There are two mindsets – the ‘competitive’ mindset where the market is believed to be finite in scope and scale, that assumes that resources are scarce, an approach to strategy based on solely on the competitive aspects of fundamental frameworks like Porter’s Five Forces. Or as I see it, a zero sum game.
That is, the mentality that thinks that ‘if the other guy wins, I lose’ or ‘If I win, the other guy loses’. That makes sense in poker, which is in fact a game, but not, imho, in the business of value creation, revenue generation and growth. It assumes the pool is stagnant.
The other mindset – one that is quite rightly gaining traction, but has yet to be wholly understood in the context of growing the market or generating revenue – is that of a ‘design thinker’. Bear with my choice of words for moment, let them not distract you from the abstract concept that I am trying to convey. The ‘design thinking’ mindset believes that the market is infinite, in scope and scale, it assumes that value can be added, enhanced and created, it’s an approach to strategy that does not need ‘one right answer’ as the goal before it’s implementation. And due to this basic difference, there cannot, thus, be a zero sum game.
That is, ‘if I win, I would have created value, adding to the pool from which my wins come to me, therefore I’m not taking away the other guy’s wins which existed before I came along and added some more.’
Let me try to explain this thought a little further. Here is the basic ‘Competitive Forces‘ Model by Porter, better known as the ‘Five Forces’,
From the same website, comes this accompanying cautionary note,
competitive forces model is probably one of the most often used
business strategy tools and has proven its usefulness on numerous
occasions. Porter’s model is particularly strong in thinking
outside-in. Care should therefore be taken not to underestimate or
underemphasize the importance of the (existing) strengths of the
organization (inside-out) when applying this framework.
And quite rightly, since it’s a model that is used for analyzing the industry
in which the company is a part of, rather than an analysis of the
corporation itself. Better suited for the use by external management
consultants than a corporate planner. I would hazard a guess however
that ‘competitive strategy’ has been understood only it’s
basic terms of competition without the nuances of strategic thinking
behind it. In fact, Fast Company has this article on Michael Porter’s
contribution to strategic thinking and his opinions, which I found
extremely relevant to the current conversations – from Davos to the
blogosphere – on creativity, innovation and design as value creators for competitive advantage. I’m reproducing
here, a significant yet relevant portion of it, in order to support my
This is the paradox that Porter faces. His notions on strategy are more
widely disseminated than ever and are preached at business schools and
in seminars around the globe. Yet the idea of strategy itself has, in
fact, taken a backseat to newfangled notions about competition hatched
during the Internet frenzy: Who needs a long-term strategy when
everyone’s goal is simply to "get big fast"?
Strategy has suffered for three reasons. First, in the 1970s and
1980s, people tried strategy, and they had problems with it. It was
difficult. It seemed an artificial exercise. Second, and at the same
time, the ascendance of Japan really riveted attention on
implementation. People argued that strategy wasn’t what was really
important — you just had to produce a higher-quality product than your
rival, at a lower cost, and then improve that product relentlessly.
The third reason was the emergence of the notion that in a world of
change, you really shouldn’t have a strategy. There was a real drumbeat
that business was about change and speed and being dynamic and
reinventing yourself, that things were moving so fast, you couldn’t
afford to pause. If you had a strategy, it was rigid and inflexible.
And it was outdated by the time you produced it.
That view set up a straw man, and it was a ridiculous straw man. It
reflects a deeply flawed view of competition. But that view has become
very well entrenched.
There’s a fundamental distinction between strategy and operational
effectiveness. Strategy is about making choices, trade-offs; it’s about
deliberately choosing to be different. Operational effectiveness is
about things that you really shouldn’t have to make choices on; it’s
about what’s good for everybody and about what every business should be
Japan’s obsession with operational effectiveness became a huge
problem, though, because only strategy can create sustainable
advantage. And strategy must start with a different value proposition.
A strategy delineates a territory in which a company seeks to be
unique. Strategy 101 is about choices: You can’t be all things to all
The essence of strategy is that you must set limits on what you’re
trying to accomplish. The company without a strategy is willing to try
anything. If all you’re trying to do is essentially the same thing as
your rivals, then it’s unlikely that you’ll be very successful. It’s
incredibly arrogant for a company to believe that it can deliver the
same sort of product that its rivals do and actually do better for very
long. That’s especially true today, when the flow of information and
capital is incredibly fast. It’s extremely dangerous to bet on the
incompetence of your competitors — and that’s what you’re doing when
you’re competing on operational effectiveness.
What’s worse, a focus on operational effectiveness alone tends to
create a mutually destructive form of competition. If everyone’s trying
to get to the same place, then, almost inevitably, that causes
customers to choose on price. This is a bit of a metaphor for the past
five years, when we’ve seen widespread cratering of prices.
There have been those who argue that in this new millennium, with
all of this change and new information, such a form of destructive
competition is simply the way competition has to be. I believe very
strongly that that is not the case. There are many opportunities for
strategic differences in nearly every industry; the more dynamism there
is in an economy, in fact, the greater the opportunity. And a much more
positive kind of competition could emerge if managers thought about
strategy in the right way.
In sum, imho, the much more positive kind of competition that Porter is talking about, one that demonstrates comparative advantage, offering different choices for different needs – a Long Tail, if you will - can only emerge from the return to the basics of business. That is, to create a strategy based on differentiation yourself from the market, offering a unique product that no rival can offer, simply by virtue of it’s roots – it emerges from your understanding of your core value proposition, that differentiates you from any other, and then enhancing, creating and finally communicating that difference.
And that is where the basic principles of design methodology – design thinking, if you will – together with the basic principles of strategy 101 can come together to provide you with the tools to observe the market, draw your insights on your intended ‘user’s needs, create a product or service for those ‘as yet undiscovered’ needs and so, create your market.
Which in turn, implies that you are then not taking away somebody else’s share of the pie, because you are baking a new pie.