Winning, earning profits, or creating customer value: What is the best focus for developing supply chain strategy? Commenting on my last post, Joe Wikowski points out Michael Porter might disagree with A.G. Lafley and Roger Martin’s emphasis on winning as the foundation for developing strategy. Witkowski writes, “winning, or beating your rivals, in the context of Porter’s 5 forces framework, is too narrow.” He says, according to Porter, customers, suppliers, substitutes, and potential and existing rivals all impact a company’s ability to earn profit.
Intrigued by the distinction and wanting to know more, I came across an interesting, albeit biting, Forbes article written by contributor Steve Denning. The article, “What Killed Michael Porter’s Monitor Group? The One Force That Really Matters,” appeared November 20, 2012, and is packed with provocative comments designed to incite conversation. Decide for yourself whether Denning’s commentary is fair or not. However, citing Apple, Amazon, Salesforce, Costco, Whole Foods, and Zara, Denning makes the interesting point that the purpose of the successful firm today is to deliver “more value to customers through innovation.” Focusing strategy on driving profit for profit’s sake will not lead to sustained success, Denning suggests.
If a firm is successful at creating and delivering customer value, it is more likely to create more profit and win over time. But if the focus is on profit or winning for its own sake, customer value through innovation is not guaranteed. Denning recognizes this, and sees continual innovation as the only means to sustain success in today’s global marketplace.
Consider the focus of your supply chain strategy. What is the balance between creating profit and delivering customer value?