Business leaders tend to see competition as a cleansing wind, blowing away waste and abuse. But the world is not that simple. If you invest in advertising or product development to take business away from a competitor, that may increase the corporate pie. But if you invest to take business away from a sister brand or division, that may make the whole corporate pie smaller. Not only are the investments in advertising and development partially wasted, but you have probably pushed down the prices of both brands.
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Thereās a competition for market share and a competition for mind share. If your competitors are telling better stories than you, if theyāre playing the game and youāre not, then it doesnāt matter if their product is worse. They will get the attention. To any customers, investors, partners, or talent doing a cursory search, they will appear to be the leaders in the category. The more people talk about them, the greater their mind share, and the more people will talk about them.
Both cost leadership and differentiation require the pursuit of distinctiveness. You donāt get to be a cost leader by producing your product or service exactly as your competitors do, and you donāt get to be a differentiator by trying to produce a product or service
identical to your competitorsā. To succeed in the long run, you must make thoughtful, creative decisions about how to win. In doing so, you enable your organization to sustainably provide a better value equation for consumers than competitors do and create competitive advantage.
If you continue down the road you are on you will be counting on motivation to move the company forward. I cannot honestly recommend that as a way forward because business competition is not just a battle of strength and wills; it is also a competition over insights and competencies. My judgment is that motivation, by itself, will not give this company enough of an edge to achieve your goals.
In the same way, a good business strategy deals with the edge between the known and the unknown. Again, it is competition with others that pushes us to edges of knowledge. Only there are found the opportunities to keep ahead of rivals. There is no avoiding it. That uneasy sense of ambiguity you feel is real. It is the scent of opportunityā¦
Similarly, we test a new strategic insight against well-established principles and against our accumulated knowledge about the business. If it passes those hurdles, we are faced with trying it out and seeing what happens.
Given that we are working on the edge, asking for a strategy that is guaranteed to work is like asking a scientist for a hypothesis that is guaranteed to be trueāit is a dumb request. The problem of coming up with a good strategy has the same logical structure as the problem of coming up with a good scientific hypothesis. The key differences are that most scientific knowledge is broadly shared, whereas you are working with accumulated wisdom about your business and your industry that is unlike anyone elseās.
A good strategy is, in the end, a hypothesis about what will work. Not a wild theory, but an educated judgment. And there isnāt anyone more educated about your businesses than the group in this room.
Integration is not always a good idea. When a company can buy perfectly good products and services from outside suppliers, it is usually wasteful to go through the expense and trouble of mastering a new set of business operations. However, when the core of a business strategy requires the mutual adjustment of multiple elements, and especially when there is important learning to be captured about interactions across business elements, then it may be vital to own and control these elements of the business mix.