Front-Line Strategy
Comparison
Front-line Strategy Comparison Overview
Porter's Six Principles and Sun Tzu
SPIN Selling and Front-Line Strategy
Miller-Heiman and Classical Strategy
Porter's Six Principles and Sun Tzu
A whole book could be written about the synchronicities between the
Michael Porter's view of strategy and classical front-line strategy. Though
the noted leader of Harvard's Institute for Strategy and Competitiveness
looks at strategy from a more traditional management viewpoint, his and Sun
Tzu's ideas converge in a number of areas. The purpose of this article is to
explain how Sun Tzu's tools help those using Porter's approach. We base this
article on Porter's own short explanation of his six principles in the
Harvard Business Review
(April 16, 2001).
Organization Goals
Both Porter and Sun Tzu start with the same focus on the importance of goals.
Porter defines only one correct goal for any organization, superior long-term
return on investment. Porter says that other forms of goals, such as sales
volume or market share leadership, result in poor strategy. While Sun Tzu agrees
that meeting economic goals are a necessary condition for survival, classical
strategy views goals and values from a much broader perspective. Without this
perspective, truly understanding competitive positions is difficult.
Front-line strategy teaches that organizations are built on an economic
foundation, but they are also constructed around a core of philosophy, mission,
or values. This mission describes the organization's role in the world in a way
that is meaningful to its members. Most importantly, it creates a shared bond
within the organization that is larger than its economics alone. If the only
shared goal in an organization is financial, then employees should leave
whenever they discover better financial opportunities elsewhere. However,
Sun Tzu teaches that people stay with organizations because they support other
levels of their mission and get rewards beyond those that are purely economic.
The economic level is the most basic of four levels of goals in classical
strategy. The other three levels of motivation are the professional (caring
about recognition for your skills), the emotional (caring about your fellows),
and the spiritual (caring about ideals). While economic goals must be satisfied
for the sake of survival, the higher level of goals make it easier to understand
many differences between the competing organizations. The difference cannot be
explained by simple economics. Classical strategy teaches that economic goals
are the broadest but they are also the most shallow. The more an organization is
perceived to operating on a purely "economic" level, the less loyalty it
generates from its followers.
In classical strategy, goals are the uniting force within an organization.
They are the gravity that holds it together. If an organization simply
represents a paycheck for its employees and an investment to its stockholders,
it has very little gravity, very little attractive force. If an organization
represents a set of higher values, it can be attractive in even when its
economic value or economic performance during a certain period is less than that
of competing organizations.
We will return again to the importance of classical strategy's concept of
unifying goals when we discuss Porter's final point about continuity.
The Value Proposition
Michael Porter's second principle of strategy is its delivery of a value
proposition. Porter defines this as a set of benefits that are different
than those offered by competitors. Again, both Sun Tzu and Porter agree that
strategy is a comparative science, comparing positions among alternative
positions. They both also agree that a given strategy is never universal.
No strategic position can offer all things to all people.
Classical strategy enhances this analysis with the idea that a particular
value proposition arises from a unique competitive position in a larger
environment. This idea is echoed by Porter when he describes the value
proposition as focused on "a particular set of uses" or "for a particular set of
customers." Sun Tzu takes this analysis much further, dividing the environment
into the "ground" and the "climate" and then identifying a number of useful
characteristics of each that help us further understand competitive positions in
the environment.
Porter's focus on competitors who offer alternatives and set of customers,
who have a use for our offerings, is a great place to start. At the most basic
level, competitive positions are defined by the subjective view of customers
about the relative value offered by competitors. However, a competitive
battleground is more than the sum of its customers and competitors. In classical
strategy, we can analyze the ground by the types of terrain, the dimensions of
distance, obstacles, and dangers, and common forms of competitive alignment.
And the battleground is only one half of the competitive environment, the
climate must also be considered.
Porter recognizes the complexity of the competitive environment with his view
of the five forces that shape a rivalry. He describes these forces as 1) degree
of rivalry, 2) barriers to entry, 3) threats of substitution, 4) supplier
power, and, 5) buyer power (more
about them here). The many different elements within these five categories
reflect aspects of Sun Tzu's environment. While Porter offers a valuable
breakdown for the discussion of specifics, Sun Tzu offers a more comprehensive
overview of the entire system. For example, several aspects of Porter's
supplier and buyer power could are more simply understood from Sun Tzu's
analysis of "full" versus "empty" ground. That analysis says simply that
crowding reduces power. Lots of alternative suppliers reduces supplier power.
Lots of alternative customers reduces buyer power. The general rule helps us
understand how the specific elements within Porter's model work.
In classical analysis, climate represents all the forces driving change. This
element can be inferred from Porter's analysis but it is not dealt with
directly. Classical strategy teaches that understanding climate is an important
as understanding ground. Even in his "threats of substitution," Porter
overlooks how change can completely undermine existing competitive models.
Classical strategy teaches that change is built in to every competitive
position. We cannot understand the competitive picture of relative value as a
snapshot. Relative competitive positions are not a point on a map, but a path
with direction and velocity (something that Porter does recognize in his idea of
continuity below).
To use Porter's terms, the value proposition of using classical strategic
analysis in conjunction with Porter is that it offers a powerful
simplified perspective that helps us understand a bigger picture. This
perspective allows people to see the relative power of different positions more
quickly and easily. Porter's system invites more detailed and in-depth analysis
of competitive positions. Sun Tzu's system allows people to make fairly good
decisions when the time or information isn't available for more detailed
analysis.
The Distinctive Value Chain
Michael Porter's third principle of strategy is that it must be reflected in
a distinctive value chain. This means that the organization must
perform activities differently than its rivals. Porter's argument here is that
if a company adopts only "best practices," it starts behaving more and more like
its competitors and thereby loses its competitive advantage.
Sun Tzu's system agrees with this analysis and extends it in significant
ways. For Sun Tzu, what Porter calls the value chain is just one aspect of what
Sun Tzu called methods. The key element of methods is itself just one half of
what makes a competitive unit function. Methods, that is, the organization's
skills of manufacturing, logistics, service delivery, marketing, human
resource management and so on (to use Porter's list) must be coupled with the
skill of individual decision-making or what Sun Tzu calls "command" or
"leadership." While people work together functionally, we each make decisions
alone. What decisions individuals are free to make and how they go about making
those decisions are also part of the organization's competitive ability. Group
process are the result of individual decisions, but what individuals can decide
is also a part of those processes.
Sun Tzu also separates the methods of production, which is Porter's primary
focus, from the methods of competition. This difference is critical because,
while production processes are within the control of the organization,
competitive processes are, by definition, outside of the organization's control.
Production systems can be planned and information about production environments
can be fairly complete. Competitive methods must adapt to changing external
conditions and information about those conditions is always very incomplete.
While Porter's view of the value chain works well for productive systems, the
front-line strategy of Sun Tzu is superior for competitive systems.
Both Sun Tzu and Porter agree that, to have an advantage, an
organization must do something differently than its competition. This is true
both of internal production systems and external competitive systems. The main
advantage of learning Sun Tzu's systems in addition to Porter's, is that they
help you in developing unique, external, competitive systems.
Trade Offs
Michael Porter's fourth principle teaches that good strategy requires
trade-offs. A organization must reject some product features, services, or
activities in order to have the resources to provide others. Porter teaches that
choosing trade-offs is what makes an organization truly distinct. Porter uses
the idea of trade-offs to identify where best practices can be imitated. If an
improvement doesn't involve a trade-off choice, it can be imitated. If an
improvement requires a trade-off, the practice should not copy others because
doing so "almost guarantees that a company will lack any advantage."
Porter's ideas about trade-offs and Sun Tzu's are virtually identical.
However, while Porter focuses on internal choices about product features and
services, classical strategy focuses on external choices about how to work
outside the organization.
First and foremost, the concern of classical strategy is the source of our
limited resources. Their source is the environment that we control. We get our
physical resources, money, employees, and raw materials, from the ground that we
control. In a sense, we get our emotion resources and time from the other half
of the environment, the climate.
Front-line strategy teaches that resources are limited because our control of
the environment is always limited. The more people work on the front-lines, the
less control they have over their resources, even their resource of time. The
environment itself makes demands on their time in ways that cannot be planned or
controlled.
Working on the front-lines, people must be even more systematic about their
choices regarding trade-offs because of higher failure rates. In a production
process, waste can be minimized by controlling the process. In a competitive
environment, a high percentage of efforts must result in waste because the most
critical actors and resources are outside of organization control. A salesperson
cannot know which prospects are worthwhile and which are not without investing
time. A salesperson must often go through the entire sales cycle in order to
discover if his or her time has been wasted or not. While internal advantages
can be created by simply focusing innovation on trade-off decisions, external
competitive advantages require a much more sophisticated system of individual
decision-making. This is why front-line strategy offers such as sophisticated
tool set helping people to choose which external opportunities to pursue.
Whatever their differences in focus, both Porter and Sun Tzu agree that
the key to competitive advantage is moving away from competition.
Fit
Porter's fifth principle says that strategy defines how all the elements of
methods fit together. He says that the choices made about the value
chain are interdependent. All activities should reinforce one another.
Products should be designed to be easily manufactured and designed and
manufactured to be easily serviced after the sale. This fit is difficult for
competitors to imitate because it is easier to duplicate one activity or feature
than it is an entire system.
Sun Tzu also uses the idea of "fit," but again his concern is external rather
than internal. While Porter worries mostly about the efforts of competitors to
duplicate competitive processes, classical strategy worries primarily about the
fit between product or service scope and benefits and customer's needs.
The concern is less about efficient and unique process than about leaving
openings that represent opportunities for rivals.
A number of tools from classical strategy are designed to identify external
opportunities that fit an organization's capacities. This is done in a number of
dimensions. One of those dimension is size. Classical front-line strategy
teaches that organizations should not try to pursue markets that too large for
their capabilities. Opening large markets without the capabilities to fill them
invites competitors with more resources to duplicate a pioneer's successful
efforts on a larger scale. Instead, classical strategy teaches organization to
explore only niches that they can fill. For example, filling a local market
completely before spreading out nationally. This an issue of limiting costs as
well as inviting competition.
Sun Tzu explains the idea of competitive "fit" with his theory of
"weakness" and "strength." This concept says that a company's
strengths "fit" the weaknesses of its customers in a way that its competitor's
strengths cannot. This concept describes an external opportunity simply as an
"opening that fits surplus capabilities." The five dimensions of "fit" follow
the five key factors. In other words, Sun Tzu concept of fit ties together all
of the key aspects we have discussed thus far into a neat, discrete package.
Both Porter and Sun Tzu are concerned about eliminating the downstream costs
of poor fit. Both see good fit as a competitive advantage that is nearly
impossible to duplicate. The differences are between the fitting together the
internal processes in the value chain and fitting the organization into its
environment. Both require very different skill sets and decision-making tools.
Continuity
Porter's sixth and final principle says that strategy requires continuity
of direction. A company avoids certain opportunities in order to define what it
stands for. Porter teaches that without this continuity, companies cannot
develop unique skills, assets, and build a reputation. Organizations that have
to reinvent themselves are invariably weak competitors. For continuous
improvement to work, it must be "guided by a strategic direction."
This brings us back to the key difference between Sun Tzu and Porter on the
topic of goals. While Porter sees goals as strictly financial, classical
strategy teaches that an organization's goals, values, and mission must be the
source of its focus and unity. These goals are the organization's guiding
principles. If the guiding principles are economic alone, they provide no basis
for maintaining continuity. They tell you nothing about what business you should
or should not be in. When those goals have professional, emotional, and even
spiritual dimensions, people can know for certain where they should and should
not focus their efforts.
If the organization's goals are its unifying force, they will also naturally
direct its continuity. In Sun Tzu's system, all the other four elements of a
strategic position --ground, climate, decision-making, and methods--are
connected through the organization's shared goals. These other elements change
readily as positions are built up and advanced over time. New markets are
captured. Changes of climate are leveraged. New leaders emerge. New
methods are learned. What maintains the organization's continuity is its core
values, its core goals.
This core of values is what holds the organization. These values become the
organization's identity. They prevent it from getting too spread-out into
different marketplaces. They allow it to survive downturns in business climate.
They allow it to rally around a central leader rather than be torn apart by
separate divisional goals. They allow it to hold to its core competencies while
farming out ancillary activities.
While Porter's approach identifies the importance of continuity in building a
competitive positions, Sun Tzu's system identifies the source of that continuity
as its mission and values. Many strategic systems mistake a mission for a
strategy, but while mission must connect to the other elements of strategy, it
is just the core. A corporate level mission must be translated into lower level
missions, down to the role that individuals play in that mission. In Sun Tzu's
system, a mission is a direction, a path. The original term Sun Tzu used for
mission is known in Chinese as the tao, which means path.
Summary
Porter's ideas work so well with classical strategy they share very similar
perspectives on the nature of competition. While Porter's financial goals are
absolutely necessary, Sun Tzu suggests that a more extensive understanding of
goals is necessary to address Porter's need for continuity. Porter identifies
the importance of strategy in delivering a value proposition, but Sun Tzu brings
in the larger idea of the competitive environment to help us understand the
relative strengths and weakness of a value proposition more clearly. The
creation of Porter's distinct value chain is easier if we understand how
decision-making affects both internal processes and external competition. Using
Sun Tzu's ideas, we can easily extend Porter's idea of fitting together internal
processes to fitting into competitive niches. Together, the two systems bring
together two sets of different tools with the same goal of developing a
distinctive competitive position.
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