Saturday, February 2, 2013

Competition or Cooperation: What’s your Strategy?


Porter's 5 Force strategy model is a framework that is based on the thinking of threat for competition, survival and intensity of competitive rivalry. It's made significant impact on businesses strategy planning cross-sector in last century, however, the emerging trends such as digitalization and globalization make the businesses & world much more inter-connected and interdependent with each other, is such competitive, defensive view of world still good for customers or society as a whole? Shall we get evolving to more collaborative and customer centric model from profit-centric Five Forces? What are your strategic plans to sustain your enterprise in 21st century at digital era?   

1. From Competition to Collaboration

On the face of it, it appears that the current global economic woes could be the root source for the failure of many companies’ world-wide. However, there is much that gives pause for thought about good strategy crafting and nature of business dynamic, as  the old industrial model (profit making model) of business is breaking down, and new digital model is emerging:
 
 ·     From “Push Out” the Competition to “Pull up” the Partners: The 5CF model is valid at certain degree, and, most importantly, the 5CF model is only ONE of many considerations (tools) when formulating business strategy. In the 5CF, there is no single force that discusses collaboration aspects between partners and customers. At digital eco-system, customers and partners are co-creating ideas, collaborate more seamlessly in order to design next generation of products and services, organizations shouldn’t just focus on competitions, but need pull up the resources and partners to build up new business differentiators.

·      From Competitors to Coopetitors: More often than not, today’s businesses are not only competing for getting more customers, but they need cooperate with each other to set up policy, tune business ecosystem, and overcome common barriers facing in their verticals. We are seeing a paradigm shift in our culture away from competition to cooperation. These shifts happen at "glacial speed". :-), that’s why the new hybrid word “coopetitiors” emerging.

·   From unhealthily internal competition to cross-functional collaboration:
Some organizations may use Five Forces as gospel, even influence their culture improperly; when one only holds competition in mind, use Five Forces as hammer, they may think all other functions or colleagues as nails, to make unhealthily internal competition for limited resources, to cause silo thinking and overall business ineffectiveness, as well as toxic business culture. Only balancing with collaborative thinking and behavior, business can be running with harmony and stick to long term strategy.    

2.From Compete on Everything to Compete for Blue Ocean

Five Forces framework is only one of the strategy models approach. Before considering whether something is or not in Porter's strategy approach, other strategic models should be reviewed such as Blue Ocean Strategy, as The “Blue Ocean Strategy” tries to align innovation with utility, price and cost positions, a great approach in evolving the enterprise.

  • The three key conceptual building blocks of Blue Ocean Strategy are:
             a) Value innovation
             b) Tipping point leadership
             c) Fair process

  • The Six Principles of Blue Ocean Strategy
a)  Reconstruct market boundaries
            b)  Focus on the big picture, not the numbers
            c)  Reach beyond existing demand
            d) Get the strategic sequence right
            e) Overcome key organizational hurdles
            f)  Build execution into strategy

  • From Competition Forces to Technology Forces: In order to sustain the enterprise in the 21st century, organizations need to understand the 5 Forces at play and understand market value chains and systems. It is the forces within the model which change. "Nexus of New Technology (SMAC --Social, Mobile, Analytics and Cloud)" are forces at play within the model, look for analyst report and see what trends is well suited for the industry where the enterprise fall and layout appropriate social, cloud, big data, mobility strategy. 

3. From Competition Driven to Customer-Focus

Competition-driven may also make business stress out, with ignorance of noble business purpose: How to create and delight customers? 

  • Strategy requires a clear articulation of targeted customer segments and the value proposition required to please them. Clarity of this value proposition is the single most important dimension of strategy. There is no clear view represented in the 5CF model. 
  • Look at the business strategy as to what business are saying and suggesting for their customer acquisitions and relationship side. The only safe heaven today is to engage with the customer and continuously add more value through redefining and redesigning what we offer and how we engage. Customer design experience is how to win decently, but not with the competition.     
        
  • The Balanced Scorecard: Can be used to better inform decision takers. It normally manifests itself by means of a dashboard metaphor. In other words, it is a reporting front end. Underpinning it must be a means to translate data into information, but with a considerable degree of distillation and reduction to present in dashboard form. The associated concept of the Key Performance Indicator and its purpose seems to be often misunderstood. Indicators are frequently based on qualitative or quantitative measurements. To make it truly effective, indicators should be well designed to reflect customer-centric and multi-dimensional values   
In summary, the adoption of a model, whatever it is, aside from being one way of articulating strategy is also the thing on which so much of the organizations policy and associated governance is put into coherent form. However, the amount of work involved in making sure these models work is often not properly, addressed/described by their proponents. Thus, a considerable degree of thought and design is must to ensure model works for business, not the other way around. Seeing the business beyond “competition” angle, and always see the world objectively, holistically, with positive and progressive tone, as the world we see is dependent on the lens we use and what we see. Finally, the intension of such debate is not about how to prove the strategy analytics framework such as Five Forces wrong, more about how to update and upgrade our thinking/knowledge, being learning agile, understand context, hunt for Blue Ocean, and never forget noble business purposes as the end.





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