Customer Strategy? Or Strategy vs. Customers? Part 1 of 2.

The October 2007 issue of Harvard Business Review is out; in snailmailboxes, anyway (at HBR, no early advantage is given to electronic subscribers, unlike most other publications.)

The issue provides such a juicy entrée to business thinking that I can’t cover it with one blog posting. Look for the Part 2, next posting, which will pit Amazon against credit card companies.

But first—let’s talk business and global warming. The entire Forethought section this issue is devoted to “the climate business and the business climate.”

No fewer than 7 articles address the issue, led by the reigning king of corporate strategy, Michael Porter, co-authoring with Forest Reinhardt. Porter’s life’s work has been to cement the link between strategy and competition. It’s hard to overstate the effect his work has had, even on those who don’t know him by name. The term “sustainable competitive advantage” is, in large part, his handiwork.

After cementing that worldview in business, Porter applied it to countries, then to non-profits; and now to global warming. What, you might ask, does corporate strategy have to do with global warming?

Porter gives a quintessentially Porterian answer. First, you might be able to make money on it (what with higher energy prices, green policies, et al).

But that can be just operational. The bigger reasons for companies to think climate, says Porter, are strategic. You might be able to stake out a position in an emerging market; or prevent a competitor from doing so. Walmart’s emission reduction programs don’t just save money; they “will be strategic if [Walmart can]…reduce emissions in a way that is difficult for its smaller rivals to replicate.”

As Porter and Reinhardt put it:

While many companies may still think of global warming as a corporate social responsibility issue, business leaders need to approach it in the same hardheaded manner as any other strategic threat or opportunity.

I submit there is something profoundly wrong with this logic.

There is something wrong with business thinking when the core guiding strategic concept is the pursuit of continued competitive domination by corporate entities. When the best thinking business can bring to bear on global warming boils down to the dictum to view it like "any other strategic threat or opportunity."

In a world that is networked, globalized, outsourced and inter-dependent, the last thing we need is an old ideology centered on companies “built to last” who are all about “playing hardball” to achieve “sustainable competitive advantage.” That mode of thinking has proven itself incapable of dealing with the economic issues of "the commons" time and time again, on a less-than-global scale. Why should it prove any better when the stakes really are global?

Is that really the best we can do for a guiding set of beliefs? I think not.

I am not suggesting that companies ought to be do-gooders. Nor am I suggesting that companies ought to calculate political pressure and react according tof the relative power of broader constituencies and their enlightened self-interest (an approach responsible for “business ethics” being perceived as an oxymoron). I am not suggesting “co-opetition” as a solution.

I am suggesting we need an entirely different business ethos—a logic as powerfully and concisely stated and as deeply embedded at the heart of business as competition was when Porter wrote in the late 70s—but an ethos based on relationships, networks, synergy, inter-dependency, collaboration, customer-supplier relations, and mutuality.

Do the other 6 articles in HBR’s forethought section offer that ethos? Not really. One talks about the stakeholder pressures that will be brought to bear on companies; another about the value of transparency. All are stuck in the same root assumption: business is about the sustained competitive advantage of companies.

Elsewhere in the same HBR issue, however, there lurks a clue about a viable alternative approach.

Stay tuned to this blog for Part 2.


2 replies
  1. Sims Wyeth
    Sims Wyeth says:

    I have just returned from moderating a two-day conference for the executive search and HR world.  The theme was that human capital (ouch!) is the only sustainable competitive advantage.

    As I lay sleepless in Gotham on the 43rd floor of my midtown hotel, I pondered some of the language being used by the congregants.

    Let’s start with "sustainable competitive advantage"–a ringing phrase you attribute  to Michael Porter.

    Let me consider the idea in broad terms.  Correct me if I’m wrong, but aren’t 99% of the species that have ever existed on our planet extinct?  

    How about continents?  Atlantis is gone, and our own North American continent used to be tropical and upside down in the Tropic of Cancer.  No lasting power there.

    How about cultures?  Egypt?  Not what it once was.  Rome?  Great place to visit, but not a world power anymore.    The British Empire?  Soviet Russia?   The glory that was Greece?  Gone!

    Let’s consider companies.  Do they have the capacity to sustain themselves over long periods of time?  It depends on what you mean by "long" I guess.

    I keep thinking of Buster Brown, the shoe company.  They may be still around, but I’m not aware of them.

    I learned how to word-process on a Wang.  Are they alive?

    IBM, Ford, GM, GE, AT&T–these companies are the tyranosaurus rexes of the age, and each one has been hit on the chin and gone wobbly in the knees. 

    I don’t know the attrition rate on the Fortune 500 list, but I suspect it’s considerable.  I looked for the data, but not even Google could find it (could be a sign they’re getting old!)

    I have a friend who is marketing a new supercomputer that is more reliable and cheaper to maintain because it doesn’t get as hot as the others.    That’s a competitive advantage, but how sustainable is it?

    Maybe a more accurate phrase would be "temporary competitive advantage."  Except it wouldn’t sell a lot of books or earn its author a King’s ransom.

    But back to the conference and the theme that human capital is the only sustainable competitive advantage.  I like this thought, because it puts my business (transforming the personal impact of people) in a very favorable light.

    Groups of humans who share beliefs and convictions, who work together, who trust each other and are led by ethical, inspiring people are responsible for the greatest achievements of man.   The defeat of the Persians at Thermopylae, The Magna Carta, the Declaration of Independence, the US Constitution–all these come to mind.

    And great companies seem to be animated by belief systems and values that provide meaning as well as income for employees.

    Am I cynical to say that there is always a counterbalancing force to generosity, altruism, and doing well by doing good?

    How many utopian communities have survived?  The Blithedale Romance, Jonestown, The Hog Farm.  They all have a half-life that seems to de-energize them from within.

    Leaders change.  Power corrupts.  The endless fight for recognition, security and distinction (Lincoln wrote about this as he tried to manage his military leaders) creeps in to undermine trust among colleagues. Suddenly we see selfishness, rivalry, and deception.

    "Things fall apart, the center cannot hold," sang the poet William Butler Yeats. "Mere anarchy is loosed upon the world."

    Human capital (ouch again!  what makes us refer to people as resources or capital?) may very well be the single greatest source of greatness, because out of human beings come ideas, passions, imagination, innovation , cultures, and compassion–but let us not deceive ourselves with ringing phrases.

    Past performance is the best indicator of future performance.  Competitive advantage is temporary.



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