Question

Topic: Strategy

Are Porter And Treacy & Wiersema Outdated?

Posted by Anonymous on 8/3/2009 at 7:53 AM ET 125 Points
Looking at the most used marketing and strategy models you’ll certainly find the three strategic directions of Michael Porter: cost leadership, (product)differentiation or a focus strategy. Michael Treacy and Fred Wiersema have later adapted this to operational excellence, product leadership and customer intimacy. But are these theories still valid?

Porters theory is from 1980, Treacy and Wiersema have published theirs in 1995. But the world has changed with the internet. It’s much more easy to find information and also capital flows have changed. Smart production methods are easily copied and for practically all consumer products there are price comparison websites.

My view is that cost leadership or operational excellence is no sustainable strategy any more. Competitors will challenge you on every move and your profitability evaporates. With a large variation in product supply also product differentiation or product leadership is only sufficient if it leads to really unique products. And worldwide there are so many suppliers that there always is one with a complete offering for a specific client: also the focus strategy or customer intimacy needs to be redefined.

What is then a sustainable strategy? I have put my ideas in the concept of the ‘Strategy accelerator’. Please visit www.strategy-accelerator.com. I think that only having a unique product or being relevant for your market will help you to sustain your profitability. Operational excellence is only a constraint. Please let me know your thoughts so I can improve the concept further.
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RESPONSES

  • Posted by Inbox_Interactive on 8/3/2009 at 9:35 AM Accepted
    I think the executives at Walmart may not buy into the argument that cost leadership is not a valid strategy.

    But they're only the largest retailer in the world, so what do they know...
  • Posted by Levon on 8/3/2009 at 12:51 PM Accepted
    I think Porter and Kotler were important in past years - but considering how mediums of marketing have changed - so to has the theory on what works.
  • Posted by ranjanpaul on 8/5/2009 at 1:55 PM Accepted
    The fundamentals remain true even today. What makes any principle or concept workable is how it is adapted in the current context. A manager's ability to read, understand foresee how this will roll over in the future makes for success or failure of any strategy.
  • Posted on 8/9/2009 at 3:48 AM Accepted
    I was talking to my global strategic management professor, if studying Kotler's book really worth in this present context. He answered back " Fundamentals remains the same, be it science, maths or marketing ". So, it goes true for the Kotler's works. The books of these authors are just the reflection of their experiences and collective wisdom over the years, and what great would it be to have a pie of it.

    Internet certainly has changed the rule of the game, but beyond this 14"X9" display there is a world that still plays by the same game. Internet is just a medium and not the source, atleast for almost all the commodities in the world. The companies that play by the cost leadership or operational excellence still do exist. Our needs for the marketplace remains the same, except the description.
    Similarly, the strategies that we find suitable might have few extra boxes than Kotler might have thought so.

    To market an innovative product isn't simply about finding a very unique, never formulated market strategy - much of the fundamentals still applies.

    And I guess, Kotler and alike, have pretty much done a decent job that still is applicable today, maybe with changes here and there. After all, thats what fundamentals are for!

    Cheers!
    Rome
  • Posted by Gary Bloomer on 8/10/2009 at 4:40 PM Member
    Dear Alfred.griffioen,

    I've never attended a marketing class and until I read your question, I'd never heard of Porter, Treacy, or Wiersema. And no doubt, they've never heard of me.

    But they're not answering your question. I am.

    Now, despite the fact that I've never attended a marketing class in my life, I think my 25 years of life in the marketing and design trenches affords me the knowledge that what follows is valid.

    Theories are great. But sometimes, theory can get you into a lot of trouble.

    So when it comes to solid, hard plans that create real world
    results the best sustainable strategy you can apply is this. Ready?

    Did the marketing persuade people to buy the goods, try the service, or use the product and was the message powerful enough to make those people do so again?

    That's it.

    Did the message make enough of a difference in people's lives to convince them to choose the thing you're selling, or switch to it from their regular brand, whatever that might be?

    Was there sufficient significance and relevance in the message to create the need, fulfill the dream, and solve the prospect's problem in a memorable and remarkable way? And here I mean "remarkable" in the sense that did those people have a good enough overall experience tell other people about it in a positive light?

    Did the call to action and every other point of connection between the goods and the customer's decision to buy generate enough momentum in terms of merit, value, transfered benefit, price paid, and ease of use/purchase for that person to willingly hand over their money and become a loyal buyer?

    And did all of this make that customer want to do it again?

    And again?

    And again?

    If the answer to these questions is yes, hurrah! Put the flags out. Job done! G & Ts all round and everyone goes home to their kith and kin as happy bunnies.

    But if the answer to the question is no, there was something wrong and for you, chummy (if you're the marketer), it's back to the drawing board.

    Either something was wrong with the connection between the message and its recipient (prospect or customer, it doesn't matter).

    Or there was some miss-match between the message and the market or audience the message was delivered to.

    Or there was something out of kilter with the media in which the message was delivered.

    When something like this happens the automatic response on the parts of many marketers and business owners is to point the finger solidly at the marketing (or the marketing company) and proclaim loudly "We tried that and it didn't work!"

    To which my answer is "Crap! Someone screwed up the message, its delivery, or its intended target."

    The lame old mare of "We tried that and it didn't work!" is wheeled out EVERY TIME a business (and that's ANY business) screws up a piece of marketing.

    It's SUCH a huge cop out and it's why many badly marketed businesses go down the pan. And with that kind of attitudinal anchor dragging them down perhaps theses kinds of businesses deserve to wind up in Davy Jones locker.

    But avast me shipmates! Panic yee not. All is not lost.

    When it happens, when this sudden space in the provider network creates a Darwinian vacuum, it generates an opportunity into which the truly savvy marketer or business owner steps and from which the switched on marketer can profit and profit well.

    If they're well positioned. And if they've got their wits about them.

    For many, many business owners it's easier to drive that good old BMW (Bitch, Moan, and Whine of "We tried that and it didn't work!") than it is to ask what went wrong and how they can fix it.

    It's easier to do this and NOT take responsibility because taking control means having to think (God forbid!) of ways to do it again, to do it properly, and this time, to pay attention to the message and (and this is the key) what that message is telling the customer, how the message is delivered, or who it's delivered to in terms of their ability to buy.

    (Read that last bit again).

    As for Walmart, I think they're a different beast.

    They're geared up as a good many things, as cost leaders AND price leaders because of the arrangements they have with their suppliers.

    They buy in such huge quantities that they get to create their own terms. No 30 net arrangements for them. They work more on 90 days net.

    Which means?

    They pay less per item (wholesale), they mark it up accordingly, they promote it, sell, run out, resupply and resell again and again and they do all this (and this is the brilliant part) BEFORE THEY HAVE TO PAY FOR THE FIRST BATCH.

    Think about that for a moment.

    Think of its profit potential on selling goods that have not yet been paid for and being able to both bank and reinvest the total profit many times over BEFORE the first payment becomes due.

    The companies that can do this are few and far between. And this explains why Walmart is so big.

    Their swifter inventory turn means they get to sell, reorder, restock, and resell the product many more times than smaller buyers do before they have to pay for the goods or pay the distributor.

    And when you add THIS into the points I made above, the practical upshot is that Walmart's profit margins climb like a Skylark over a summer meadow.

    Such is the majesty of commerce when it's done and done properly. God, what a beautiful country!

    Gary Bloomer
    Wilmington, DE, USA
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