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to make of their failed or struggling

positions? Where are the Carmike


Cinemas, Vanguard funds, and Jiffy
Lubes that were the experiments of
days gone by?
The few companies that have
managed to sustain their positions
decade after decade are the excep-
tion rather than the rule. When we
do try to understand their long suc-
cess, we see not so much position-
ing, fit, and alignment as an eternal
restlessness, a constant experimen-
tation and tinkering, mixed with the
sort of adaptive discipline that entre-
preneurs use to guide and shape their
investments.
Entrepreneurs offer two lessons
that are directly applicable to con-
temporary strategy. The first is that
defensible strategies seldom emerge
from analysis. Although analysis is
obviously important, data are freely
available to all comers. The critical
process is experimentation. Only ex-
perience generates the unique, inte-
grated sets of activities that Porter
links to advantage. Only continuous
experimentation keeps a company's
position from becoming so well
aligned that it makes itself vulner-
able to disruption.
The second lesson is that undisci-
plined experimentation is worse
than no experimentation. It is the
discipline imposed by strategy that
dictates which experiments to try,
how much they may cost, and what
will happen if they succeed (or fail).
We believe that strategy creates nec-
essary coherence and preserves re-
sources. Experimentation prevents
dangerous rigidity.
Strategy, in other words, is about
first analyzing and then experiment-
ing, trying, learning, and experi-
menting some more. It is about nev-
er quite achieving total alignment,
but rather leaving some unaligned
activities out there to spark the next
round of change. It is about plan-
ning, to be sure, but it is also about
learning the way to the strategic so-
lution. Today's strategy has to do
with the fundamentally entrepre-
neurial process of driving toward
destinies as yet unknown.
Where does this leave the quest to
understand strategy? One promising
direction is to understand entrepre-
neurial thinking better. Some princi-
ples are already clear: attend to early
warnings of future possibilities; ex-
periment to find a unique place in
that future; and employ the disci-
pline of spending imagination before
spending money.
1. Data on Ikea were obtained from Christo-
pher A. Bartlett and Ashish Nanda, Ingvar
Kamprad and IKEA, HBS case no. 9-390-132,
and from "Furnishing the World," The Econo-
mist, Novemher 19,1991, p. 79.
Michael E. Porter replies: "What Is
Strategy?" was a title intended to be
provocative and was chosen based
on my strong conviction that both
theorists and practitioners have lost
sight, over the past decade, of the na-
ture and role of strategy in compet-
ing. The letters reflect the article's
provocative character. On the one
hand, there is strong resonance with
many of my core propositions. On
the other hand, there are some polite
cries of outrage from not altogether
unexpected sources.
The letters raise a number of im-
portant issues that deserve further
discussion.
On operational effectiveness.
There is a tendency for those con-
cerned with operational effective-
ness to take offense because distin-
guishing it from strategy may make
it seem less important. That is unfor-
tunate. I stress repeatedly in the arti-
cle that operational effectiveness is
not only essential but so essential
that it has become a given. My cri-
tique of the tools and the thinking on
operational effectiveness rests not on
their use but their misuse. Stalk cites
the HBR article he wrote with Alan
M. Webber ("Japan's Dark Side of
Time"). That article powerfully il-
lustrates the misuse of such thinking
in the case of time-based competi-
tion. Operational effectiveness is
just as important as strategy to per-
formance. Improving operational ef-
fectiveness when there are no trade-
offs requires no strategy. However, I
believe that strategy holds the key to
superior performance that is more
than transitory.
There may be industries in which
competition inevitably rests on op-
erational effectiveness (or, in Coyne
and Subramaniam's terms, frontline
skills or streams of insights). My ar-
ticle certainly allows that possibili-
ty, and I take issue with the asser-
tion that my ideas rest on assump-
tions about the type of industry. My
point is that those industries in
which competition is restricted to
operational effectiveness are less
likely to be hospitable ones.
I also allow the possibility that a
company can attain and sustain an
operational advantage. Yet the half-
life of advantages in operational ef-
fectiveness is clearly shortening. My
point is that such advantages will
usually be harder to sustain than
those attained through the trade-offs
and fit arising from a strategy.
On synthesis and entrepreneur-
ship. MacMillan and McGrath's let-
ter is a marvelous statement of the
creative and entrepreneurial charac-
ter of good strategies. I wholeheart-
edly agree with it, and my article at-
tempts to provide the intellectual
architecture to make the creative
and adaptive process less hit-or-
miss. I found that many of the com-
panies I investigated developed very
early on a sketch of a unique posi-
tion. We can debate whether the
concept came from analysis or from
insight and intuition, but the posi-
tioning concept did not arise solely
from experimentation. The sketch
of a position was turned into a mas-
terpiece through a process of learn-
ing and experimentation that Mac-
Millan and McGrath's letter begins
to capture.
Why are entrepreneurs often the
ones who develop great strategies?
Because in big companies the organi-
zational forces working against
strategy are so great that they defeat
the efforts of many mariagers. How-
ever, I see no inevitable strategic
failure for larger, established compa-
nies, provided that they approach
the task with a clear view of what
strategy is and what makes a strat-
egy sustainable.
One caution I have about MacMil-
lan and McGrath's letter is that it
focuses on the process by which a
great strategy emerges - a character-
istic of the literature of those who
study entrepreneurship. If a strategy
did not arise out of a formal analysis
and a conscious, structured planning
process, some thinkers have a ten-
156
HARVARD BUSINESS REVIEW January-Fehruary 1997
dency to reject tbe relevance of
frameworks for understanding strat-
egy. Tbat, in my view, is a serious
mistake. Wbat matters is not tbe
process but tbe principles underly-
ing success. Tbat a given company
was lucky in stumbling onto a good
strategy does not make tbe need to
learn tbe underpinnings of a good
strategy less important.
On language. Management ideas
abound, and words like integrated,
fit, system, and, indeed, strategy are
used loosely in tbe discourse about
competition. Levien's useful letter
provides some instructive examples
of how various frameworks can
be related to one anotber. How-
ever, most practitioners are not so
tbougbtful, and many managers are
confused or use vague concepts to
justify virtually any action. One of
tbe major goals of my article is to
add some additional rigor and defini-
tion to tbe terms we use to describe
strategy and competitive advantage.
On the need for choice. Coyne and
Subramaniam question tbe view
that strategists can or should predict
enough about the future bebavior of
tbeir industry to cboose a position-
ing. Tbe alternative, presumably, is
to stay flexible and responsive by
avoiding commitments. I strongly
disagree. I believe tbat cboice is in-
evitable in any truly successful
strategy and tbat cboice requires
some informed predictions. As
MacMillan and McCratb point out,
bowever, a position is not static but
the result of a more or less continual
process of improvement and experi-
mentation. The absence of cboice,
wbicb Coyne and Subramaniam
seem to advocate, guarantees (at
best) mediocrity. My experience bas
been tbat avoiding cboices is ulti-
mately just as risky as making in-
formed bets about some aspects of
tbe future direction of competition.
On the role of the strategist.
Levien seeks more guidance on the
role strategists can and should play
in achieving synthesis around a
strategy - an important question. I
have tried to articulate the princi-
ples involved and to create a lan-
guage system for discussion among
parts of an organization. Stalk's re-
cent HBR article ("Breaking Com-
promises, Breakaway Growth") pro-
vides another helpful way of discov-
ering a unique position. The leader-
ship and organizational challenges
of managing the process is a subject
tbat is preoccupying me currently.
WHAT HOLDS THE MODERN
COMPANY TOGETHER?
G. van Schaik
President of the European
Foundation for Management
Development
Wassenaar, The Netherlands
There is no doubt that corporate
culture plays a crucial role in hold-
ing the modern company together.
Culture is not a new phenomenon:
every corporate community has had
a culture. But activating it as a rele-
vant aspect of management is new.
As has always been true, modern
enterprise is held together by people.
People are tbe most important - or
one of the most important-assets of
the corporation. It is generally ac-
cepted that assets have to be man-
aged properly, but given a cboice,
managers would ratber manage
problems tban people. Compared to
people, problems are easy.
Tbat may explain wby tbe corpo-
rate world bas for decades focused on
tbe more technical aspects of man-
aging a company. Clobalization and
delayering are two examples of fasb-
ionable management techniques
that aim to produce greater revenues
and better cost control. It was only a
few years ago, when attention shift-
ed to entrepreneurship, that the be-
havior of a corporation's population
became a management vebicle for
driving tbe company forward.
Rob Goffee and Garetb Jones iden-
tify in a very lucid and compreben-
sive way tbe place and role of culture
in tbe corporate world. In "Wbat
Holds tbe Modern Company Togetb-
er?" (November-December 1996)
tbey offer tbe reader a practical mod-
el for diagnosing the state of a com-
pany's culture. Their matrix shows
to what degree the various types of
corporate culture (read: types of cor-
porate human bebavior) glue tbe en-
terprise togetber.
In my experience, a company's cul-
ture is quite often more tban glue,-
it is tbe company's driving force.
Goffee and Jones successfully answer
tbe question Wbat culture do we
bave? But that is only the starting
point for management's real work.
Having identified our culture, we
next have to ask ourselves the ques-
tions Is our culture the right one for
moving forward? Does it have to be
further developed? Does it have to
be cbanged? If so, wben sbould we
cbange and bow? I have found asking
those questions a lot easier than an-
swering them.
Creating a dynamic and flexible
culture is a bell of a job. People en
masse are not, on the whole, dynam-
ic and flexible. Corporate popula-
tions are conservative and wary of
cbange. Tbe only way to get them
moving is with a clear, concise vi-
sion that shows a benefit in tbe end.
Unlikely as it may seem, drastic
cultural cbange is less complicated
tban gradual cbange. Dramatic inci-
dents affecting tbe corporation's fu-
ture are tbe most effective spurs to
culture cbange. Managers demon-
strate wbere they want to go, their
audiences listen readily, and project-
ed dates for realizing changes are
usually accepted. However, when
things are moving smoothly and
the future nevertheless requires a
change in culture, it is hard work to
convince the corporate population
that something has to be done at all.
It is hard to describe concretely to
your people what type of communi-
ty and culture is necessary for the fu-
ture. A successful change takes a
long time. Years! And if you decide
to go for such a change, it remains an
open question whether the outside
world or your competitors will give
you the time. But that should never
be a reason not to go for it.
To get tbe company to support tbe
leadersbip, several tbings are essen-
tial. One is a focus on tbe future. Do
not tell your people tbat you are
cbanging to correct tbe past. Tbey
bave done tbeir best in tbe past.
Telling tbem tbat it was no good-so
they were no good - demotivates
them and makes them insecure. In
that condition, they cannot help you
win the war.
The CEO and senior managers
also have to be constantly, visibly.
HARVARD BUSINESS REVIEW January-February 1997
157
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