Can a strategy in the middle be successful?
Followers of Michael Porter will recall that he teaches the importance of having a clear strategy. He argues that there are three important positions from which to have this clear strategy – you can be the lowest cost supplier in the market, or you can be strongly differentiated in some way, or you can play in a niche. He says that the worst place to be is stuck in the middle.
At first glance this seems intuitively true; clear positioning has to be a good thing. But, surely this doesn’t mean that all companies with a low cost position will do well and all companies that are differentiated will do well and all companies in a niche will do well? Surely there must be some companies in the middle ground that can do well.
The supermarket wars are good territory for this discussion. For many years Sainsbury and Tesco have been in the middle and they have done well. At least, they did well until Aldi, Lidl and Waitrose came along. This seems a strong argument for Michael Porter’s paradigm with Aldi and Lidl winning at the low cost end and Waitrose at the differentiated end.
But wait a minute. In Germany there are more than 100,000 Mittelstand companies and most of them are doing well. They employ 70% of the German workforce. A bigger company than the Mittelstand but nevertheless one in the middle ground is Marks & Spencer which may have lost some ground but it is still a hugely successful company supplying us with food, vests and value home products. John Lewis claims to be never knowingly undersold and yet it is not positioned as a low cost supplier nor does it occupy a premium slot in the high street – it is firmly in the middle and it is doing well. We shouldn’t dismiss the middle ground as the worst ground.
So what is the answer if success isn’t due to positioning?
What makes a company successful is not where it is positioned in some economic framework; what makes a company successful is how good it is at what it does – wherever it sits. Being good is not about being okay, it is about being fanatical. A company can be successful in the middle ground or at any place on the edges if it is:
- fanatical about quality. Whether the product is low, middle or high priced, it must deliver against the quality expectations of its customers – and then some.
- fanatical about service. Because loyalty is driven by service, witness John Lewis.
- fanatical about understanding customers. Because customers have needs that change and suppliers have to respond to them.
- fanatical about managing costs. Because it is easy to let these get out of hand.
These four factors are the drivers of success. And all this fanaticism must be maintained year in and year out because every decision should be with the long game in mind. Being fanatical about being good is far more important than where a company is positioned in any framework. Sorry Professor Porter.
Do you agree? Let us know your thoughts in the comments section below.