Today’s dynamic markets and technologies have called into question the sustainability of competitive advantage. Under pressure to improve productivity, quality, and speed, managers have embraced tools such as TQM, benchmarking, and re-engineering. Dramatic operational improvements have resulted, but rarely have these gains translated into sustainable profitability. Gradually, the tools have taken the place of strategy.
That shift led to the rise of mutually destructive competitive battles that damage the profitability of many companies. As managers push to improve on all fronts, they move further away from viable competitive positions. Operational effectiveness, although necessary to superior performance, is not sufficient, because its techniques are easy to imitate. In contrast, the essence of strategy is choosing a unique and valuable position rooted in systems of activities that are much more difficult to match.
It’s important to trace the economic basis of competitive advantage down to the level of the specific activities a company performs. In many cases, making trade-offs among activities is critical to the sustainability of a strategy. Whereas managers often focus on individual components of success such as core competencies or critical resources, managing fit across all of a company’s activities enhances both competitive advantage and sustainability.