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Innovator's Dilemma

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In “What is Strategy,” Michael Porter writes that “strategy is creating fit among a company’s activities (75).” He delineates success of a strategy through a company’s ability to do many unique things well, and align them in a way that makes it very difficult for competitors to replicate. The core themes (such as high level of service, endless customization) that comprise company’s strategy are therefore so tightly integrated that one could not be separated from another. Competitive advantage emerges from the entire system of activities that is different from that of rivals. The three sources of strategy as identified in the article are customers’ needs, accessibility, and or the variety of a company’s products or services. Needs -based positioning targets a specific group of customers and caters to all of their needs. Ikea presents an excellent example of this as their strategy is to be a one-stop, convenient shop for all furniture needs of price-sensitive consumers who often work and have children and do not require high levels of customized service. Secondly, access-based positioning segments customers by access, which is anything that requires a different set of activities to reach customers in the best way. Carmike utilizes an access-based strategy as a function of geography by operating movie theaters only in underserved rural locations. Lastly, variety-based positioning is based on the choice of product or service varieties, such as Jiffy Lube, which specializes in speedy, low-cost oil changes only.

I agree with Porter’s statement that the “Competitive value of individual activities cannot be separated from the whole.” Individual activities are easily identified and copied by competitors. Porter illustrates how Continental, a full-service airline, attempted to copy individual activities of a highly successful rival, Southwest. Continental created Continental Lite, which directly replicated some of Southwest’s activities, such low-cost fares with no first-class seating or meal offerings. In so doing, they alienated travel agents, a large source of clientele for their core business with low commissions, and they mismanaged their existing business customers who valued service associated with the Continental name. By imitating only a few individual activities, without the whole system of Southwest’s low-cost, high convenience strategy, they lost a great deal of money and loyalty.

Porter argues that although operational effectiveness (OE) is essential, it will never differentiate a company and provide long-term profitability the way strategy does. Operational effectiveness can be boiled down to a set of management tools and best practices. The most general and effective diffuse quickly as imitation is rife. They can lead to competitive convergence as many companies adopt similar methods, emulating efficiency practices or new technologies for example. Porter states, “Operational effectiveness means performing similar activities better than rivals perform them… In contrast, strategic positioning means performing different activities from rivals’ or performing similar activities in different ways (72).”

Christensen believes most technologies fall into the “Sustaining technology” categoryвЂ"whether radical or incremental, they improve the performance of established products, along the dimensions of performance that customers in major markets already value. In order to be “disruptive,” a technology must bring to market a very different value proposition than available previously. According to Christensen, there are five principles to disruptive technologies. First, companies depend on investors and customers for resources. Their financial and human resources therefore are dictated by these parties who do not want to allocate to markets with lower margin technologies that they don’t yet know they want, that is until it is too late. Secondly, small markets don’t solve the growth needs of large companies. The larger the company, the more new sales needed in order to perform



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