the late 60s and the early 70s was the rapid spread of the strategic-planning concept… Few management techniques have swept through corporate and government enterprises more rapidly or completely. Writer after writer has hailed this new discipline as the fountain-head of all corporate progress. In 1962, one published report extolled strategic planning as– a systematic means by which a company can become what it wants to be…

Five years later, it was called– a means to help management gain increasing control over the destiny of a corporationBy 1971, praise of strategic planning verged on the poetic; it had become– the manifestation of a company’s determination to be the master of its own fate to penetrate the darkness of uncertainty and provide the illumination of probability… It’s not surprising, therefore, that one company after another raced to embrace this source of managerial salvation…

Hence, it seemed appropriate to ask some chief executives whether strategic planning has lived up to its advance billings. Three anonymous reactions were as follows; strategic planning is basically just a play thing of staff… and, it’s like a Chinese dinner: I feel full when I eat it, but after a little while I wonder whether I’ve eaten at alland, strategic planning is a staggering waste of time and money… Some CEOs, of course, would disagree with these comments, but the fact remains that in large majority of companies strategic planning tends to be an academic, ill-defined activity with little or no bottom-line impact… Nothing really new happens as a result of the plan, except that everyone gets a warm glow of security and satisfaction now that the uncertainty of the future has been contained: Unfortunately, warm feelings do not produce tangible business results…

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That is, the strategic plan should clearly set forth the critical issues facing a company or division in terms of alternative courses of current action… And, if there are more than five or six issues, then they are probably the wrong ones… also, if the decisions do not involve major risks or investments and/or changes in competitive posture, or if the decisions do not have to be made now, then they are the wrong decisions… This is the creative leap that too many managements fail to make in strategic planning. They fail to ask; What do we do now as a result of this plan? They fail to recognize that the end product of strategic analysis should not be plans; but– decisions, actions… Hence, strategic planning should be more like; strategic agility and that means– it’s risky; it’s difficult; it requires leadership

In the article What Makes Strategy Fail by Ruth Tearle writes: Many senior managers are very cynical about the strategic planning process… The usual commentary is that strategic planning is a waste of time; the agenda is just like last year where we achieved nothing… there was no real direction, nothing was ever implemented. For many observers strategic planning is a process of having many great ‘pretenders’ and the end result is a sham. Time spent away at fancy retreat where nothing gets achieved, and employees throughout the organization continue to complain about the lack of direction… How do you know if the strategy retreat is ‘pretence’ or ‘success’? How do you know if the retreat delegates are only just great ‘pretenders’? Consider, for example:

  • Delegates who:­ Pretend to be there. Pretend to listen. Pretend to ask questions. Pretend to contribute. Pretend to act in best interests of the organization, while cleverly sabotaging the process…
  • Leaders who: Pretend the purpose of the retreat is to allow the group to co-create a strategy. Pretend that simply presenting a strategy to the teams is enough to excite and inspire them. Pretend it’s possible for a team to develop a vision of the future without considering how the future may be different from today. Pretend it’s possible for a group of bored people to create a brilliant strategy, which will excite and delight– customers, employees….

In the article Strategic Plan: Neither Strategy Nor Plan But Waste of Time by Benjamin Ginsberg; It would be incorrect to assert that strategic plans are never what they purport to be, i.e., blueprints for the future. Occasionally a business plan does, in fact, present a grand design for next decade… A plan that is actually designed to guide an organization’s efforts to achieve future objectives… Such a plan typically presents concrete objectives, a timetable for their realization, an outline of the tactics that will be employed, a precise assignment of staff responsibilities, and budgets… Whether one agreed or disagreed with the goals stated by the plan, there could be little disagreement about the character of the plan…

However, this ultimate plan is usually indistinguishable from dozens of other plans, which were probably copied from still other plans… Usually there is nothing new or different, it just a rehash of the same old rhetoric… this inter-changeability of visions, underscores the fact that the precise content of most business strategic plans is pretty much irrelevant… Plans are usually forgotten soon after they are promulgated, and no one can remember much about any of those plans… These plans are not a blueprint for the future, instead they are management tool for the present… The ubiquity of traditional planning is another reflection and reinforcement of the continuing realization that many leaders are out of touch with the reality of the changing world…

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However, it must be remembered that the underlying objectives of the strategy planning process is as important today, as ever.  It’s still critical to establish and communicate the strategic direction of a business… and if business competitive environment is static and pretty much as assumed by business leadership, then traditional strategic planning process will likely produce the desired results… But herein lies the failing; the business environment is no longer predictable, and it’s changing at rate faster than the planning horizon, which requires a new way of thinking– it requires a focus on ‘agility’ as the strategic imperative…

According to Denise Lee Yohn; the amount of disruption in today’s markets (and speed at which it happens) requires a very different planning approach… Instead of setting a definite strategy and following it through at all costs, companies should focus on– strategically adapting-to and excelling-at whatever path they find themselves on…

Developing strategic agility starts with changing many of the traditional thought bubbles (i.e., beliefs, assumptions, rules…) about the strategic planning process… According to Fred Pidsadny; focus on how the business must shift and adapt to stay competitive, or better yet to disrupt and leapfrog the competition, and once you determine necessary course corrections, take action ‘immediately’– don’t wait for next strategic planning session… Today’s market leaders must be– fast, agile, and able to change course with a minimum of disruption– strategic agility, fast execution– must be Priority #1.

According to C. Eric Brown; Don’t overly complicate it. Don’t over-think it. Create a relevant strategy, define the tactics, measure progress… then change it, if it’s not working… There is no natural cycle of when to define and refine strategies; strategic planning, monitoring– must happen whenever necessary, anytime, all of the time… Creating strategies that are truly adaptive requires that you give-up on many long-held assumptions, and focus on answering a series of specific interrelated questions about the organization’s strategic direction, for example; what vision to pursue… how to make a difference… how to succeed… what capabilities it will take to get there…

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It’s time to radically change the way you think about business; In the book, ‘Execution: The Discipline of Getting Things Done’, they say– So much thinking has gone into strategy that it’s no longer an intellectual challenge; rent any strategy you want from a consulting firm… In the book, ‘Confronting Reality’, it argues that the methodologies used to plan the future of business have steadily drifted away from reality and the strategic plans of most companies just don’t work…

According to Tom Peters; it’s foremost task, responsibility of the current generation of leaders to re-imagine the entire business process… To that end, it’s necessary to break away from that which does not work, and reinvent the process of creating strategies… According to Dwight D. Eisenhower; plans are useless but planning is everything… and you must be ready to adapt to whatever curveballs the twenty-first century sees fit to throw…

Strategic Assets– Rethink Your Competitive Edge in Shifting Global Markets: Strategic Muscle Ain’t What It Used To Be…

Strategic Assets are specific core resources, capabilities… that an organization possesses, which provides it with a significant and unique competitive edge that sustains it as growing, prosperous organization… In financial accounting, an asset is an economic resource; anything tangible or intangible that is capable of being owned or controlled to produce value. 

Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset)… Under this definition, such things as; employees, customers, brands, supply chain… are not considered assets, even though they may be the critical factors in the economic success of an organization– This is because an organization does not have sufficient control over these entities to satisfy the accepted definition of an asset…

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But according to Paul O’Malley; strategic assets are key capabilities, resources, relationships… which are the basic ingredients for value creation and key driving factors in the success of a business… Examples of strategic assets might include; employees, customers, intellectual property, brands, distribution channels… According to John Kay; strategic assets are certain competitive advantages based not only on the distinctive capabilities of a business but on also on their dominance or market position

However, in today’s highly competitive business environment many so-called strategic assets may not be sustainable and eventually they become competitive liabilities rather than assets… So, have you reviewed the basic assumptions behind your strategic assets, lately… are they still valid, or are your strategic assets more of a liability?

Strategy- Strategic Fundamentals: The use of the term strategy or strategic has literally changed the map of the world and caused the rise and fall of many businesses, organizations, nations… The unique combination of wisdom, science and craft have made strategic value creation a universally sought after skill…

The basic premise of a strategy is that its development requires the courage to accept uncertainty… According to a French general; strategy is the art of conducting war not by means of coup d’oeil (glance or look) from behind a horse’s ears, but in an office on a map… Strategists must accept that they will not have all of the information and not see the spectrum of events, yet they must be committed to creating and implementing a strategy…

The uncertainty that may exist is not only a result of not having complete information and not being able to predict future events, it also is a result of the events generated by a dynamic and thinking competitor. The design of strategy with competitors in mind and their undetermined actions is what requires a strategist’s embrace of uncertainty… Strategy deals with competitive situation in an uncontrolled environment…

Strategy is the greatest ‘winning tool’ that man ever invented! It enables the practitioners to see clearly the future of any encounter before it’s undertaken,,, Strategy is ‘the thinking of the General’ and has been the secret art of success for thousands of years… According to Sun Tzu; all men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved... Business history is littered with examples of leaders who could not accept the uncertainty of strategy, and defining unsustainable ‘strategic assets’ and wounding-up settling for failure at the hands of competitive tactics…

In the article Competing on Resources by David J. Collis and Cynthia A. Montgomery writes: Competitive edge are the things that enable an enterprise to perform activities better or more cheaply than their rivals, e.g.; physical assets, prime locations, intangible assets, strong brand, technology capabilities, brilliant supply chain, outstanding employees…

As recently as 10 years ago, we thought we knew most of what we needed to know about competitive strategies, but the pace of global competition and technological change has left many businesses struggling to keep up… One business framework that is grounded in economics is ‘resource-based view’ or strategic asset view of a business…

This approach derives its strength from its ability to explain in clear managerial terms why some competitors are more profitable than others, how to put the idea of core competence into practice, and how to develop diversification strategies that make sense… it sees companies as having a very different collection of tangible and intangible assets and capabilities…

No two companies are alike because no two companies have the same set of experiences, or acquired the same assets and skills, or built the same organizational cultures… These assets-capabilities determine how efficiently and effectively a company performs its functional activities: Following this logic, a company is positioned to succeed if it has the best and most appropriate stocks of competitive relevant resources for its business…

These capabilities, built up over time, transform otherwise pedestrian or commodity inputs into superior products and make the companies that develop them more competitive in global markets… Competitive advantage, whatever its source, ultimately is attributed to the ownership of valuable resources (both tangible and intangible) that enables the business to perform activities better, more cheaply, different from competitors… Superior business performance is, therefore, based on competitively distinct set of resources (i.e., strategic assets), which are deployed within a well-conceived strategy…

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In the article Most Important Assets are Not on the Balance Sheet by Leslie Back  writes: In context of accounting, assets are defined as items of economic value, especially those that can be converted to cash, such as; property, equipment, inventory, and the like… Also, intangibles, such as; patents, trademarks, goodwill… are quantified for balance sheets…

These assets, as well as liabilities and retained earnings on the other side of the sheet, dominate corporate thought and action. In so doing, however, companies overlook their most important assets, its ‘employees’. The employee is the secret in the sauce and glue that holds organizations together– without ‘right’ employees, other assets are valueless… and, followed by a good business ‘reputation’ as the next most important asset…

Fortune Magazine has estimated that a company’s reputation represents 75% of the total value of an average business… Which brings us to the last non-financial asset; ‘corporate mission’… This asset, when appropriately applied, will protect all other assets. The ‘mission’ provides guidance: It gives employees a sense of purpose, it guides all decision-making, it the moral and ethical compass and written articulation of the organization’s soul…

When a ‘mission’ is clearly defined it gives direction on what assets should be acquired and where to divest… Hence, when an organization has a ‘mission’ beyond the mere of money-making, and when it considers its ’employees’ as its greatest investment, and when it secures its ‘reputation’ by doing what is right… then these, by definition, are strategic assets…

According to Cliff Bowman; companies are continually under pressure to make the most of their assets… In today’s highly competitive world, it’s essential to understand what ‘thing’ is giving your organization a competitive advantage or edge in the market place: What is it about your product or service that is valued by your customers, such that they buy it? What is your competitive edge– your strategic asset– your differentiator that separates you from the competition… You must identify those dimensions that are critical to your customers, and why they choose you over a rival…

Pinpointing the best way to deliver value to the customers is a strategic asset… Understanding your special qualities requires you to delve deep inside your organization to uncover the sources of advantage, many of which may not be obvious, but they are your organization’s competitive muscle and the key to your business success…

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However, in today’s global business landscape strategic assets can quickly become obsolete assets– basic assumptions about your competitive position and presumed strategic assets might not be valid… According to nine out of 10 executives; their companies developed annual strategic plans where they define their mission, competitive edge–strategic assets… Moreover, they develop these plans without consideration for the pace of change in their business environment…

As market pressures drive organizations to become more– flexible, responsive, able to change on a moment’s notice, the ability to rethink the execution of strategy based on new competitive assumptions is rapidly becoming more important than the strategy itself… According to Denise Lee Yohn; the amount of disruption in today’s markets (and the speed at which it happens) requires a very different planning approach. Instead of setting a definite strategy and following through at all costs, companies must focus on– strategically adapting to and excelling at whatever path they find themselves on…

Organizations must focus more on having the right people and less on the right plan, replace strategic planning with strategic decision-making, and nourish a culture of discipline, action, and results… Developing strategic agility starts with changing many of your ‘thought bubbles’ (i.e., beliefs, assumptions, rules) about your competitive edge–strategic assets and strategic planning process..

Accept the idea that many– ideas, beliefs, assumptions on which you based your plans may well be obsolete… Shift your thinking about competitive edge and focus on market realities, which means that you must automatically assume that markets are constantly changing… focus on what needs to shift in the organization, and how you can adapt to get to where you want to go.

Once you determine the necessary course corrections, take action immediately… It’s hard making-decisions without certainty about what the future holds, but the world moves so fast that hesitation can be fatal… And, once you fall behind, it can be very difficult to catch up… Make the development of strategic agility a strategic asset and priority for the organization…

Marketing Authorities and Economists Think Differently: How They View– Market Structure Vs. Market Segmentation…

Market structure: Many companies look to market structure and market segmentation to better understand the composition of markets and to identify and profile groups of people (i.e., potential customers) to grow their business… but is  ‘market structure’ the same as ‘market segmentation’ or do they differ?

Market structure is often defined as interconnected characteristics of a market, such as; relative strength of buyers and sellers, degree of collusion, types of competition, differentiation, barriers of entry… Whereas, market segmentation is defined as process of subdividing, targeting a mostly homogenous market into clearly identifiable segments having similar need, want, characteristic, demand… In segmentation the objective is to design a market mix that precisely matches the expectations of the customers…

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According to Jeanne Grunert; economists and marketing people each define the terms a bit differently: Economists look at the overall market structure with the goal of defining and predicting consumer behavior… Whereas, marketing professionals seek to define the market structure to create competitive strategies as part of their overall marketing plan…

Economists examine market structure to help with decision-making and they seek to analyze broad trends in order to better understand consumer motivation… While marketers also look at trends, but they defer in that economists tend to focus more on the big picture… The economist want to know more about how this information affects large segments of various populations. Whereas, marketing is keen to understand the information, but apply it to their company’s specific marketing strategy…

Economist define market structure according to how an industry– that’s serving a market– is organized, and these structures typically include:

  • Monopolistic competition: Type of imperfect competition such that companies sell products, services… that are not identical with each other, but competitive… they are differentiated from each other by branding, pricing, quality… hence, they are not perfect substitutes…
  • Oligopoly: Market is controlled by small number of companies that together have the majority of market share… Duopoly: Special case of oligopoly with only two controlling the market.
  • Monopsony: Only one buyer in a market…
  • Oligopsony: Many sellers but meet only a few buyers…
  • Monopoly: Only one seller of a product, service…  Natural monopoly: Serves the entire market demand, typically at lower cost than any combination of two or smaller, and more specialized companies…
  • Perfect competition: No barriers to entry, an unlimited number of sellers and buyers, and a perfectly elastic demand curve…

Marketing, in contrast, defines market structure a little differently, when they know that an industry is organized as describe as one of the above restructures, i.e.,  oligopoly, perfect competitive… typically they will dig deeper into industry, searching to better understand other factors, such as; nature of competition, vulnerability, customer behavior, price sensitivity… Understanding the market structure and landscape helps marketers develop relevant and effective marketing strategies… Hence, defining a structure from marketing perspective tends to seek answers to questions, such as:

  • What are the key motivational drivers that determine how, why, what… consumers buy?
  • How do product, service… packaging, features, brand, pricing… and other factors play into the consumer decision to buy?
  • What and where are the opportunities for growth in an industry through major innovation?
  • What are the key market differentiators and competitive factors?
  • Where are the key market opportunities, threats, risks?

Defining market structure isn’t always easy. Definitions remain fluid and subject to change even among various functions-groups within a company…  and it’s common that different companies view the same market structure differently… As may be observed, both marketing and economists confuse the terms; segments and structures, so much so that the line between the two is nearly obliterated. You can have a conversation with some of these people and, at the end, not only will you not know what they are talking about, but you feel completely confused about both subjects…

In the article What Can Economics Learn From Marketing Market Structure Analysis?  by Charles Fischer writes: The concept of market structure is central to both economics and marketing. The problem for economists and marketing professionals is that a meaningful operational definition of market structure is elusive… Each discipline takes a different methodological approach toward the definition… and each has its own strengths, limitations.

Economics is concerned with broad socio-economic,  micro-economic issues, e.g., competitive fairness, predatory pricing… Whereas, marketing is more concerned about the managerial aspects of market structure… Although, each discipline touches on the primary domain of the other, the primary distinction between the two is just a matter of relative emphasis… 

In economics, markets are classified according to the structure of the industry serving the market… Industry structure is categorized on the basis of market structure variables which are believed to determine the extent and characteristics of competition… In the traditional framework, these structural variables are distilled into the following taxonomy of market structures:

  • Perfect Competition: Many sellers of a standardized product, service…
  • Monopolistic Competition: Many sellers of a differentiated product, service…
  • Oligopoly: Few sellers of a standardized or differentiated product, service…
  • Monopoly: Single seller of a product, service… for which there is no close substitute…

These four market structures each represent an abstract (generic) characterization of a type of real market… Market structure is very important because it affects business outcome through its impact on the– motivations, opportunities and decisions of economic players participating in the market… A key element of the economic market structure is product substitutability, which is strategically linked to market definition… however, this also complicated by the fact that consumers have their own perceptions of product substitutability…

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In the article Market Structure Analysis by Steven Struhl writes: Some of the confusion surrounding market structures arises from the fact that two contrasting traditions of– marketing and economics– have embraced it… Comparing and contrasting the marketing vs. economic methods are briefly summarized as:

  • Marketing approach: Basic elements– analyze the relationships among– target markets and segmentation, potential customers, competing brands, risks, opportunities, business strengths and weaknesses, pricing strategy…
  • Economic approach: Basic elements– analyze the trends of buyers and sellers, extent to which products, services… are substitutable, analysis of comparative costs, market barriers to entry, extent of mutual interdependence– extent to which buyers and sellers depend on each other…

One important point that the economists have in common with marketers is that they include demand elasticity and cross-demand elasticity (or words meaning the same thing) in market structures. Also, how economists get to their answers is usually very different from marketing practices, for example; economists can do much of their work without ever talking to an actual person, and some even act as if asking people what they do or think is, in fact, superfluous to understanding what is happening in a marketplace.

This may seem slightly ridiculous, but we should remember that these people win ‘Nobel’ prizes, while humble marketers and market researchers do not, but perhaps they are onto something… The basic consideration in market analyses is reaching a definition of exactly what constitutes the market… Traditionally this is done by focusing on these factors:

  • Degree to which products, services… can substitute for each other, based on consumer perceptions…
  • Extent to which products, services… are intended to serve similar purposes…
  • Impact of products, services… on each other and as measured by elasticity of demand and its effects on each other, as well as cross-elasticity

In typical marketing approaches, it always start with the consumers… but, to reach an overall market structure, the needs of each consumer must be aggregated… This is an aggregated list of each consumer’s– behaviors, perceptions… The  two main aggregation methods are:

  • Behavioral aggregation; (linked to studying market impact)…
  • Subjective aggregation; (linked to the extent to which products, services… can substitute for each other, ratings, opinions, and perceptions)…

Aggregation is problematic: One question often asked is– what happens when aggregation consists of many idiosyncratic consumer opinions; in other words, how do you meaningfully aggregate all the individual consumer choices or opinions when these often reflect great diversity?  Since most marketing authorities do not consider market structures to be the same as market segments, hence finding segments almost always is taken to mean looking for groups that fit these following criteria:

  • Defined product, service… related needs different from those of all other groups…
  • Characterized or identified specific customer– needs, wants…
  • Reachable selectively (or targeted) through communications and marketing efforts…

Different segments of a market, may structure a market differently, since their needs are different… A clear understanding of a market’s structure and segmentation is paramount to understanding it’s– needs, buying processes, preferences, value perceptions, revenue potential… but then, as important, translating these insights into an actionable strategy is precursor to developing a successful business…

Better Mousetrap–Myopia; Build It, They Will Come… Baloney! Business Reality– Better, Is Not Good Enough Anymore…

A wise man once wrote: If a business builds a better mousetrap, the world will make a beaten path to their door… Well, that’s not exactly what Ralph Waldo Emerson said, but it’s close enough… ah, build a better mouse trap, yes; it’s a business goal to build a better mouse trap– and not just different mouse trap but a ‘better’ mouse trap… but, ‘better’ is relative: Better for whom? Better for what? Why should consumers care?

According to Steve Denning; once upon a time, business could succeed by building a better mousetrap, but the world has changed– Building a better mousetrap is not good enough anymore and businesses that don’t recognize it will not survive– now, business success requires a synthesis between understanding markets, new technology, design, simplicity… Now, it’s the principles of ‘radical change’ management that matters– it’s different way of thinking, speaking, acting, interacting with the world… it’s a very different ballgame from the old-school of build a ‘better mousetrap’ management…

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According to Bob Ford; better mousetraps are built every day, but waiting for the world to line up at the door is just wishful thinking… Introducing step-change innovation is much more than just technology itself; it involves establishing a compelling vision that encourages people to get on board… and for many businesses the status quo prevails and innovation never gets a chance…

The mousetrap way of thinking has at least two severely limiting assumptions: First, it assumes that the answer can only be found within just the technology… Second, it defines goals in terms of the solution (‘how’) rather than in terms of the consumer needs (‘what’).  This way of thinking is an obstacle to the development of newer, better, more effective… ways to meet consumers’ needs. In fact, it often doesn’t meet the consumer’s needs at all… innovation that starts with analysis of the consumer’s real-life needs (‘what’) can often allow innovators to devise more successful solutions than innovation that starts by assuming a better version of an existing technology (‘how’)…

In the article Myth: Just Build a Better Mousetrap by Steve Denning writes: This isn’t a new style of management– ‘build a better mousetrap’ is indeed old-school. It’s quite different from the ‘radical change management’ being practiced now by truly innovative businesses, for example:

  • First: Building a better mousetrap embodies an inside-out mindset; it means thinking about producing a product from within the firm, rather than thinking outside-in, which is thinking about the people who are going to use the product and what would delight them. The inside-out perspective characterizes the 20th Century thinking, whereas the outside-in represents the shift in power from buyer to seller, which characterizes the new business reality… According to Professor Ranjay Gulati; firms with an inside-out mindset are much less resilient than those that adopted an outside-in mindset, basing everything on understanding customers’ problems, wants, needs…
  • Second: When the goal is producing a product, the management approach tends to be old-school– top-down control management. A product is an output, i.e. a thing. You can set up reliable systems to produce outputs… By contrast, ‘delighting the customer’ is an outcome, not an output… It’s not something that top-down control management is capable of accomplishing. Top-down control management was designed to deliver products efficiently. To generate the outcome of ‘delighted customers’, you need self-organizing teams focused on the customer’s experience…
  • Third: Delighting customers can only be approached by trial and error– work has to be organized in short cycles through dynamic functional linking, rather than through traditional hierarchical bureaucracy, which is used to produce the ‘better mousetrap’, utilizing efficiencies of scale…
  • Fourth: Organizational values have to change. If the goal is simply to build a better mousetrap, the task of management becomes simply that of building it as efficiently as possible… It’s a focus on continuous improvement– In effect, the mousetrap must keep getting better for customers to be delighted… By contrast, ‘delighting’ by focusing on the customer’s needs, experience…
  • Fifth: Communications must change. You can’t delight customers by communicating in top-down commands, which is also dispiriting for employees… You need horizontal adult-to-adult communications.
  • Sixth: Businesses need to be systematically measuring whether customers are, or are not, being delighted and adjusting their actions accordingly.

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In the article If You Build It, Will They Come? by David Power writes: Many growth companies make the mistake of launching new offers before they understand the market… They believe the value of their new offer will be so obvious to customers that all they need is a great engineering team and a predatory sales force and they can race their idea to market. This build it and they will come approach to product development is also known as technology in search of a marketIt’s the business equivalent of oil well wildcatting — the high stakes search for oil in unchartered territory.

As a business model, it’s terribly capital inefficient… Businesses often confuse new technologies with new markets… The notion of technology in search of a market is an expensive risk that businesses can avoid by answering two simple but enlightening questions: 1) Who is the customer? 2) What business problem do we solve? If a company cannot answer these questions, it may have a technology but not a market. There are two arguments for building a product before validating a market…

  • First-mover advantage: If we don’t launch it now, someone else will emerge as the category leader… This worked for Facebook but not for ESPN’s Mobile Phone, HP ‘s tablet computer, Solyndra’s solar panels, and countless other half-baked new offers… Furthermore, being the first mover guarantee– does not guarantee success…
  • Customers don’t know: Steve Jobs made clear; We don’t do market research. Our goal is to design, develop, and bring to market good products… and we trust, as a consequence that people will like them… Similarly, Henry Ford once said; If I’d asked customers what they wanted, they would have said ‘a faster horse’… Every century we get a genius or two like Ford, Jobs… Unfortunately, most innovators are not as gifted, and there are many more examples of technology in search of a market that fail…

In the article Build a Better Mousetrap by Claude Whitacre writes: Of course, ‘mousetrap’ is a metaphor for a new product, service… I just picked mousetraps because it was catchy… Great marketing is fundamental – imperative for finding out what people want (i.e., what problems they want to solve), analyzing the size of the market (i.e., understanding demand for the solution), understanding competitive forces (i.e., seeing what else is trying to solve the same problems)…

Whereas, biggest issue with build a better mousetrap approach are the assumptions, e.g.; there is a market for your better mousetrap, and all the keys are aligned– right market size, competition, timing, price, performance… However, the basic assumptions are counter to a highly innovative and competitive market environment… it’s everything in business, but in reverse order… Some points to watch:

  • Do people really want a better mousetrap? Is there something about the mousetraps sold now that people don’t like? For example, do people get their fingers snapped by the tripping mechanism? Do they hate the idea of picking up a dead mouse to dispose of it? Is it the sight of the dead mouse? The smell? Just the idea of mangling a perfectly innocent mouse?
  • Is the market growing, or shrinking? Are there more people buying mousetraps than last year? If so, you have an opportunity to ride the wave with a slightly cheaper version of the current mousetrap. If number of mousetraps sold every year is sharply declining, is it because there is something better out there? If not, building a better mousetrap, with dwindling demand, is a sure way to failure…
  • Do people really want to kill mice? Would a more accepted product be one that repels mice? How about something that repels mice, and gets rid of the smell (assuming that dead mice smell) at the same time? Is that something people want? How about a way to treat the wood or insulation so that mice hate the taste, and won’t come in at all?

In the article Building a Better Mousetrap by A. Blanton Godfrey writes: Companies that fail to create a competitive advantage definitely face a survival struggle. Just trying to do exactly the same things as the competition, but only a little bit better, is a tough strategy with which to succeed… According to Jack Welch; Innovate or die-In these challenging times, the statement has more relevance than ever… However, we often misunderstand innovation. Far too many people think only product innovation matters, and they forget that we can also be incredibly innovative in production, distribution, marketing, service…

Many times I’ve heard people state emphatically: If we don’t come up with new products, we’ll be out of business– What nonsense… Many of the most successful new companies during the past decades haven’t really created new products– just new ways of producing, distributing… those that already exist. Innovation isn’t just about breakthrough thinking, new products– often, it’s simply understanding better ways to produce something, distribute something or make it easier for the customer to use the product… Innovation comes in many forms, but it’s often innovation that drives long-term success…

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Myth of the mousetrap is perhaps the most damaging myth about business: It gives the impression that building a good product or even just a better product than the competition is the majority of what it takes to build a business… According to John Seiffer; that’s just not true; yet the comfort of believing it forces countless businesses to endure the pain of failure despite having a good, great, or superior product…

According to David Burkus; the ‘mousetrap myth’ is perhaps, of all the myths of innovation, the most stifling to innovation because it doesn’t concern generating ideas, rather it affects how ideas are implemented. It’s not enough for an organization to have creative people; it must develop a culture that doesn’t reject great ideas. It’s not enough for people to learn how to be more creative; they also need to be persistent through the rejection they might face…

Creative ideas, by definition, are novel and useful but it’s hard to see the usefulness in new ideas when you’re judging them with an old mindset… As leaders, it’s especially important to remember our inherent bias against creativity and make sure when we judge creative ideas, we aren’t using their novelty as an excuse to dismiss their usefulness

According to Joseph L. Driscoll; there is so much happening ‘on the inside’ of a business that we forget about what’s happening ‘on the outside’… Build a better mousetrap and the world will beat a path to your door: In business, nothing could be further from the truth…

So, go ahead; build a better mousetrap if you are so inclined, but to build a ‘better business’ remember, Jack Welch’s comment: Innovate or die…

Business Strategy — Stuck-in-the-Middle or Build-in-the-Middle: Bridging the Gap or Dead End Proposition…

Business Strategy–‘Stuck-in-the-Middle’ or ‘Build-in-the Middle’: Many business implement a ‘build-in-the-middle’ strategy, which tries to balance the key strategic elements of; competitive differentiation, product-service price, market focus… in order to build a sustainable, profitable business…

However, according to Michael Porter classic book ‘Competitive Strategy’; he hypothesis that a business can secure a sustainable competitive advantage by adopting and executing only ‘one’ of three generic strategies, namely; cost leadership, differentiation, niche focus… and, when a business attempts to adopts more than one or a combination of these three strategies, then the business becomes ‘stuck in the middle’, which is a losing proposition…

According to Robert F Bruner; a single-minded focus on ‘cost’ or ‘differentiation’ or ‘focus’… may be tomorrow’s business graveyard… Customers, markets, competition… are not static and business must be flexible, nimble, creative, innovative… to survive, grow, prosper… But, Porter says that business, which are ‘stuck in the middle’ have no clear business strategy, and are at serious risk… He stresses the idea that practising more than one strategy loses focus, and hence a clear direction for the future business trajectory cannot be established…

However, D. Miller– questions the notion of being ‘caught in the middle’. He claims that there is a viable middle ground between strategies. Many companies, for example, have entered a market as a niche player and gradually expanded… According to Baden-Fuller and Stopford; most successful companies are the ones that can resolve what they call ‘the dilemma of opposites’…

According to Davis; research has shown evidence of successful firms practicing a ‘hybrid strategy’… business employing a hybrid business strategy (e.g., low-cost and differentiation) outperform the ones adopting one generic strategy…

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According to Michael Porter in his book– Competitive Strategy: The business that fails to develop its strategy in one of the directions; cost leadership, differentiation, niche focus…  is a business  that is ‘stuck in the middle’ and is in an extremely poor strategic situation and is almost guaranteed low profitability… Businesses that are truly differentiated can fend off the competition because they are perceived as having a unique product-service, they are more likely to earn superior margins, and are virtually ‘competitive proof’…

Porter’s strategy is embarrassingly simple– just pick one these strategies and align with it… According to John Kay; it’s true that a company that fails to develop its strategy in at least one of these three directions (i.e., a business that is stuck in the middle) is in an extremely poor strategic situation but the notion that business cannot pursue both cost reduction and product differentiation is clearly false

According to Anthony Fensom; being in the middle isn’t bad position provided that you offer value… business strategy can be driven by many objectives; ranging from gaining new customers, market share, improving turnover… or just generally supporting product positioning… and, being stuck in the middle can be a good place, at times– if the price is right…

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There is ample research on business strategy that suggests that the ‘middle’ is to be avoided for fear of being ‘stuck’ in it… According to Bob Bruner; problem is not the ‘middle’… but allowing the business to get ‘stuck’ at all– is the real issue… How the problem is being perceived has big implications for taking action, for example; some business experts argue that the ‘middle’ may not be all that bad since it provides the opportunity to test and discover possible new segments of ‘demand’…

After all, demand can be defined well beyond just– cost and differentiation, for example; convenience, style, location… Then, there is the pesky problem that consumer demand keeps changing over time, which necessitates constant experimentation to discover new or evolving demand… Today’s single-minded focus on cost or differentiation may be tomorrow’s business graveyard; customers, competition, markets… are not static they are continually ‘changing’ and business is continually ‘jockeying for position’… But, being ‘stuck’ in a bad business without a viable exit strategy is a business waiting to fail...

According to Stealers Wheel; ‘stuck in the middle’ is like being caught between clowns and jokers, they may be weak competitors, and thus may present a great opportunity for business to better serve their market, create value… and accelerate business growth… When this is true, then the middle is bad…

In the article Stuck In The Middle by Paul Simister writes: Effectively being stuck in the middle comes from trying to compromise– and it creates ‘muddle’; muddle is bad, muddle confuses customers– they don’t really know what you stand for or what to expect from you… muddle confuses employees– they don’t understand the priorities, and it affects work performance…

A stuck in the middle position happens when a business designed to be low-cost starts adding little extra frills, which don’t add a corresponding amount to the customer value– that’s when business suffers additional cost, but customers don’t get additional value… Or, when differentiated business comes under pressure on price, perhaps due to a market disruption from new technology or a low-priced competitor, and in reaction the business starts cutting costs in areas which damages their advantage…

If you think the business is stuck in the middle – or heading in that direction – then you must critically review business strategy and implement the appropriate adjustments… That means– you must decide what the business is, and what it isn’t… You must decide who the business customers are, and who they aren’t… You must decide what the business is selling, and what it’s not… Strategy is about making wise choices, and then having the courage, conviction to follow through– it’s commit to turning words, ideas… into action…

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In the article Oh, Professor Porter, Whatever Did You Do? by John Kay writes: One of the most famous propositions in business strategy is Michael Porter’s injunction not to be ‘stuck in the middle’… According to Porter; the worst strategic error is to be stuck in the middle, or to try simultaneously to pursue all the strategies. This is a recipe for strategic mediocrity and low performance, because pursuing all these strategies simultaneously means that a business unable to achieve any, due to the inherent contradictions…

The trouble with Porter’s proposition is that– it’s just not true… Many successful businesses are stuck in the middle… to them ‘stuck in the middle’ means offering– medium cost, medium quality… in fact, they do slightly better than the clearly focused choices of high-cost, high-quality… or low-cost, low-quality… So perhaps Porter’s ‘don’t be stuck in the middle’ means– not that you must choose one or the other strategy, but if you don’t– you will fail… Perhaps then all that ‘don’t be stuck in the middle’ really means is that– it’s good to be good at something…

In the article Stuck In The Middle? Take Flexible Approach by Bob Bruner writes: The problem is not the middle; it’s allowing the business to get stuck at all… The ‘middle’ seems to be what every executive wants to avoid these days. And perhaps for good reason. There is ample research on business strategy that suggests the middle is to be avoided for fear of being ‘stuck’ in it. The conventional view is to see the ‘middle’ as a no-win situation. I see things slightly differently; the problem is not the middle it’s allowing the business to get stuck at all…

Being ‘stuck’ is one of the worst situations for business without a viable exit strategy, for example; think of manufacture operations that are obsolete and face exit costs that can ruin the economics of a business as it approaches its end… Or, minority investor who is stuck in an under-performing private firm looking to exit and investment-securities are illiquid… Or, an airline stuck with an aging fleet of airplanes, uneconomic union contracts, landing rights that don’t fit the more profitable segments of demand… Or, retailers stuck with stores in neighborhoods with the wrong demographic trends… Or, technology company stuck with commitment to obsolete technology…

There are many of examples of ‘stuckness’ situations, whereby management makes inflexible commitments to what they think could be sustainable and attractive business strategy… when, in fact, these ‘difficult-to-reversible’ strategic decisions and commitments– exposes the business to potentially catastrophic consequences…

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The challenge for business leadership is not to avoid the middle, but rather to develop flexibility– such as a sensible Plan B– if the competitive situation turn against you. The middle is bad if you are stuck in some important way, for example; the inability to respond appropriate under new competitive conditions… It’s not particularly difficult to think of companies that are neither cost leaders nor differentiators that produce sub-par returns on invested capital, but many have historically ‘muddled’ along for years with incoherent strategies… However, the days of muddling along without a clear strategy are numbered…

According to Porter; a company’s failure to make a choice between cost leadership and differentiation essentially implies that the company is stuck in the middle. There is no competitive advantage for a company that is stuck in the middle and the result is often poor financial performance… However, there is disagreement among scholars on this aspect of the analysis…

According to John Kay and D. Miller; cite empirical examples of successful companies like Toyota and Benetton, which have adopted more than one generic strategy. Both these companies used the generic strategies of differentiation and low-cost simultaneously, which led to the success of the companies...

In contrast, according to Tim Friesner; Yahoo has been stuck in the middle for number of year… and future for the business is looking less and less certain. Google occupies the search and online advertising position, and Microsoft has negated its problem in the search space, with the successful development of Bing. It looks like Yahoo has remained loyal to its long serving strategists, at a time when it really needed fresh ideas. This is an example of not moving with the times in a very fast-moving and dynamic tech sector… 

Michael Porter has noted that strategy is as much about executives deciding what a firm is ‘not going to do’ as it’s about deciding what the business ‘is going to do‘… In many cases, business is ‘stuck in the middle’ not because executives fail to arrive at a well-defined business strategy but because businesses are out-maneuvered by rivals…

According to Joseph Schumpeter, great economist; described the competitive turbulence of capitalism as ‘gale of creative destruction’… being stuck in a bad business without a viable exit strategy– is a business waiting to fail…