For over three decades, Michael Porter’s seminal work on corporate strategy has dominated management thinking, dictating that companies make clear choices among generic strategies: cost leadership vs. differentiation, or broad appeal vs. niche market. To align resources, organizations then design, staff, and create policies to support their chosen strategy. The idea that a company could achieve differentiation through innovation, service excellence, or other value-adding features, as well as cost leadership (compared with the company’s peer group), has been alien to this thinking.
Yet some leading companies have developed capabilities and strategic positions that would normally be considered contradictory. For example, Singapore Airlines (SIA:SP) delivers exceptional service, supported by continuous innovation, while maintaining a leaner cost structure than its peers, at a level of efficiency only found in the budget airline segment. Apple (AAPL) offers popular, innovative products that redefine whole industries, while at the same time its efficiency levels are higher than those of the traditional cost leader, Dell (DELL).
I call such a configuration of capabilities and positions Quantum Strategy, after the idea that at the quantum level of reality, the same electron can be two places at the same time, and two different electrons can occupy the very same physical space. While such a situation seems impossible, it is real and can serve as a fruitful analogy for companies and leaders that wish to develop a strategy that is hard to imitate and can deliver a competitive advantage.
What are some principles that can help a company implement Quantum Strategy?
Focus and simplicity
Focus and simplicity can help you deliver high levels of value as well as do so efficiently—focus in terms of product and markets, avoiding unrelated diversification and overpopulated, complex product lines. Simplify your organization, remove unproductive processes, and make a concerted effort to gain synergies among your related businesses.
When you make technology, people development, or other investments, keep the above goals in mind and invest only if both are satisfied. The right investments to accomplish dual goals cannot always be justified by conventional, short-term financial measures. They have to be made based on strategic principles and courageous leadership, willing to be different and to break from the “me too” mentality, which results only in average performance or mediocrity.
Instill the appreciation for dual capabilities in the organization’s culture by serving as a role model, consciously and consistently making decisions and taking actions that symbolize the strategic values you wish the organization to develop. Steve Jobs, for example, was the embodiment of innovative, groundbreaking thinking as well as Zen-like levels of simplicity and focus.
Think in terms of business systems rather than value chains and engage these systems globally in a way that strengthens the dual capabilities that underlie your strategy. Value chains encourage linear, input-process-output thinking with a view to optimizing operations. Business systems, on the other hand, are interorganizational networks that involve competition as well as collaboration to achieve synergies beyond the boundaries of a single company. Thinking in terms of business systems fosters the pursuit of differentiation in the most efficient way, rather than simply the goal of operational optimization.
Corporate strategies that blend positions and capabilities traditionally considered distinct are difficult to accomplish; which is what makes them valuable. The choices that courageous leaders have to make are not between generic strategies as conventionally thought, but are rather tough organizational and investment choices that can lead to effective development and integration of apparently conflicting capabilities.