#45 Trade-Offs, Understanding Michael Porter
This is the fifth post in the series that summarizes the book Understanding Michael Porter. Read the first post on common misconceptions about competition here, the second on five forces, the third on competitive advantage, and the fourth on creating value.
Competitive advantage depends on making choices that are different from those of rivals, on making trade-offs.
Trade-offs are the strategic equivalent of a fork in the road. If you take one path, you cannot simultaneously take the other
Most common misconceptions about trade-offs:
More is always better. You can have it all. Making trade-offs is almost a sign of weakness
Is it possible to sustain a competitive advantage?
Executives often resist making trade-offs for fear that they will lose some customers. When you try to offer something for everyone, you tend to relax the trade-offs that underpin your competitive strategy
Trade-off are choices that make strategies sustainable because they are not easy to match or to neutralize
Robust strategies involve multiple trade-offs. The very best have trade-offs at almost every step in the value chain.
Trade-offs arise for a number of reasons:
Product that best meets one set of needs performs poorly in addressing others
The configuration of activities that best delivers one kind of value cannot equally well deliver another
Inconsistencies in image or reputation