Strategic fit is fundamental
Strategic fit among activities is fundamental to any advantage and, more importantly, the sustainability of that advantage. In his 1996 Harvard Business Review article, What is Strategy?, Michael Porter discusses the synergy between strategic choice and the context in which the decision is made.
Porter argues that fit occurs when there is simple consistency – activities are reinforcing and effort is optimized. In the HBR article he writes, “Rather than seeing [strategic choice] as a whole, [decision-makers] have turned to ‘core competencies’, ‘critical resources’, and ‘key success factors’. In fact, fit is a far more central component of competitive advantage than most realize.” (Porter, 1996: 70) Fragmenting systems into parts may make us feel like we’re getting a grip but it only works if every piece is understood in the context of the whole.
Competitive advantage of context
It’s simple math to see that context matters. When I work out on our deck I get less done than when I toil at the office. The work is the same, tools are identical, but significantly less gets done in one context versus the other. Distracted by kids, birds and the endless construction behind our home – I can’t concentrate outside.
Similarly, water management in Canada, for the most part, is significantly easier than in, say, Israel. Back-to-back droughts and a relatively infinitesimal base allocation make Israel an unlikely place for water-intensive industries.
Compare Edmonton, Alberta to Silicon Valley, California – where would you start a new high-tech business (if you could pick)?
Clearly, place matters.
Yet, in spite of the obvious importance of place, it seems to factor little into the alternatives considered by decision-makers. And when it does, it is rarely with the thought of leveraging the advantages of place but more often overcoming the barriers.
We recently completed a piece of work focused on understanding the role of place in optimizing investments. The analysis includes more than 75 indicators that measure the relative strength of a region’s capabilities, supporting institutions, environmental context and industrial ecosystem.
The tool is built to help investors understand which places are the best places for specific industries. For some industries skill sets and technologies matter most. For others the support of industry associations and local government is key. And it goes around the circle, but the point is that places are optimal sites for only some industries – not all industries.
This assessment, of the advantages that accrue from place, is called Jurisdictional Advantage. It measures the character of place. It is an important tool for reconciling the vast range of market opportunities a region might wish to pursue with the relatively few opportunities a region is positioned to capture.
When place creates success
A friend told me a story about Rick Warren that I haven’t been able to confirm. Since I think the story is interesting, I thought I’d it anyway.
Rick Warren is the celebrated author of The Purpose Driven Life. Forbes called his previous book, The Purpose Driven Church, “the best book on entrepreneurship, management, and leadership in print”. He’s been invited to speak at the United Nations, the World Economic Forum in Davos, Harvard’s Kennedy School of Government, and TIME’s Global Health Summit. The Economist said he is “arguably the most influential pastor in America.”
In 2006, after selling more than 30 million copies of The Purpose Driven Life, Rick Warren was a bit of a celebrity. In an interview, the story goes, he was asked what’s next. Apparently he misunderstood the question and started to run through a list of new goals. The interviewer interrupted and rephrased the question: Did he plan to leave his Church and pursue other things? Realizing what was meant, Rick grins and says something like, “Oh, sorry, no we have no plans to leave. We made a commitment to stay with the church for 40 years. We aren’t going anywhere.”
Imagine what would change if you committed to stay in one place for 40 years. Think of how that changes your choice of home, friends, community and work. As a business owner, consider how much more important “place” would suddenly become.
If people, supporting agencies, infrastructure, natural environment and industrial ecosystems define place, what would be different, in your interest in these elements, if you knew you would never leave the place you are now?
Choosing to stay
I still struggle with living in Edmonton. It’s flat, there’s no good lakes, the winters are long and dark, and it is way out on the edge of the world. It’s hard for me to commit to staying.
Maybe it’s my young kids, it might be the product of ageing, or maybe I suddenly recognize its importance but these days I feel a pressure to choose a place. I feel the importance of investing in people. I feel like I should get involved at the university or support local economic development. For the first time ever, I think some of the decisions the city is making feel important. I wonder about caring for the river not far from our home. I think often of other, local companies that might need what we do (even if they can’t afford it).
I feel the weight of place. Not a burden. More like my favorite, leather coat. It lies heavy on my shoulders, it creaks with my movements – when I first put it on, for some odd reason, it reminds me I am alive.
What is place for you?
I am deeply interested in stories of how place matters to business and the success of local economies.
- Has your business chosen to stay? What has that meant? What changed?
- Has your business existed in the same community for more than 50 years? What has that taught you about the importance of place?
- Of those businesses and industries that care most for your community – its people, environment, and success – how long have they been around? Are the people that run them from that same place? Why do they care?