Competitive Strategy
To beat the market, advantages have to be robust and responsive in the face of market forces. Few companies, in our experience, ask themselves if they are beating the market; “just playing the market game” seem good enough. But playing can feel safer than it is. Weaker players win surprisingly often in war when they roll-out a divergent strategy.
As Strategy Consultants we help companies to perform Value Chain Analysis and Activity Mapping to identifying those strategic capabilities, understanding how they can evolve dynamically to keep and reinforce a competitive advantage, and how they can beat the market.
Value Chain Analysis Services: Every organisation exists to provide something of value to a client or customer. Whether the products and services are valued by the customer, and whether the organisation creates this value efficiently and effectively, are different matters. Value network analysis, developed by Verna Allee in the 90ies, shows how an ecosystem, industry, organisation, department, or process produces value. It shows the flow of transactions—both tangible and intangible—through roles in the system and to customers. The analysis is drafted in a participative workshop and then supplemented through interviews, surveys, and mathematical analysis of the value network. Clients learn:
- How work actually gets done?
- The kind of value the organisation is really creating
- How efficiently the organisation converts resources into value for the customer?
- Where there are failure points in the value creation process?
- How customers perceive the value received from the organisation?
Activity mapping Services: diagnose by means of an activity map how the different activities of an organisation are linked together. There are computer programs in existence that can be used, or such analysis may be done more basically, for example by drawing network diagrams. These maps are generated by groups of managers from within the organisation, working with a facilitator, mapping the activities of their organisation on a large blank wall initially by using Post-Its. General lessons that can be drawn from such maps about how competitive advantage is achieved and the relationship between competences and competitive advantage include
- Consistency and reinforcement - The different activities that create value to customers are likely to be pulling in the same direction and supporting rather than opposing each other
- Difficulties of imitation - It is more difficult for a competitor to imitate a mix of linked activities than to imitate any given one.
- Trade-offs - Even if imitation were possible it could pose another problem for competitors.
Strategic Capabilities
If the capabilities of an organisation do not meet customer needs, at least to a threshold level, the organisation cannot survive; and if managers do not manage costs efficiently and continue to improve on this, it will be vulnerable to those who can. However, if the aim is to achieve competitive advantage then the further question is: what strategic capabilities might provide competitive advantage in ways that can be sustained over time? If this is to be achieved, then several criteria are important.
Different writers, managers and consultants use different terms and concepts in explaining the importance of strategic capability. Given such differences, it is important to understand how the terms are used here. Overall, strategic capability can be defined as the resources and competences of an organisation needed for it to survive and prosper.
It is important to emphasize that if an organisation seeks to build competitive advantage it must have capabilities that are of value to its customers. This may seem an obvious point to make but in practice it is often ignored or poorly understood. Managers may argue that some distinctive capability of their organisation is of value simply because it is distinctive.
Having capabilities that are different from other organisations is not, of itself, a basis of competitive advantage. Managers should consider carefully which of their organisation’s activities are especially important in providing such value. They should also consider which are less valued.