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Porter, M. (1996). What is strategy? Harvard Business Review 74(6) 61–78.

© Har vard Business School Publishing

Reading 1.4

What is Strategy?

HBR NOVEMBER-DECEMBER 1996

I. Operational Effectiveness Is Not Strategy For almost two dec�des, managers have been

learning to play by a new set of rules. Companies must be flexible to respond rapidly to compet­ itive and market changes. They must benchmark continuously to achieve best prac­ tice. They must outsource aggres­ sively to gain ef­ ficienc i e s. And they must nur­

egy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management, benchmarking, time-based competition, outsourc-

ing, partnering, r e e n g i n e e r'i n g , change manage­ ment. Although the resulting op­ erational improve­ ments have often

ture a few core competencies in the by Michael E. Porter race to stay ahead of rivals.

been dramatic, many companies have been frustrated by their inability to

translate those gains into sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As manag­ ers push to improve on all fronts, they move farther away from viable competitive positions.

Positioning-once the heart of strategy-is reject­ ed as too static for today's dynamic markets and changing technologies. According to the new dog­ ma, rivals can quickly copy any market position, and competitive advantage is, at best, temporary.

But thos-e beliefs are dangerous half-truths, and they are leading more and more companies down the path of mutually destructive competition. True, some barriers to competition are falling as regulation eases and markets become global. True, companies have properly invested energy in becom­ ing leaner and more nimble. In many industries, however, what some call hypercompetition is a self-inflicted wound, not the inevitable outcome of a changing paradigm of competition.

The root of the problem is the failure to distin­ guish between operational effectiveness and strat-

HARVARD BUSINESS REVIEW November-December 1996

Operational Effectiveness: Necessary but Not Sufficient

Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise. But they work in very different ways.

Michael E. Porter is the C. Roland Christensen· Professor of Business Administration at the Harvard Business School in Boston, Massachusetts.

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