Creating Profit Through Alliances - business models for collaboration E-book | Page 23
2. Product differentiation (Porter) and Product
Leadership (Treacy & Wiersema)
3. Cost Leadership (Porter) and Operational
Excellence (Treacy & Wiersema)
The difference between the product differentiation
strategy and product leadership - as Treacy &
Wiersema emphasise - lies in not introducing a
product different from the rest just once, but to
structure your organisation in such a way that you
can introduce a distinctive product time and again. As
such, they acknowledge the fact that new products
too can be copied and become obsolete.
The main difference between cost leadership and
operational excellence lies in the fact that with
operational excellence the customer's efforts in
buying, using or maintaining the product are also
taken into consideration. Both Porter and Treacy &
Wiersema attribute competitive advantage to having
the lowest price or the lowest overall costs.
Differentiation in the sense of offering a different (or
the best) product may at times bring advantages, but
given the speed at which products are copied, it is
often not a sustainable competitive advantage.
Product leadership is sustainable, provided you
continue to invest in new knowledge, protect that
knowledge with patents as much as possible, and
work on retaining your most important product
developers and product managers.
Cost advantages may arise in different ways: through
scale, by completing the learning curve quicker than
someone else, by having the right suppliers or
partners, or by having a tightly-run business. They
can be significant and may form a good source of
profit. The question is to what extent this type of
advantage is sustainable in a world where knowledge
can be shared swiftly.
Scale size that, according to the Boston Consulting
Group, can only be achieved by being market leader,
Apart from that, a product these days should not just
is also possible by collaborating, or by outsourcing
be different or better, but it should have a
your production process to a party that is familiar
differentiation that can be communicated clearly and
with that line of business. This will help you complete
transparently. This means that this strategic direction
the learning curve faster. The suppliers and partners
must be refined further as: (continuously) having a
of your competitor also want to work with you and
unique product or unique service (Figure 11).
vice versa, and they may even introduce innovations
to you first, rather than
The three strategies of
The three directions of
What happened in the
to others.
Michael Porter (1980)
Treacy & Wiersema (1995)
internet age?
Product dif ferentiation:
having a better product
Product leadership:
continuously introducing new
products
The enormous diversity of
products makes it hard to
stand out
Figure 11. Development of differentiation on product
In the event a business has a broad portfolio, the
criterion is that the majority of turnover is generated
by unique products or services. Having a single niche
product is not enough: the remainder of your
portfolio will still experience price competition.
Current validity
Other economic factors
also play a role:
economic growth,
inflation, exchange rate
movements and trade restrictions may lead to
sudden shifts in the cost pattern. A lot of markets
experience a status quo for a number of years, only
to descend into a price war later. In this day and age,
cost-based strategies are therefore no longer
sustainable by definition (Figure 12).
(Continuously) having
unique products
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