> ***"leadership has degenerated into orchestrating operational improvements and making deals. But the leader’s role is broader and far more important. General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company’s unique position, making trade-offs, and forging fit among activities. The leader must provide the discipline to decide which industry changes and customer needs the company will respond to, while avoiding organizational distractions and maintaining the company’s distinctiveness."*** Michael Eugene Porter is an economist, researcher, author and teacher. He is widely regarded as the father of the modern strategy field. Throughout his career at Harvard Business School, he has made contributions on the topics of economic theory, strategy, management and competitiveness. He has received numerous awards and is the most cited scholar today in economics and business. Learn more here: [Michael E. Porter](https://www.hbs.edu/faculty/Pages/profile.aspx?facId=6532)  > ***"A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both.*** > ***"Companies that try to be all things to all customers, in contrast, risk confusion in the trenches as employees attempt to make day-to-day operating decisions without a clear framework."*** **The three types of fit are:** 1. First-order fit is simple consistency between each activity (function) and the overall strategy. 2. Second-order fit occurs when activities are reinforcing. 3. Third-order fit goes beyond activity reinforcement to what I call optimization of effort. Competitive advantage grows out of the entire system of activities. > ***"Consistency ensures that the competitive advantages of activities cumulate and do not erode or cancel themselves out. It makes the strategy easier to communicate to customers, employees, and shareholders, and improves implementation through single-mindedness in the corporation."*** > ***"For the past decade, as managers have improved operational effectiveness greatly, they have internalized the idea that eliminating trade-offs is a good thing. But if there are no trade-offs companies will never achieve a sustainable advantage. They will have to run faster and faster just to stay in place."*** > ***"Trade-offs are frightening, and making no choice is sometimes preferred to risk- ing blame for a bad choice. Companies imitate one another in a type of herd behavior, each assuming rivals know something they do not."*** > ***"The more that rivals out- source activities to efficient third parties, often the same ones, the more generic those activities become. As rivals imitate one another’s improvements in quality, cycle times, or supplier partnerships, strategies converge and competition becomes a series of races down identical paths that no one can win. Competition based on operational effectiveness alone is mutually destructive, leading to wars of attrition that can be arrested only by limiting competition."*** > ***"Strategy is the creation of a unique and valuable position, involving a different set of activities. If there were only one ideal position, there would be no need for strategy. Companies would face a simple imperative—win the race to discover and preempt it. The essence of strategic positioning is to choose activities that are different from rivals’."*** > ***"Strategic positionings are often not obvious, and finding them requires creativity and insight. New entrants often discover unique positions that have been available but simply overlooked by established competitors."*** **Competitive strategy is about being different.** > ***"But the essence of strategy is in the activities—choosing to perform activities differently or to perform different activities than rivals. Otherwise, a strategy is nothing more than a marketing slogan that will not withstand competition."*** > ***"The probability that competitors can match any activity is often less than one. The probabilities then quickly compound to make matching the entire system highly unlikely (.9 x .9 = .81; .9 x .9 x .9 x .9 = .66, and so on). Existing companies that try to reposition or straddle will be forced to reconfigure many activities. And even new entrants, though they do not confront the trade-offs facing established rivals, still face formidable barriers to imitation."*** Peter Thiel giving a talk about Strategy: Competition is for Losers [](https://www.youtube.com/watch?v=3Fx5Q8xGU8k) #### TL;DR What is strategy? Strategy refers to the unique position a company will be able to achieve as it takes specific steps cumulatively over time. How are we going to create value? How are we going to be unique? How are we going to create an advantage and sustain that advantage over time. Competitive strategy is about being different. Strategy has a theory, that theory should explain: 1. Why are we in this specific playing field? 2. How we are going to win in this playing field? The success of a strategy depends on doing many things well and integrating the activities with each other. If there is no fit among activities, there is no distinctive strategy and little sustainability. A sustainable competitive advantage requires: - Unique competitive position for the company - Activities tailored to strategy - Clear trade-offs and choices vis-à-vis competitors - Competitive advantage arises from fit across activities - Sustainability comes from the activity system, not the parts - Operational effectiveness a given Strategy requires many different and integrated activities compounding over time. The probability that a competitor can match a specific activity is often less than 1 - the probabilities then quickly compound to make matching the entire system highly unlikely (.9 x .9 = .81; .9 x .9 x .9 x .9 = .66, and so on). It is harder for a rival to match an array of intertwined activities than it is merely to imitate a particular sales approach or replicate a set of product features. Positions built on systems of activities are far more sustainable than those built on individual activities. Strategy requires focus, constant discipline and clear communication with all stakeholders.