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Kindle Notes & Highlights
“The essence of strategy,” Porter often says, “is choosing what not to do.”
Porter’s is the rare intellect that successfully bridges the divide between economic theory and business practice.
Properly understood, competitive advantage allows you to follow the precise link between the value you create, how you create it (your value chain), and how you perform (your P&L).
A common piece of advice for managers has been to focus on their core activities and to outsource the rest. Fit challenges that bit of conventional wisdom.
Competition focuses more on meeting customer needs than on demolishing rivals.
In the vast majority of businesses, there is simply no such thing as “the best.”
When an industry converges around a standard offering, the “average” customer may fare well. But remember that averages are made up of some customers who want more and some who want less. There will be individuals in both groups who will not be well served by the average.
Competing to be unique is unlike warfare in that one company’s success does not require its rivals to fail.
The five forces framework explains the industry’s average prices and costs, and therefore the average industry profitability you are trying to beat.
If there are economies of scale, at what volumes do they kick in?
The untested assumption that a fast-growing industry is a “good” industry, Porter warns, often leads to bad strategy decisions.
To repeat, then, industry structure is dynamic, not static. When you do industry analysis, you are taking a snapshot of the industry at a point in time, but you are also assessing trends in the five forces.
If you have a real competitive advantage, it means that compared with rivals, you operate at a lower cost, command a premium price, or both.
Stock price, Porter warns, is a meaningful measure of economic value only over the long run.
If you have a competitive advantage, it will show up on your P&L.
Your value chain must be specifically tailored to deliver your value proposition.
Trade-offs are choices that make strategies sustainable because they are not easy to match or to neutralize.
It usually takes years, not months, to successfully implement a new strategy.
That is what strategy is all about. It’s about a point of view about the future and then making decisions based on that. The worst thing you can do is not have a point of view, and not make decisions.’”
Paradoxically, continuity of strategy actually improves an organization’s ability to adapt to changes and to innovate.
