Gaining competitive advantage in business

Gaining an edge over competitors in any niche

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The Japanese challenge was like a strike to the confidence of the western business elite, but detailed comparisons of the two management styles and studies of successful businesses convinced westerners that they have the ability to overcome the challenge. The 1980s and early 1990s saw a plethora of theories explaining exactly how this to achieve this goal. They cannot all be detailed here, but some of the most important strategic advances are explained below.

Active strategic management needs active information gathering and active problem solving. In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett adopted an active management style that they called management by walking around (MBWA). Senior H-P managers were rarely seen at their desks. Their daily activity was divided between visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which reliable strategies could be created. The MBWA concept was published in 1985 in a book by Tom Peters and Nancy Austin. Japanese managers employ a similar system, which began at Honda, and is sometimes called the 3 G's (Genba, Genbutsu, and Genjitsu), which means “actual place”, “actual thing”, and “actual situation.

Probably the most effective strategist of the decade was Michael Porter. He introduced many new concepts including; 5 forces analysis, generic strategies, the value chain, strategic groups, and clusters. In 5 forces analysis he presents the forces that shape a firm's strategic environment. It is like a SWOT analysis with structure and purpose. It shows how these forces can be used by a firm to obtain a sustainable competitive advantage.

The 1980s also saw the popular acceptance of positioning theory. Although the theory was coined by Jack Trout in 1969, it didn’t get wide popularity until Al Ries and Jack, Trout wrote their classic book “Positioning: The Battle For Your Mind” (1979). The basic premise is that a strategy should not be evaluated by internal company factors but by the way customers see it relative to the competition. Crafting and implementing a strategy includes creating a position in the mind of the collective consumer.

In 1992, Jay Barney, saw strategy gathering the optimum mix of resources, including human, technology, and suppliers, and then configure them in unique and sustainable ways.

In 1989 Richard Lester and the researchers at the MIT Industrial Performance Center obtained seven best practices and concluded that firms must speed up the shift away from the mass production of low cost standardized products. The seven areas of best practice were:

•           Simultaneous maintained improvement in cost, quality, service, and product innovation

•           Breaking down red tape barriers between departments.

•           Decreasing layers of management into flatter organizational hierarchies.

•           Improving relationships with customers and suppliers.

•           Intelligent new technology applying.

•           Global focus.

•           Improving human resource capabilities.

 

Article Tags: Competitive Advantage

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