- Strategy requires trade-offs. Strategic positions, by their very nature, tend to be mutually exclusive. If they were not, they would not be unique, and therefore would not provide any advantage. A company must forego some product features, services, or value chain activities in order to be unique at others. It is these trade-offs that make a company truly distinctive.
- Strategy defines how all of the activities that a company performs fit together. All of a company's activities, throughout the value chain, must be consistent with the strategy, and must be mutually reinforcing. There are three types of fit: First Order, which is simple consistency between each activity and the overall strategy; Second Order, where activities are mutually reinforcing; and Third Order, which is the optimization of effort, such as coordination and information exchange across activities to eliminate redundancy and minimize wasted effort. A company's strategy must be reflected in the way it does business, or it is nothing more than a marketing slogan.4
- Strategy requires continuity of direction. A company must define a distinctive value proposition that it will stand for, and have the discipline to pursue it even if it means forgoing certain opportunities. Continuity of direction, or what W. Edwards Deming called constancy of purpose, is mandatory for a company to successfully create a distinctive value chain with a high degree fit throughout. Such a result is accomplished over years, not months. In fact, it never ends. Companies lacking constancy of purpose, persistence in leadership, or persistence in ownership, will continually be reinventing themselves, guaranteeing mediocrity, while wasting enormous resources.
Systems and Competitive Advantage Page 3 of 4