Strategy without intelligence, intelligence without strategy, страница 4

Competitors and strategy success

Just like there are multitude reasons for failure, but it is rarely if ever the result of direct competition, there are many ways to succeed, but rarely if ever by following competitors closely. The strategic principle behind success is not a “formula” for success a-la various management gurus, who name “model firms” without a control group and hope their clients forget those fast, as they fall from grace a few years later. The strategic route to success postulated in an article by Porter (1996) entitled “What is strategy?” was as simple and as complex as: “Do it differently”. Porter did not have the irritating habit of forging a definitive and trivial list of “successful behaviors” of the day (a habit The Economist labeled “wet fingers in the wind” in reference to Covey, Peters or Collins's famous lists). Instead, Porter examines the bases for positioning stemming from a set of (different) activities creating a unique value; that principle positions “strategic positioning” as always relative to competitors.

Pratt and Whitney, a manufacturer of aircraft engines, has been lagging badly behind GE and Rolls Royce in share of new engines outfitted on the Boeing and Airbus aircrafts. Conventional wisdom in aircraft engine development since the 1960s was the fewer moving parts, the better. Instead of imitating GE and Rolls, the clear market leaders, P&W made a strategic decision to bet on a turbofan technology which had more moving parts but promised to be more fuel efficient and less noisy than conventional jet engines. Knowing it had little chance of making sales to Boeing or Airbus, who are wedded to GE and Rolls, respectively, it decided not to try. Instead of following its competitors, it joined Bombardier, which was looking for advantage in challenging Boeing, Airbus and Embraer. As the NY Times and The Economist reported, P&W's unique strategy was propelling P&W back into the front line of the industry.

In 1990, ASML, a small Dutch company producing tools for chip making, had less than 10 percent market share. The market was completely dominated by Canon and Nikon, who used a fully integrated model. Instead of imitating the Japanese giants, ASML chose a diagrammatically opposing model – it redesigned its product to make it modular, and farmed out work to specialist firms. It also chose to show customers how to solve problems with its machines on their own, while Canon and Nikon kept all knowledge close to their chests. In 2009, ASML had 65 percent of the market.

In an industry known for rapid imitation, the airline industry, two firms stand out. Southwest, which introduced a strategy based on activities very different than full service airlines (no seating, no meals, no hubs, no travel agents), and Allegiant, which deliberately caters to leisure passengers in small communities, flying them direct and at very low fares to vacation hubs such as Vegas and Orlando. Southwest's model is impossible to copy for the large, full service airlines, which depend on connections at their large hubs and pay commissions to travel agent/sites. Allegiant also faces little direct competition as most airlines shun its small communities. It actually defines itself as a travel company, not an airline, and makes as much money from rental services and vacation packages as from tickets.

One may think that not following competitors is good for small companies mostly. But LVMH, the world biggest luxury-goods group, has been steady in its insistence of being different from competitors. While its competitors embarked on merchandizing easy-to-sell products and putting their names on many products, LVMH stayed focused on quality. Its crown jewel, Vuitton, for example, never puts its product on sales. Instead, it destroys unsold stock; it never gives licenses to outside firms; and it owns its own stores while competitors sell through department stores. During the recession of 2008, as Prada, Valentino, Lacroix, and Escada went into financial difficulties, Vuitton sales grew by double digits.