Michael Porter's theory on strategic positioningprovides a useful model for understanding businesses as systems and how that concept results in competitiveness and superior performance. While Porter's intent is to describe competitiveness and the business characteristics that result in competitiveness, he also describes how high-performing businesses function as well defined systems.
According to Porter, superior performance depends on creating a sustainable competitive advantage. Competitive advantage is achieved in two ways:
Operational Effectiveness - Doing the same things your competitors do, but doing them better.
Strategic Positioning - Doing things differently from competitors, in a way that delivers a unique type of value to customers.1
Operational effectiveness on its own rarely yields long-term competitive advantage. A company can maintain an advantage only if it can sustain a higher level of operational effectiveness than its competitors. If companies in an industry compete on the same plane, performing similar activities, it is relatively easy for one competitor to copy the advances of another, eliminating any advantage. Additionally, operational effectiveness does not guarantee that a company is doing the right things. With an absence of strategy, it is very possible that a company can become very effective at being mediocre. Continuous improvement is absolutely necessary, but it must be guided by strategic direction.2
Systems and Competitive Advantage Page 1 of 4