(This is post number 6 of a series I’m doing on business strategy. My focus is the work of strategy guru Michael Porter via a book he cooperated on titled - Understanding Michael Porter: The Essential Guide to Competition and Strategy - by author Joan Magretta.)
At Powersoft, the company I explained to you back in post #86, from day one we made two clear statements.
Statement #1: Our software development tools would support all the leading relational databases. Which meant we'd stay out of the database business. We'd play no favorites. BUT THEN, a few years later, we bought a database company.
Statement #2: Our target customers were corporate software developers that built serious applications. And, accordingly, we charged thousands of dollars per developer to use our tools. BUT THEN, a few years later, we introduced a product at a price point in the low hundreds of dollars. A price point that made us available to everyone from hobbyists to hackers.
What would strategy guru Michael Porter think of these major changes in direction?
PORTER AND CHANGE
At first glance you might think he’d be against the kind of sweeping changes I described above. Here are a couple quotes from Magretta/Porter that backstop this thinking (page 162 & 160)...
"A good strategy, consistently maintained over time through repeated interactions with customers, is what gives power to a brand.”
And here's the second quote...
“Whereas the spotlight is more often directed at companies that change too little, Porter highlights an equal, if not greater, mistake: companies can change too much, and in the wrong ways."
So it sounds like he's saying "be consistent", "don't change too much”.
But, if you dive a little deeper, that’s not at all what he’s saying. Here’s more Magretta/Porter (page 166)…
“Continuity of strategy does not mean that an organization should stand still. As long as there is stability in the core value proposition, there can, and should, be enormous innovation in how it’s delivered.”
Great advice. You have to establish core stability, or else you're running around without an anchor. Trying to be everything to everyone. And here's more Magretta/Porter (page 172)...
“The problem, Porter argues, is that when you substitute flexibility for strategy, your organization never stands for anything or becomes good at anything.”
I see lots of companies doing exactly as Porter suggests - they substitute flexibility for strategy. Jump on every fad or half-assed opportunity and follow them down rat holes. And this whac-a-mole game leaves the organization in a mess.
Sure, they're embracing change as the gurus suggest. But it ain't working for them. And Porter/Magretta can explain why (page 181)…
“Put in human terms, it is easier to change when you know who you are and what you stand for, and very difficult to change when you don’t."
Bingo. You kneed to know who and what you are personally and as an organization before you leap into anything. Otherwise your results are going to be random and/or tragic.
But, if you have that core, know who and what you are, then you have a huge advantage on the marketplace. You can absorb risks that others, with weaker cores, can't handle.
So, within your core, you must refuse change. Everywhere else, you can experiment like crazy. Go on a learning rampage. Accumulate knowledge at a pace your competition can't match.
That's how you dominate a market.
THE POWERSOFT CHANGES EXPLAINED
In the opening I described a couple strategic decisions that Powersoft made. And I asked how Porter would feel about them. With our new insight on how to do change, let's answer that question.
When we bought the database company - even though it sounded like a violation of our core - it wasn't. We weren't abandoning our focus on tools to become a player in the database business. We were taking control of an asset that solved a big problem for us. Developers wanted to buy our product and start experimenting immediately. By putting this reliable, small-footprint database in the box with our tools, we made this possible. They could now be up and running in minutes. And everything fit on a laptop so they could take it home and play even more. No delays, no headaches, complete portability. So the database purchase, while looking like a move away from our core, actually fit like a glove. And it was a huge success. And, in an odd twist of fate, we were eventually purchased by a database company. And that tiny database became a crown jewel in their portfolio.
When we introduced our low-priced development tool we also remained true to our core. Yes it was a different price point with a very different distribution model. Facts that caused a bit of a learning curve. But we never lost our focus on corporate developers and their need to upgrade their skills. You see, this new product was so cheap that they would buy it out of their own pockets. So even if their company hadn't yet chosen us as a vendor, the developers could still upgrade their skills. And once they fell in love with the product, they'd introduce us to their employer. Or, if the employer wasn't listening, they'd quit and head to another shop that was using our tools. The demand for developers trained in our technology was so high that either way they, and we, won. Because once they started using our tools at work, they'd have to buy our full-featured, full-priced product. (In full disclosure, I was strongly against the shipping of this less expensive product. And I was as wrong as a person can be. It was a huge hit and critical to our continued growth.)
So, in summary, I’m confident Porter would be a big fan of these moves. Because while they were big changes, they didn't violate our core.
(This site is all about building a Map that will help me do work and life better. So at the end of each post I check in to see if any changes / insights come to mind.)
If this strategy stuff does lead to adjustments I assume they’ll be in the IF sections of my Self and Work Maps. But there’s nothing to report today.
See you next time when I wrap up this series on Michael Porter and strategy…
***NOTE: I've added a new section to the website titled SPEAKING. Here you'll find brief examples of my public speaking, and information on how to get hold of me if you're looking for a speaker.