Traditional thinking about strategy is woefully incomplete in its focus on the positioning of products or services. Porsche Automobil Holdings SE, for example, sells expensive sports cars to wealthy individuals who covet status and a thrilling ride, while Kia Motors Corp. sells more utilitarian vehicles to frugal consumers who are merely looking to get from point A to B in a cost-effective manner. Defined this way, strategy is about staking out and defending a unique competitive position.1
While useful, this approach to strategy underplays much of what most people would agree makes a company truly competitive. Not only does it give short shrift to what a company knows; it completely ignores the fact that in today’s dynamic economy, organizations have to continually reinvent who they are and what they do in both large and small ways. One important means of doing this is through innovation.
An effective strategy thus is comprised of three key components that must be aligned: product/market, knowledge and innovation. And as the competitive landscape changes, organizations need to continually revisit their alignment among these positions.
This article introduces the notion of competing based not only on what an organization makes or the service it provides but also on what it knows and how it innovates. Each aspect represents a competitive position that must be evaluated relative to the organization’s capabilities and to others in the marketplace battling for the same space.
Based on our research with over 50 organizations, we describe what it means to compete based on product, knowledge and innovation and to align, and if necessary realign, all three positions and provide several implications for strategic managers.
1. M.E. Porter, “What Is Strategy?” Harvard Business Review. Vol. 74, no. 6 (November-December 1996): 61-78.
2. M.H. Zack, “Developing a Knowledge Strategy,” California Management Review 41, no. 3 (spring 1999): 125-145.
3. This conclusion is based on a knowledge strategy audit performed at Polaroid by one of the authors shortly before Polaroid’s turn towards bankruptcy.
4. P. Patel and K. Pavitt, “How Technological Competencies Help Define the Core (not the Boundaries) of the Firm,” in “The Nature and Dynamics of Organizational Capabilities,” ed. G. Dosi, R.R. Nelson and S.G. Winter (Oxford: Oxford University Press, 2000), 312-333.
5. M. Sawhney, R.C. Wolcott and I. Arroniz, “The 12 Different Ways for Companies to Innovate,” MIT Sloan Management Review 47, no. 3 (Spring 2006): 75-81.
6. The case study is based on primary research conducted over several years by one of the authors and the company’s 2005-2007 annual reports.