Strategy and Fit

One of the most seductive misperceptions about strategy is that it is interlinked with operational effectiveness. Companies believe strategizing is about pursuing better, efficient, cheaper ways of performing their existing activities. The concreteness of this pursuit has also added to the fixation with improving operational effectiveness. However this is short lived and any competitor can mimic the advantage. In other words it leads to hyper competition and most of the unlocked value is captured by the customer (no monopoly profits).

Strategy is more related to positioning yourself. It could be for a variety of reasons like increasing power in relation to market institutions, addressing the needs of a particular consumer segment etc..It involves designing a set of activities that will help you achieve this position.

However strategy is not just about achieving this position but also sustaining it. The sustainability is achieved through the Fit between various activities. A group of n activities can have a simple/consistent fit, a reinforcing fit or an optimizing fit. Either way the fit between these activities prevents repositioner or straddlers from draining away your advantage.

Mathematically: if there are n fitted activities. 0.5 is the probablity that a competitor can imitate any activity then the n activities drag down the possibility of imitation to 0.5^n