Strategic Focus - The Simple Version

Strategic Focus is critical in organizations - while having it may not necessarily lead to success, not having it pretty much guarantees failure.  You know a company has it when it has a clear and consistent vision, and has a well-defined strategy for executing on the vision.

Most approaches to strategic focus tend to follow one of two paths - Strategy as Trade-Offs (Michael Porter), and Strategy as Discipline (The Discipline of Market Leaders - Treacy and Wiersiema).

Strategy as Trade-Offs

There have been tons of books written about it, and it has pretty much dominated the "Strategy" discussion since the 80s, (with many rebuttals to - check out Blue Ocean for one of the major ones) Porter defines three types of strategy

1. Cost Leadership:  Being more efficient than anyone else. 
2. Differentiation:  Superior products or service compared to others.
3. Focus of the above in a market niche:  Meeting the specific needs of customers/buyers (either narrow or broad)

Porter's key insight (IMHO) was that each of the above required radically different approaches to markets and operations, and trying to straddle them was a recipe for disaster.  In short, Porter said that a company should pick one, and only one of the above, and relentlessly focus on it.  Trying to go with more than one approach would, at best, result in sub-par performance (compared to competitors), and more likely - market failure.  He actually took this one step further and claimed (with some research seeming to validate it) that straddling strategies was actually a sign of management failure, indicating that the relevant choices of markets, direction, and scope had not been made.

Strategy as Disciplines

In 1993, Treacy & Wiersema modified Porter's approach somewhat with Strategy as Value Disciplines.  These are customer-focused practices, based on putting a customer's needs first and foremost across all activities of a company.  They are

1. Operational Excellence: Streamlined, efficient, low-touch, highly automated operations (FedEx)
2. Product Leadership:  Product-centric, innovative, low time-to-market and potentially disruptive (Apple)
3. Customer Intimacy:  Customer service first and foremost - customer service. (Nordstrom's)

These do, admittedly, feel like a recasting of Porter's Trade-Offs based on a customer-centric view of the world.  In fact, Treacy & Wiersema, like Porter, believe that a company can only focus on one of the above as firms that mix strategies will end up being not particularly good at anything.  Unlike Porter however, they also maintain that regardless of which one the company focuses on, the others need to be up to par, i.e., at least at a certain minimal level based on market conditions.  

The reality of most companies is that they don't focus on any of the above, resulting in mediocre performance. To quote them

When we look at these managers’ businesses [complacent firms], we invariably find companies that don’t excel, but are merely mediocre on the three disciplines…What they haven’t done is create a breakthrough on any one dimension to reach new heights of performance. They have not traveled past operational competence to reach operational excellence, past customer responsiveness to achieve customer intimacy, or beyond product differentiation to establish product leadership. To these managers we say that if you decide to play an average game, to dabble in all areas, don’t expect to become a market leader.

To summarize, the only way to be truly successful is

1. Provide the best offer in the marketplace, by excelling in one specific dimension of value. Market leaders first develop a value proposition, one that is compelling and unmatched.
2. Maintain threshold standards on other dimensions of value. You can’t allow performance in other dimensions to slip so much that it impairs the attractiveness of your company’s unmatched value.
3. Dominate your market by improving the value year after year. When a company focuses all its assets, energies, and attention on delivering and improving one type of customer value, it can nearly always deliver better performance in that dimension than another company that divides its attention among more than one.
4. Build a well-tuned operating model dedicated to delivering unmatched value. In a competitive marketplace, the customer value must be improved. This is the imperative of the market leader. The operating model is the key to raising and resetting customer expectation.

(hat tip Principles of Management - Carter, et al)