In the November-December 1996 issue of Harvard Business Review
, there’s an article titled “What is Strategy?”
by Michael E. Porter. We’re going to revisit our imagined question of whether or not your onboarding practice is strategic, but first we’re going to meditate a bit on the contents of this HBR article. I’m not going to recount the article paragraph by paragraph—you’re welcome to buy a copy
yourself for $8.95—but we will explore the high level themes of strategy and how it might connect to the day-to-day life of someone working in customer experience. To start, we have to talk about operational effectiveness.
The very first words of the article feel like a gauntlet thrown: “Operational effectiveness is not strategy.” I bristled the first time I read that. Especially at a start-up or growth-stage company, where there’s so much variability as the company grows, a failure to be operationally effective early on only multiplies and can greatly hamper a company’s long term success. As a quick example, think of sales. If your sales team is not operationally effective—that is, you’re doing a bad job at sales—pretty soon you’re going to discover you don’t have the revenue to support a path toward profitability, dooming your startup to an inglorious end. If you’re not operationally effective, you won’t survive, but perhaps it’s not enough to just survive.
The other reason I bristled is because I take personal pride in being operationally effective! And working at a place like FullStory, we place a lot of value in building systems where we can do our best work. If nothing else, trying to be operationally effective can be fun, if not also a means to eliminate inefficiencies and reduce costs.
But as Porter puts it in his article, operational effectiveness is “necessary but not sufficient.” His argument, which he makes from first principles, is that if competitors all strive to be operationally effective in the same way, solving the same problems for the same set of customers, businesses will start to look the same, in a process he calls “competitive convergence.” To illustrate this point, let’s continue our example with sales, assuming that all things are equal between you and a direct competitor. You both have a product that solves similar problems for the same set of customers at a similar price. The only thing different is how well you execute at selling. If you do the work to improve operational effectiveness on your sales team, bringing you on par with your competitor, if everything else is equal, the only remaining place you have to compete is price. If everything looks the same to the customer, you have to lower your price to win their business, cutting into your profitability.
Competitive convergence necessarily leads to lower profitability for each competitor. For each competitor, having maxed out operational effectiveness independently, the only remaining way to become more operationally effective is to merge with a competitor or be acquired, but even this doesn’t guarantee profitability, only the hope of lower cost as redundancies are eliminated (that’s a euphemism for firing a bunch of people, but who knows, maybe you’ll eliminate some technology overhead as well). What this means is that even if you’re maxing out operational effectiveness in every area—you have a finely tuned sales machine, a great customer success team, the best-run engineering organization in the business, etc.—all of this could still lead to reduced profitability in the long term if your competitors are all doing the same thing. The piece that is missing, if you’re only focusing on operational effectiveness, is strategy.
So what is strategy? Here’s one of the ways that Porter describes it:
“Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.” (emphasis added)
With this seed of a definition, let’s circle back and and look at one way we might consider CX to be strategic.