We've been talking about competitive positioning. And we've been using tools and frameworks like strategy maps and understanding generic competitive positions, and these things have been helping us, try to understand how we can assess a firm's competitive position in a industry or market segment. But it's useful to step back, I think, and ask ourselves where does a valuable competitive position come from? So we can come back to some of these fundamental ideas. I think, first and foremost, we always wanna start with our values. As an organization, what's our mission, what's our purpose? What do we value, what is it we're trying to accomplish? And contemplating, and asking, and answering those questions can help us really understand where we're headed. But again, it's also important to remember that we have to think about market opportunities. And that might involve understanding the structure of the industry or market segment. And we also need to understand our capabilities, what are we able to do? What do we know how to do well? What can we do better than our rivals? Right? So, one way of thinking about this might be thinking of it as sort of a corollary to this fundamental idea of, If everybody can do it, it's difficult to create and capture value from it. So corollary to that might be this idea that If some market positions are more valuable than others, if they're more favorable positions than other positions, then we would expect firms to try and gravitate towards those more favorable positions. Therefore it's important to understand the dynamics of industry structure. Is there something about the structure and the make up of the industry that makes it difficult to compete, or that shelters certain market positions more than others. We also need to understand firm capabilities, is there something in our capability set, is there something we know how to do well, that can allow us to maintain a sort of sustainable competitive advantage and defend our market position. So remember we've got tools for all these things. To understand industry structure, you've got a tool or a framework known as the five forces analysis and this is a useful way to understand the competitive makeup of an industry. To understand capabilities we've got a capabilities analysis that helps us understand the people and the processes and the systems and the alignment of those things, in a way that might make a competitive advantage more sustainable. So, I think it's useful to think about three or four key questions you want to ask yourself as you're thinking about understanding, diagnosing the competitive position of a particular firm in an industry. First of all, you might ask, are there some favorable strategic opportunities? In other words, which positions are better than others? And again, these tools can help you answer that kind of question. A second question might be, how contested is a position? Is there enough there to allow us to defend a position once we enter? You might read about a thing known as a blue ocean strategy. When you read about that, what's that referring to is a sort of uncontested market position. This is sort of a wide open area, maybe a market that didn't really exist before in a formalized way. So certainly if you can enter a market like that, that's uncontested, that provides certain opportunities that a red ocean strategy might not afford you. A red ocean strategy being a sort of contested marketplace. And you might have to take a different approach if there's some entrenched rivals in that industry, that are competing and have some competitive advantage. A third question we might ask is, can we establish the competitive position we've identified as a good one. And that's a really key question. Do we have the capabilities to establish a great key competitive position? Simply identifying that a particular position would be advantageous isn't enough. Do we have the ability to execute, to enter that position and execute and defend that position? So, look, let's go back to automobiles. Maybe you're an auto manufacturer like Kia. And maybe they've decided that the luxury automobile segment, a more specialized niche or differentiated segment, represents a great competitive position, which it is. Maybe the more fundamental question for Kia is do they have the set of capabilities that would allow them to really compete well with the other firms that are already in that space, right? Can we create value in unique ways, versus the established players that are already there. Finally, we might ask if we can defend this competitive position once we've established it. And that's a question about how sustainable any competitive advantage is gonna be. Is it difficult for others to imitate. And how are others in the industry likely to evolve and respond to our entry or our establishing that position in the marketplace. So you know I think the larger point here is about, trying to begin to understand how these different tools and frameworks can operate together. By itself, a five forces analysis won't ever tell you everything you need to know about establishing and defending a valuable competitive position. It'll tell you a lot. But then you might need to combine that with a capabilities analysis and really understand the competitors and do a competitor analysis. So the larger point here is to really understand a good, favorable, competitive position in a market, requires the use of a number of these tools together, and that can really reveal something important about where the the best positions are and what's required to enter, establish, and defend those positions.
