Strategy: Choices, Competition and Consequences

Published December 25, 2023

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Samachar and Choices

During my IndiaWorld days in 1997, I had to decide on how we could create the news content that our audience (primarily non-resident Indians) wanted. One path taken by other portals was to hire journalists. I decided that I wasn’t going to go down that path – a newsroom would be an expensive recurring cost, and I did not have that kind of money. So, I chose to use technology to solve the problem: software would crawl the home pages of news sites every 30 minutes, extract the headlines by reverse engineering the HTML, and then put the top five headlines from multiple news sources on a single page. This site I called “Samachar”.

As it turned out, Samachar.com became the most popular Indian news portal. Many visitors made it their home page, visiting multiple times daily. It became the gateway to popularising the other sites in the IndiaWorld portfolio. It created a differentiator that no other Indian portal could match. Advertisers (mainly telecom companies selling calling cards and banks) flocked to Samachar.com. The ‘Samachar Strategy’ was a big reason behind IndiaWorld’s success. Rather than becoming a money sink, it became a money spinner.

The word ‘strategy’ is perhaps the most used and abused word in business conversations. Everything becomes a ‘strategy’, importing to an idea or action gravitas and making everyone in the room pay attention. Over time, the meaning has been diluted and expanded. So, what really is strategy? At its core, strategy is about making choices. It’s about deciding where to play and how to win. In the case of Samachar, I made the decision to use automation as an alternative to journalists.

From a previous post in my Proficorn series: “Ramesh Mangaleswaran explained strategy very well. He described it as a set of choices that a business needs to make, and then decide on the resources (human, capital). Strategy needs a combination of big bets and not so big bets (options). The big bets need to be counterbalanced with a safety net if things go wrong. Strategy also needs to be thought at two levels – like looking through a telescopic (long-term, directional) and microscope (near-term, specific actions).”

In that post, I also had a couple more quotes on strategy, both from Michael Porter.

Business World: “[Michael] Porter also warned about the overuse of the word strategy. He simplified the definition in business as a set of choices that are long term and articulate the competitive advantage that companies will seek to create, in order to win. The strategy also should not be confused for goal and aspirations. It is more than just particular actions – it is holistic. At the same time, it is not a mission statement or values. It is not vague, it is specific.”

Farnam Street: “Really, strategy is about making specific choices to win in the marketplace. According to Mike Porter, author of “Competitive Strategy”, perhaps the most widely respected book on strategy ever written, a firm creates a sustainable competitive advantage over its rivals by “deliberately choosing a different set of activities to deliver unique value.” Strategy therefore requires making explicit choices— to do some things and not others— and building a business around those choices. In short, strategy is choice. More specifically, strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.”

In this series, I will discuss strategy in more depth, and connect it to my profipoly idea – how can strategy help businesses build a “profits monopoly”?

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Wikipedia and Michael Porter

Let’s begin our strategy journey by reviewing some of the writings.

Wikipedia offers history and an overview:

Strategy (from Greek στρατηγία stratēgia, “art of troop leader; office of general, command, generalship”) is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the “art of the general”, which included several subsets of skills including military tactics, siegecraft, logistics etc., the term came into use in the 6th century C.E. in Eastern Roman terminology, and was translated into Western vernacular languages only in the 18th century. From then until the 20th century, the word “strategy” came to denote “a comprehensive way to try to pursue political ends, including the threat or actual use of force, in a dialectic of wills” in a military conflict, in which both adversaries interact.

Strategy is important because the resources available to achieve goals are usually limited. Strategy generally involves setting goals and priorities, determining actions to achieve the goals, and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources). Strategy can be intended or can emerge as a pattern of activity as the organization adapts to its environment or competes. It involves activities such as strategic planning and strategic thinking.

Henry Mintzberg from McGill University defined strategy as a pattern in a stream of decisions to contrast with a view of strategy as planning, while Henrik von Scheel defines the essence of strategy as the activities to deliver a unique mix of value – choosing to perform activities differently or to perform different activities than rivals. Max McKeown argues that “strategy is about shaping the future” and is the human attempt to get to “desirable ends with available means”. Vladimir Kvint defines strategy as “a system of finding, formulating, and developing a doctrine that will ensure long-term success if followed faithfully.”

Michael Porter wrote about strategy in a 1996 article in Harvard Business Review:

Operational effectiveness and strategy are both essential to superior performance, which, after all, is the primary goal of any enterprise. But they work in very different ways.

A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs.

…Strategy is the creation of a unique and valuable position, involving a different set of activities. If there were only one ideal position, there would be no need for strategy. Companies would face a simple imperative—win the race to discover and preempt it. The essence of strategic positioning is to choose activities that are different from rivals’. If the same set of activities were best to produce all varieties, meet all needs, and access all customers, companies could easily shift among them and operational effectiveness would determine performance.

…Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do. Without trade-offs, there would be no need for choice and thus no need for strategy.

…Strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well—not just a few—and integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability. Management reverts to the simpler task of overseeing independent functions, and operational effectiveness determines an organization’s relative performance.

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Richard Rumelt

The best definition of strategy comes from Richard Rumelt in his book, “Good Strategy Bad Strategy”. He writes:

Good strategy is coherent action backed up by an argument, an effective mixture of thought and action with a basic underlying structure I call the kernel. A good strategy may consist of more than the kernel, but if the kernel is absent or misshapen, then there is a serious problem. Once you apprehend this kernel, it is much easier to create, describe, and evaluate a strategy. The kernel is not based on any one concept of advantage. It does not require one to sort through legalistic gibberish about the differences between visions, missions, goals, strategies, objectives, and tactics. It does not split strategies into corporate, business, and product levels. It is very straightforward.

The kernel of a strategy contains three elements:

• A diagnosis that defines or explains the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as critical.

• A guiding policy for dealing with the challenge. This is an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.

• A set of coherent actions that are designed to carry out the guiding policy. These are steps that are coordinated with one another to work together in accomplishing the guiding policy.

Rumelt adds: “In business, the challenge is usually dealing with change and competition. The first step toward effective strategy is diagnosing the specific structure of the challenge rather than simply naming performance goals. The second step is choosing an overall guiding policy for dealing with the situation that builds on or creates some type of leverage or advantage. The third step is the design of a configuration of actions and resource allocations that implement the chosen guiding policy.”

Rumelt’s second book is “The Crux.” He writes: “[T]he term crux … denote[s] the outcome of a three-part strategic skill. The first part is judgment about which issues are truly important and which are secondary. The second part is judgment about the difficulties of dealing with these issues. And the third part is the ability to focus, to avoid spreading resources too thinly, not trying to do everything at once. The combination of these three parts lead to a focus on the crux—the most important part of a set of challenges that is addressable, having a good chance of being solved by coherent action.”

He adds: “The art of strategy is not finding your one true goal and passionately pursuing it with all your heart and soul in everything you do—that is a type of mental illness called monomania. The art of strategy is not setting higher and higher performance goals for people and using charisma, carrots, and sticks to push them toward attaining those goals—that presumes that someone somewhere knows how to find a way through the thicket of problems the organization actually faces.”

I have discussed more on Rumelt’s writings in Parts 4-8 of my essay, Hotline: The Crux of the Brand-Customer Relationship.

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Quotes

“A goal without a plan is just a wish.” — Antoine de Saint-Exupéry.

“A vision without a strategy remains an illusion.” Lee Bolman

“Vision without action is a daydream. Action without vision is a nightmare.” -Japanese proverb

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” – Sun Tzu

“Objectives can be compared to a compass bearing by which a ship navigates. A compass bearing is firm, but in actual navigation, a ship may veer off its course for many miles. Without a compass bearing, a ship would neither find its port nor be able to estimate the time required to get there.”  – Peter Drucker

“What business strategy is all about-what distinguishes it from all other kinds of business planning-is, in a word, competitive advantage. Without competitors there would be no need for strategy, for the sole purpose of strategic planning is to enable the company to gain, as efficiently as possible, a sustainable edge over its competitors.” – Kenichi Ohmae

“There is only one winning strategy. It is to define the target market carefully and direct a superior offering to that target market.”— Philip Kotler

“Focusing solely on what you can potentially do better than any other organization is the only path to greatness.” – Jim Collins

“To be strategic is to concentrate on what is important, on those few objectives that can give us a comparative advantage, on what is important to us rather than others, and to plan and execute the resulting plan with determination and steadfastness.” – Richard Koch

“Designing a winning strategy is the art of asking questions, experimenting and then constantly renewing the thinking process by questioning the answers.  No matter how good today’s strategy is, you must always keep reinventing it.” – Constantinos Markides

“The reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption.” — Clayton Christensen

“Without a strategy, execution is aimless. Without execution, strategy is useless.” — Morris Chang

“If a strategy is to be achieved, it must be publicly tracked, measured, and monitored. If you are trying to lose weight, you must get on the scales regularly.” -David Maister

“What we need to do is always lean into the future; when the world changes around you and when it changes against you – what used to be a tail wind is now a head wind – you have to lean into that and figure out what to do because complaining isn’t a strategy.” – Jeff Bezos

“Famous pivot stories are often failures but you don’t need to fail before you pivot. All a pivot is is a change is strategy without a change in vision. Whenever entrepreneurs see a new way to achieve their vision – a way to be more successful – they have to remain nimble enough to take it.” – a  Eric Ries

“Companies that grow for the sake of growth or that expand into areas outside their core business strategy often stumble. On the other hand, companies that build scale for the benefit of their customers and shareholders more often succeed over time.” – Jamie Dimon

“Unless structure follows strategy, inefficiency results.” – Alfed Chandler

“In marketing I’ve seen only one strategy that can’t miss – and that is to market to your best customers first, your best prospects second and the rest of the world last.” – John Romero

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7 Powers – 1

A good book on business strategy is “7 Powers” by Hamilton Helmer. He writes: “The arc of any celebrated business is underpinned by decisive strategy choices that are few and typically made amidst the profound uncertainty of rapid change. Get these crux choices wrong and you face a future of persistent pain, or even outright failure.”

He provides three definitions:

• Strategy: the study of the fundamental determinants of potential business value
• Power: the set of conditions creating the potential for persistent differential returns
• Mantra (or company strategy): a route to continuing Power in significant markets

He adds: Potential Value = [Market Scale] * [Power]

I asked ChatGPT to summarise the seven powers discussed in the book.

1. Scale Economies: This refers to the advantage large-scale operations have. When a company grows, it can spread its fixed costs over a larger number of units, leading to a lower cost per unit. Companies that achieve scale economies can under-price competitors and achieve higher profit margins.
2. Network Economies: This is about the value that increases with the number of users or participants. Think of platforms like Facebook or Twitter; the more users they have, the more valuable (and entrenched) they become. A company that taps into network economies can fend off competition because the value proposition strengthens as more users join.
3. Counter-Positioning: This involves a newcomer adopting a new, unique business model which incumbents cannot replicate without damaging their existing business. It’s a way for newer entrants to challenge established companies by making the old ways of doing business obsolete.
4. Switching Costs: This is when it’s hard or costly for customers to switch from one product to another. Software platforms or services that require significant time or resources to change (e.g., enterprise software, subscription services) benefit from this power.
5. Branding: A strong brand serves as a powerful competitive advantage. When customers trust and prefer one brand over others, that company can command premium pricing and ensure customer loyalty.
6. Cornered Resource: This is about having exclusive access to a valuable asset or resource that others can’t easily duplicate. It could be a talented team, a unique technology, or even a prime location.
7. Process Power: Over time, some companies develop unique ways of doing things that are hard for others to replicate. These efficient and effective processes can become a source of competitive advantage.

Here are 2 graphics from the book.

In the book, Helmer answers the question, “How to get there?”

• Scale Economies. With this first Power type, you must simultaneously pursue a business model that promises Scale Economies (industry economics), while at the same time offering up a product differentially attractive enough to pull in customers and gain relative share (competitive position).
• Network Economies. Here the needs are similar to Scale Economies, except that installed base, rather than sales share, is the goal.
• Cornered Resource. You must secure the rights to a valuable resource on attractive terms. This often comes from having developed that resource in the first place and then gaining ownership of it, the most common avenue being a patent award for research developments.
• Over an extensive period of time, you make consistent creative choices which foster in the customer’s mind an affinity that goes beyond the product’s objective attributes.
• Counter-Positioning. You pioneer a new, superior business model that promises collateral damage for incumbents if mimicked.
• Switching Costs. With Switching Costs, you must first attain a customer base, meaning the same new-product requirements demanded of Scale and Network Economies factor in here as well.
• Process Power. You evolve a new complex process which renders itself inimitable within a reasonable period and yet offers significant advantages over a longer period of time.

He adds: “The first cause of every Power type is invention, be it the invention of a product, process, business model or brand, The adage ‘Me too’ won’t do” guides the creation of Power… You must create something new that produces substantial economic gain in the value chain.”

This is captured below:

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7 Powers – 2

Helmer in an interview with Colossus: “If you start a business, you put something in, your time and investments and all this stuff, and you do it maybe for love, but you also get something back, and that something back has to hopefully be more than what you put in in the first place. You might question whether it was really worthwhile. And so the notion of Power is that when you figure out something about a business, you figure out something that’s better than what is currently offered. And so that might be a better business model, or it might be an interesting grant, or it might be a new product or something like that. But then the spectre of competitive arbitrage comes in. If you do something better, the question then is: okay, but for that to be durable – because what you want is durable success in business – for that to be durable, there has to be something that prevents others from taking all of that away from you. And so the something better is a benefit and that something that keeps others from getting it is a barrier. And so you need both those conditions… It’s very important to realize that often when you start a business, you just don’t know whether you’re going to have Power or not. You just don’t know. And yet, it may be a very reasonable bet to proceed knowing that an opportunity may arise… The technology frontier is constantly moving forward. And that is the most important driver of opportunity influx… The starting place for strategy and the starting place for Power is creativity…It involves invention, not discovery.”

Reed Hastings writes in the book’s introduction: “Hamilton is so much more than an able synthesizer and communicator, as 7 Powers demonstrates. Any strategy framework, to be broadly useful to a business person, must address all the key strategy issues facing an organization. Hamilton has long been aware of the deficiencies in existing frameworks. His solution? To forge ahead with entirely novel conceptual advances, and then to bind these together into a unified whole…7 Powers tightly integrates the numerous insights he has developed in his several decades of consulting, active equity investing and teaching. It is a uniquely clear and comprehensive distillation of strategy. It will change how you think about business and pull into focus your critical strategy challenges, not to mention their solutions.”

Abi Tyas Tunggal writes: “What are the secrets to making a company enduringly valuable? If we are to believe Hamilton Helmer, the answer is strategy and execution. Every celebrated business is underpinned by decisive strategy choices and operational excellence, in the midst of uncertainty, which leads to some form of competitive advantage… The crux of 7 Powers is that a business can try to improve its strengths, mitigate its weaknesses, eliminate competitor risk, better serve its customers, maximize shareholder value, or take advantage of its pricing power.”

Chris Stoneman writes: “The business strategy (small s) is a route to continuing power in significant markets. Being there (statics) is one thing, but getting there (dynamics) is quite another. Not only should businesses know which of the 7 Powers will be their static strategy, but also how and when to build and execute on them. Timing is key. Me too won’t do. Invent new things and create compelling value. Only then will businesses have the opportunity to gain continued power in a significant market.”

Dan Shuart writes: “I find Helmer’s framework a useful tool when asking the question “why”. Why does a company consistently earn superior returns on capital? Why might a company enjoy superior growth rates for many years? How long might these superior returns last? Identifying potential sources of Power among businesses and stocks you are studying is a useful exercise and helps build comfort with different competitive positions (or lack thereof). No one always gets it right, but just attempting to understand if a business has an enduring competitive moat is half the battle. If an investor’s aim is to buy good businesses it’s tough to think of a better checklist than Helmer’s 7 Powers as a starting point. Studying businesses that meet some of the above criteria amounts to fishing in a stocked pond. This isn’t the way to invest successfully but it certainly is a way.”

Sachin Rekhi writes: “Hamilton narrowly defines a successful strategy as creating a route to persistent differential returns for your business. Accomplishing this requires each strategy to have two critical components: a benefit and a barrier. The benefit materially augments your business’s cash flows by enabling you to increase prices, reduce costs, and/or reduce investment needs. The most important part of a strategy, though, is establishing a barrier, which prevents existing and potential competitors from arbitraging away the benefit. This is necessary to ensure your benefit persists, otherwise competitors could quickly catch up and remove your advantage. This is often described as developing an economic moat for your business. Hamilton then goes on to define 7 strategies, which he refers to as the 7 powers, that accomplish both of these goals. Hamilton asserts that these 7 strategies encompass every possible strategy for creating a successful moat and suggests every business must leverage one or more of these strategies to build a significant and enduring business.”

Helmer’s mantra – a route to continuing Power in significant markets – is the essence of what I call a “Profipoly” (profits monopoly, or a path to exponential forever profitable growth).

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Playing To Win

Another very good book on strategy is “Playing To Win” by AG Lafley and Roger Martin. They define strategy as “a coordinated and integrated set of five choices: a winning aspiration, where to play, how to win, core capabilities, and management systems.” In their framework, strategy is about answering five interrelated questions:

1. What is your winning aspiration? The purpose of your enterprise, its motivating aspiration.
2. Where will you play? A playing field where you can achieve that aspiration.
3. How will you win? The way you will win on the chosen playing field.
4. What capabilities must be in place? The set and configuration of capabilities required to win in the chosen way.
5. What management systems are required? The systems and measures that enable the capabilities and support the choices.

Here are short descriptions from the book on each of these five questions:

The first question—what is our winning aspiration?—sets the frame for all the other choices. A company must seek to win in a particular place and in a particular way. If it doesn’t seek to win, it is wasting the time of its people and the investments of its capital providers. But to be most helpful, the abstract concept of winning should be translated into defined aspirations. Aspirations are statements about the ideal future. At a later stage in the process, a company ties to those aspirations some specific benchmarks that measure progress toward them.

Where to play represents the set of choices that narrow the competitive field. The questions to be asked focus on where the company will compete—in which markets, with which customers and consumers, in which channels, in which product categories, and at which vertical stage or stages of the industry in question. This set of questions is vital; no company can be all things to all people and still win, so it is important to understand which where-to-play choices will best enable the company to win.

Where to play selects the playing field; how to win defines the choices for winning on that field. It is the recipe for success in the chosen segments, categories, channels, geographies, and so on. The how-to-win choice is intimately tied to the where-to-play choice. Remember, it is not how to win generally, but how to win within the chosen where-to-play domains.

Two questions flow from and support the heart of strategy: (1) what capabilities must be in place to win, and (2) what management systems are required to support the strategic choices? The first of these questions, the capabilities choice, relates to the range and quality of activities that will enable a company to win where it chooses to play. Capabilities are the map of activities and competencies that critically underpin specific where-to-play and how-to-win choices.

The final strategic choice in the cascade focuses on management systems. These are the systems that foster, support, and measure the strategy. To be truly effective, they must be purposefully designed to support the choices and capabilities. The types of systems and measures will vary from choice to choice, capability to capability, and company to company.

The book emphasizes that effective strategy is about making clear-cut choices on where to play and how to win in those chosen markets. Success requires both a deliberate approach to designing a winning game plan and the executional discipline to implement that plan consistently.

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Strategy That Works

The book by ,”Strategy that Works”, Paul Leinwand and Cesare Mainardi connects strategy to execution. Two tables capture the essence of the authors’ ideas.

Here is a short summary of each of the five ideas, as summarised by ChatGPT:

1. Commit to an Identity: Successful companies understand their unique value proposition and stay true to their ‘way to play’. They avoid the trap of chasing multiple directions and instead focus on what they do best.
2. Translate the Strategic into the Everyday: Instead of having high-level strategies that remain on paper, successful companies embed their strategic objectives into daily operations, ensuring that there’s alignment from the boardroom to the frontline.
3. Put Culture to Work: Recognising culture as a significant asset, these companies leverage their cultural strengths to drive their strategy and ensure that behaviours, mindsets, and company values are in sync with strategic goals.
4. Cut Costs to Grow Stronger: Rather than indiscriminate cost-cutting, top companies approach cost management strategically. They invest in areas that align with their identity and core strengths, and cut costs in areas that don’t fit this mould.
5. Shape the Future: Successful companies are proactive. They don’t merely react to changes in the market; they shape these changes by influencing trends, making forward-looking investments, and sometimes even creating entirely new markets.

One of the key elements of this framework is the ability to shape the future. As companies grow and age, there is a tendency to become complacent. That is when agile supercompetitors can nibble away at market share. The authors write: “The ultimate payoff for becoming and staying coherent is a position of market leadership. Companies that close the strategy-to-execution gap can become the centers of their own ecosystems, changing the structure of the industries around them to advance their own position. When companies accomplish this, they become what we call supercompetitors.” They provide a framework for incumbent leaders to guard against this.

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Blue Ocean Strategy – 1

It is rare that a conversation on strategy will not include the phrase “blue ocean.” (I myself talk about the need to find a “blue ocean in a red ocean.”) The book “Blue Ocean Strategy” by Chan Kim & Renée Mauborgne became an instant classic when it was published. Here is the contrast between red and blue oceans as defined by the Blue Ocean website:

Red Oceans are all the industries in existence today – the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, profits and growth are reduced. Products become commodities, leading to cutthroat or ‘bloody’ competition. Hence the term red oceans.

Blue Oceans, in contrast, denote all the industries not in existence today – the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth.

In short, blue oceans are uncontested spaces.

The chart below from the website puts the differences in perspective:

A cornerstone of blue ocean strategy is value innovation.

The authors list eight principles of blue ocean strategy:

A helpful tool is the “strategy canvas”. It is best understood through an example. The authors provide this canvas for Southwest Airlines.

For thinking through the blue ocean strategy, the authors suggest using the “four actions framework.”

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Blue Ocean Strategy – 2

Here are a few examples of companies that have successfully applied blue ocean strategies:

Cirque du Soleil: It created a new market space by combining circus and theater to appeal to adult audiences, moving away from traditional circuses targeted at children.

Netflix: Netflix transitioned from its initial model of mail-in DVDs to an online streaming platform, effectively creating a new market space. Instead of competing with traditional cable or satellite TV, it tapped into the demand for on-demand, diverse content with a subscription model.

Tesla: While many automakers focused on incremental improvements in fuel efficiency or hybrid technologies, Tesla made a bold move into electric vehicles with superior range and performance. They targeted not just environmentally-conscious consumers, but also luxury car enthusiasts and tech-savvy buyers, thereby carving a unique niche.

Airbnb: Airbnb created an online marketplace for homestays, offering an alternative to hotels. It connected travellers looking for cheaper or more local stays.

Warby Parker: The eyewear industry was long dominated by a few big players. Warby Parker disrupted the scene by offering designer eyewear at affordable prices through a direct-to-consumer online model. They also employed a “Home Try-On” program, allowing customers to choose five frames to be shipped to their home for free, to try them out and send back the ones they didn’t want. [Lenskart did something similar in India.]

Peloton: Peloton created a new market for home fitness by offering interactive classes led by live instructors. Peloton’s bikes and treadmills are also connected to a community of users, which helps to motivate people to work out.

Shopify: Shopify created a new market for e-commerce platforms by making it easy for people to start their own online stores without any technical knowledge. Shopify offers a variety of features and tools that make it easy to set up and manage an online store, including payment processing, shipping, and inventory management.

Aravind Eye Hospital: It created a new market for affordable eye care in India by developing a high-volume, low-cost model. Aravind Eye Hospital has performed over 7 million cataract surgeries, making it the largest provider of eye care in the world.

Zerodha: In the stock brokerage industry in India, Zerodha introduced a disruptive pricing model with significantly lower brokerage fees (often zero for delivery trades). This attracted a vast number of retail investors to the stock market, especially younger, tech-savvy traders.

Paper Boat: It created a new market for branded ethnic drinks like aam panna, jaljeera, etc. that provided a refreshing natural alternative to colas and sodas.

I asked ChatGPT and Claude for examples from B2B SaaS. Here are some success stories.

Slack: While the market had numerous communication tools, Slack revolutionised workplace communication by offering an intuitive, real-time messaging platform, integrating various third-party applications. Instead of just being another communication tool, Slack positioned itself as a collaboration hub for work.

Zoom: Before the pandemic, there were already established players like Skype and WebEx in the video conferencing domain. Zoom identified and rectified common pain points such as difficult set-ups and dropped calls. With its easy-to-use interface, seamless integration, and high-quality video, it soon became the preferred choice for businesses worldwide. It avoided competing with enterprise software like Microsoft’s SharePoint (in the early days).

Canva: Canva created a new market for graphic design by making it easy for people to create professional-looking designs without any design skills. Canva offers a variety of templates, fonts, and images that users can drag and drop to create their own designs.

DocuSign: It digitised the document signing process to make it accessible anytime, anywhere while improving security. Created an alternative to in-person signing.

HubSpot: Instead of focusing solely on one aspect of customer relationship management, HubSpot introduced an all-in-one inbound marketing, sales, and service platform. By combining multiple tools into one integrated platform and promoting inbound marketing, they created a niche in a market dominated by giants like Salesforce.

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More Strategy Frameworks

“Five Forces” by Michael Porter: It offers a holistic approach to understanding competition within an industry and formulating strategies accordingly. The five forces encompass: (1) The threat of new entrants, which assesses how easy or difficult it is for competitors to join the industry; (2) The bargaining power of buyers, gauging the ability of customers to influence prices; (3) The bargaining power of suppliers, determining the influence suppliers can have on price and quality; (4) The threat of substitute products or services, considering the potential for other products or services to capture a company’s customer base; and (5) Rivalry among existing competitors, which analyses the intensity of current competitive relationships within the industry.

“The Innovator’s Dilemma” by Clayton Christensen: It focuses on why large companies can fail despite good management due to disruptive technologies. Introduces the concept of disruptive innovation. A related idea from Christensen is to think of “Jobs to Be Done”, which focuses on understanding customer needs based on the jobs they’re trying to accomplish.

“Crossing the Chasm” by Geoffrey Moore: A marketing theory that describes the lifecycle of high-tech products, emphasising the challenges faced during the early stages of introduction.

“Three Horizons Model” by McKinsey: This helps allocate resources across Horizon 1 (current business), Horizon 2 (emerging business) and Horizon 3 (future business) for strategic growth. [I have written about this.]

SWOT Analysis: A framework used to evaluate an organization’s strengths, weaknesses, opportunities, and threats.

“Growth-Share Matrix” by BCG: It helps companies analyse their product lines or business units in terms of their market growth rate and relative market share. The matrix classifies products into four categories: Stars (high growth, high market share), which are leaders in flourishing markets and typically require investment to maintain their dominant position; Cash Cows (low growth, high market share), established and successful products that generate consistent cash flow; Question Marks (high growth, low market share), potential future stars with uncertain prospects and often necessitating significant investments to boost market share; and Dogs (low growth, low market share), which neither generate nor consume large amounts of cash and may be divested.

“Ansoff Matrix” by Igor Ansoff: It is a strategic planning tool that provides a framework to help executives and other senior managers devise strategies for future growth. The matrix categorises growth strategies along two dimensions: products (existing vs. new) and markets (existing vs. new). This results in four primary growth strategies: (1) Market Penetration, which focuses on increasing sales of existing products in existing markets; (2) Product Development, where new products are introduced into existing markets; (3) Market Development, which involves introducing existing products into new markets; and (4) Diversification, a strategy that seeks growth through introducing new products into new markets.

“Balanced Scorecard” by Robert Kaplan and David Norton: It is a strategic performance management tool that allows organisations to translate their vision and strategy into actionable objectives and performance metrics. It evaluates performance from four interconnected perspectives: (1) Financial, which measures fiscal performance and profitability; (2) Customer, emphasizing customer satisfaction and retention; (3) Internal Processes, evaluating the efficiency and effectiveness of operations; and (4) Learning and Growth, which gauges the organisation’s ability to innovate, improve, and develop its human capital.

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In exploring the essence of strategy across various seminal books and frameworks, some consistent themes emerge – strategy is centred on making clear choices to establish competitive advantage, it requires both strategic thinking and disciplined execution, it entails understanding customers and the market landscape, and it involves creating a differentiated value proposition difficult for rivals to replicate. While there are many lenses to analyse strategy, at its core it is about defining where to play, how to win, and what capabilities and systems are needed to outperform competitors. Crafting and implementing a coherent strategy remains vital for companies to carve out a sustainable niche, though the quest for an enduring “profipoly” in today’s dynamic markets necessitates constant creativity, invention and strategic renewal.