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Operational Excellence is Not a Strategy

2024-05-21

I recently re-read Michael Porter’s 1996 article “What is Strategy?”  This article is crucial for all managers and executives, as it explains the key elements of strategy and what distinguishes it from operational excellence.

Porter reminds us that excellence is not a strategy.

Let’s discuss these concepts and their impact on our decisions.

The Essence of Strategy

For the past three years, we’ve been hammering home a key message on the podcast: strategy is the art of creating value differently from the competition.

It’s about making bold, deliberate choices to stand out from the competition. This means :

  • Targeting specific customers, segments or needs: Don’t try to please everyone, but perfectly meet the expectations of a chosen clientele.
  • Offering a unique value proposition: Develop products or services that stand out by being tailored to market needs (jobs, pains, gains).
  • Setting different relative prices: Don’t get caught up in a price war; instead, price your offer according to its perceived value.
  • Adopting distinct activities and business models: Implement processes, partnerships or distribution channels that create a durable competitive advantage.

The Importance of Strategic Coherence

Porter emphasizes the importance of a holistic view of strategy. The choices made must be coherent and mutually reinforcing.

This is what he calls “strategic fit”.

Every activity and every competence must contribute to the ultimate goal: to create a unique and defensible competitive advantage.

Operational Excellence: A Means, Not an End

Of course, operational excellence is essential.

It enables process optimization, quality improvement, cost reduction, and efficiency enhancement.

But it should not be an end in itself.

If all players in a sector achieve the same level of excellence, no one really stands out.

Excellence must be at the service of strategy. It must be aligned with strategic choices and contribute to strengthening the competitive advantage.

Therefore, it is a significant means of achieving the strategic vision, but it cannot guarantee success alone.

Strategy: A Matter of Choice

A strategy requires in-depth consideration of the company’s ambitions, market positioning and means of winning.

It involves making difficult choices, sometimes counter-intuitive, but always guided by a clear and coherent vision.

Operational excellence is a valuable force, but it does not replace the need for a solid strategy.

It’s by combining a clear strategic vision with outstanding operational execution that companies can truly stand out and prosper over the long term.

Ask yourself:

  • To what end are you working to improve your performance?
  • Does it allow you to differentiate yourself?
  • Have you made different choices than your competitors?

Next Steps

When the time is right, we can help you clarify your strategic options and choices to realize your business ambitions.

Schedule a call here to get started

Thank you for being with us and have a great week,

Eric L’Heureux

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