I monitored a Linkedin discussion about the purpose of strategy for two months and was dismayed at the lack of clear understanding of strategy by the practitioners themselves. Finally, after reading a posting that suggested strategy is not about differentiation because one successful strategy is to copy incumbents, I could remain a passive reader no longer. My reply posting follows. Comments welcome.
Strategy may not technically be to differentiate, but the essence of strategy is absolutely to do things differently than your competitors in order to achieve a competitive advantage. A strategy to benchmark competitors and copy them is incomplete unless it also attacks the weak points of their strategy and exploits them. Asian competitors have been doing this for three decades. They don't just build me-too products, they usually build them cheaper and then make improvements on the original design., Microsoft has built an entire business model around its ability to commercialize products that are often not particularly better than competitive offerings by exploiting the advantage of its channel marketing power to commercialize products more successfully than rivals who sometimes have superior products. These strategies may not be particularly sexy, but they work and they involve more than benchmarking competitors and immolating them. They involve doing something slightly different to exploit weaknesses in the competitors' business model.
Simply copying competitors and doing nothing different is not strategy; it is head to head competition where the more powerful competitor and/or one who executes better or has lower cost inputs wins. Strategy enables you to overcome superior power and even superior execution, but it is not the same thing as power or execution. Likewise, effective execution and operational efficiency are about performance, and while they may support a strategy - and even provide a temporary advantage in the absence of strategy until competitors improve their performance - they are not in and of themselves strategy.
If you copy an innovator and are able to come to market cheaper because you didn't have to invest in the development of a product or business model, that could be considered a strategy because it is a choice about how to go to market - to more efficiently bring to market something that has already been commercialized by someone else. The counter strategy is to continuously innovate or to build in barriers to entry. If all you are doing is competing head-to-head, however, you are not leveraging strategy.
Business strategy is about bending the demand curve to your favor. The product may be identical but if the business model is different, you have employed strategy. If you are unable to do this, you are competing on performance alone without the advantage of strategy. If all competitors execute to their optimum level without employing strategy, you have a pure commodity market where supply equals demand and price is purely elastic. In this scenario, the provider with the lowest cost inputs will win, but with a free flow of capital and labor and open markets, even this advantage will eventually erode.
...some strategies are better than others and some competitors execute better than others, and this reality can make it difficulty to discern strategy from execution but it does not change the underlying principle that they are two different things.
Geo Strategy Partners
The leading business-to-business / industrial market research and strategy firm