Who knew Knowledge@Wharton would have good articles these days? When it first started, it was kinda of a self-promotional spam-letter. But these days, its actually somethign I scan everytime it arrives in my inbox.

Michael Porter Asks, and Answers: Why Do Good Managers Set Bad Strategies?

Porter stressed that managers get into trouble when they attempt to compete head-on with other companies. No one wins that kind of struggle, he said. Instead, managers need to develop a clear strategy around their company’s unique place in the market.

Bad strategy often stems from the way managers think about competition, he noted. Many companies set out to be the best in their industry, and then the best in every aspect of business, from marketing to supply chain to product development. The problem with that way of thinking is there is no best company in any industry. “What is the best car?” he asked. “It depends on who is using it. It depends on what it’s being used for. It depends on the budget.”

In the Internet world, eitherthe “Pie” is still growing so fast that competitors often dont really compete directly OR the “Pie” is so small no amount of optimizing can help any company win. (How many times have you seen a “space” completely disappear along with every company in it. . . gorilla game with bunch of monkeys. . .) As a result it seems like being the BEST is the ONLY strategy that all these web startups can pursing. (as seen in the continuous feature-one-ups-manship).

It is possible that because the industry changes so fast that the competitive landscape is continually defined and consumer taste always shifting; and as a result, competition never reaches the point of saturation for segmentation to really matter. (atleast not until the company is worth a few billion dollars and public)

He went on to describe key principles of strategic positioning, including a unique value proposition, a tailored value chain, clear tradeoffs in choosing what not to do, and strategic continuation, or ongoing improvement. The underpinnings of strategy are “activities that fit together and reinvigorate each other.

In the end, it seems like the hard part is betting on the right horse (aka segment) which drives your strategic choices and align your operations. However, if the company picks a slower growing segment than its competitor . . . all is lost . . . perhaps than the hardest part of “strategy” as defined by Porter is “who you want to serve” . . .