The essence of strategy is to be different, unique, in order to create value for customers and to generate profits. To be unique for our customers, it’s to know their needs, to offer a unique value proposition, and to select and execute different key activities from the competition.
If you do not have a strategy, you and your competitors are probably fighting for the same customers. Strategy is a matter of choice. As J.Magretta mentioned in her book, “Understanding Michael Porter“:
“If you are trying to serve the same customers and meet the same needs and sell at the relative price, then by Porters’ definition, you do not have a strategy.”
It is necessary to make choices about customers, products, services, prices, and business models. Here are five key questions to assess the positioning of your business and the development of your competitive advantage.
1. To what degree you do know your clients ?
- Do you know your clients and their needs ?
- What are the gains they are looking for ?
- What are the pains they want to minimize ?
- What are their criteria for selecting a product or service?
- How do they think of you?
- How do they buy?
- How do they use and consume your product or service?
2. Do you have a unique value proposition?
- What are the characteristics of your offer?
- How does it address the needs, gains and pains of your customers? Does it create value?
- How does it match the customers’ selection criteria?
- How are positioned the competing offers?
3. Do you have a unique and coherent business model?
- Do you have different competencies and know-how from your competition?
- Are your key activities different from your competition?
- Are these competencies and know-how a source of competitive advantage?
- Can your business model generate a profit?
- What are the external factors that affect your business model today? How will they affect it in the future?
4. How do you maintain strategic alignment?
- How do you maintain coordination and internal alignment (business functions)?
- How do you maintain coordination and external alignment (customers and supply chain)?
- Do you have a balanced scorecard highlighting the financial, customers, operations and human-information-competencies perspectives?
5. Are you proactive?
- Who is responsible for monitoring market evolution (customers, direct and indirect competition)?
- How do you monitor sources of innovation? Do they represent opportunities or threats?
- Is your market-industry-arena generating a healthy profit? For how long?
- How is it likely to evolve?
These questions are just a starting point, of course. Too often companies operate without a strategy. They are reacting to the actions of their competitors. Focusing on imitable initiatives or short-term efficiency gains.
To create value, it is important to be proactive and take full leadership of the targeted market segment. It is also important to recognize that the characteristics of your clients and their needs may today change more quickly. It is necessary to continually adapt and stay unique.
For additional perspective, here are 3 key references:
- Understanding Michael Porter (Joan Magretta, HBR Press, 2012)
- Business Model Generation (Alexander Osterwalder and Yves Pigneur, Wiley, 2010)
- The End of Competitive Advantage (Rita G. McGrath, HBR Press, 2013)