Hundreds of articles have been written on strategy, each with an author that presents a unique perspective from years of paradigm-shaking experience. Some even “reinvent the wheel” by rejecting past concepts altogether and introducing an entirely new way of thinking about strategy. After reading the most important of these articles, I have concluded that most of them miss the point of strategy entirely.
In a previous article, we explored what strategy is from an academic and historical standpoint. Here, we will focus on two of the most important strategic concepts – inimitability and implementation. These ideas can literally be the difference between survival and dissolution of an enterprise at any stage.
1. Inimitability
In addition to being a tongue twister, inimitability has confused executives for centuries. It is not “differentiation” or providing a clear difference between your products and your competitors, though that is also an important idea. Basically, to be inimitable, a strategy must focus its core revenue and cost drivers on methods or resources that cannot be mimicked by competitors in the long run.
Last year, one of my business professors claimed that “people and culture are your most important competitive advantage!” Let’s unpack the merits of this perspective.
While culture is essential, it is easy to imitate culture in the long run. Core values can be copied and principles for employee engagement can be learned by any company in a specific industry. This means that even if a company has a great culture, it is not a competitive advantage that will lead to long-term profitability.
On the other hand, human capital can be inimitable. Getting the right people in the right jobs is essential (see implementation below). For example, if a software developer stays with a startup throughout its early years and understands the product the company offers better than anyone on the planet, then he has knowledge and vision that, at least for a few years, will be impossible for competitors to replicate unless he leaves. Perhaps this is why product managers are often paid top salaries. It is strategically important to prevent them from jumping ship to a competitor or from launching a rival startup.
In other words, inimitability means being different, but in a specific way that is difficult or impossible to replicate. Without some privileged access to scarce resources – knowledge, geography, or human capital – a “competitive advantage” is like a wave that momentarily covers a few feet of sand but quickly recedes back into the ocean.
Walmart provides a clear example of inimitability. While its online shopping was dwarfed early on by Amazon’s popular deliveries, Walmart has been quickly gaining market share because of its already-existing distribution centers. Amazon will likely take another decade to catch up with Walmart’s more than 10,000 stores and will spend a lot of money along the way. As with most competitive advantages, Walmart’s massive bricks-and-mortar distribution network will be overcome by competitors eventually, but only at substantial cost. This has bought Walmart valuable time to adapt to the new competitive landscape of online sales, while other retailers like Sears, Toys R Us, and J.C. Penney have been forced to file for Chapter 11 bankruptcy.
2. Implementation
If a company cannot execute effectively, it doesn’t matter how inimitable its strategy may be. The late Clayton Christensen put it this way, “What you actually do is more importantthan what you think or say you do”. Strategy needs to be internalized and actualized by every employee in an organization. Otherwise, the strategy will never be more than a whiteboard diagram.
A company must also find a healthy balance between extremes. A strategy must be emergent, adapting to new opportunities, while also being firm and focused. Based on the industry, a company must also be willing to adjust its hierarchy to empower more junior employees to make decisions and allocate resources to respond to the changing business environment, innovate proactively on a small scale, and ensure that new opportunities are quickly seized by the employees with the most actionable real-time information. This will lead to company-wide buy-in of the strategy without necessitating oversight or other costly management tools.
Finally, a strategy must be built within a framework of purpose, mission, and vision. In the end, employees will be much more likely to do their best work if they know where the team is heading and are committed to the journey. While strategy is more big picture, in that it is concerned with how to maintain economic rents over long periods of time, good strategy is fruitless without employee alignment and shared energy.
The bottom line
Strategy is a difficult concept to define, given its multiplicity of usages.
However, if the ultimate objective of formulating strategy is to win against competitors over the long-term, then inimitability is the most important concept to embrace.
Once that is done, however, a company must master the ability to implement the strategy effectively. Even if mistakes are made along the way or if it takes time to build a thriving business in competitive markets, the ability to marshal the troops and effectively execute the mission is critical. So much so that rapid and focused execution can often compensate for any gaps in the overall strategic plan.
Wes Brooks is an incoming Summer Business Analyst at Cicero Group and an undergraduate studying economics, management, and strategy. He is a serial entrepreneur, works in venture capital, and enjoys singing a capella and piano improvisation.