Why Strategy Isn’t What You Think: Lessons from Michael Porter

Strategy is one of those business terms that seems to be everywhere, used by everyone from CEOs to middle managers. Everyone claims to be an expert on strategy. We hear executives talk about “strategic thinking” and ask questions like, “Does this fit our strategy?” Others mix in goals or vision. What’s the difference between a goal and a strategy? Isn’t a strategy just some plans thrown together in a PowerPoint? Hardly! In Michael Porter’s legendary article, “What is Strategy?”, he answers the question that trips up so many business leaders. Porter makes it clear that every successful strategic position rests on three principles.

The first and most crucial principle is, “Strategy is the creation of a unique and valuable position, involving a different set of activities” (Porter, 1996, p. 1). Porter is clear from the start: strategy is about being unique and different from the competition. This might seem odd at first, as it’s tempting to copy a successful competitor. Imagine you own a historic, boutique hotel marketed as family-friendly. Your competitor down the street, somewhat similar, opens a rooftop bar and attracts new guests. You try the same approach, but it fails to draw new visitors, and the bar stays quiet. Why? Because your brand targets families or older couples, not solo or adult travelers. Trying to appeal to everyone is a critical mistake. It’s impossible. Don’t try.

Within this first principle, Porter outlines three main positioning strategies to stand out to customers.

The first is variety-based positioning, focusing on a specific product or service, not the customer. You offer something distinct to a wide range of customers. Porter’s example is Jiffy Lube (note: the article, written nearly 30 years ago, reflects Jiffy Lube’s offerings at the time, though the point holds). Jiffy Lube specializes in oil changes and tire replacements. That’s it. They don’t offer full-service repairs, and they’re fine with that, as they excel at the 15-minute oil change. Variety-based positioning is about being the best at a specific offering, regardless of who the customer is (Porter, 1996, p. 6).

Needs-based positioning targets most or all needs of a specific customer group. Here, the customer is central. A company designs its offerings for a particular audience. Porter’s classic example is IKEA. Love it or hate it, IKEA’s genius is undeniable. They target customers who prioritize savings and a hassle-free experience (no salespeople). IKEA offers low-cost, modern furniture for those willing to assemble it themselves, acting as a one-stop shop for home furnishings. Customers avoid competitors’ higher prices or pushy sales tactics. By adopting needs-based positioning, a company commits to meeting all the needs of its chosen customers (Porter, 1996, p. 5).

The third position is access-based positioning, which focuses on how to reach customers through location or sales channels. Geography plays a key role here, though it’s not the whole story. Porter cites Carmike Cinemas, which no longer exists after being acquired by AMC Theaters in 2016. Carmike operated only in cities with populations under 200,000, using smaller theaters and community-focused marketing. A modern example is Dollar General, which typically locates in rural or lower-income areas. Their smaller, cheaper-to-build stores serve as modern “general stores” for essentials, ideal for price-sensitive customers who don’t need Wal-Mart’s 100,000+ SKUs. By capitalizing on “food deserts” in rural areas, Dollar General exemplifies access-based positioning. (Note: I’ve noticed on beach road trips that Dollar General often skips public restrooms—a strategic choice!)

Porter emphasizes that these three positioning strategies aren’t mutually exclusive; many companies blend them. Strategy is about making choices, and not choosing is as critical as choosing (Porter, 1996, p. 6).

It’s tempting to copy a competitor’s success, like a new feature or lower price, and think, “We should do that.” Big mistake! Porter calls this a common pitfall. Strategy isn’t about being the best at everything—it’s about being different. The most profound quote in the article is, “The essence of strategy is choosing what not to do” (Porter, 1996, p. 8). Trade-offs prioritize one aspect over another: pricing vs. experience, convenience vs. comfort. Four Seasons aims for maximum comfort, knowing you’d rather be home. Super 8 offers a basic roof over your head.

Trade-offs create a sustainable advantage, defining your identity. Being unique prevents becoming generic or confusing. As the saying goes, “You can’t be everything to everybody.” Trade-offs also protect against rivals. Porter warns of “straddling,” where competitors imitate you while keeping their own positioning—a recipe for failure. They can’t match you without harming their business.

The example in the article is Neutrogena soap. Unlike other personal care brands, Neutrogena focuses on skin care benefits, not scents or additives. By prioritizing medicinal positioning, they sacrifice volume and manufacturing efficiencies but gain uniqueness. No competitor can straddle both skin care and scented soaps without diluting their brand (Porter, 1996, p. 9).

Once a company chooses its strategy and trade-offs, implementation begins. This requires the entire organization to align and work cohesively. Porter calls this “fit,” where activities interact and reinforce each other. He puts it simply: “Strategy is about combining activities” (Porter, 1996, p. 10). Deciding a position is one thing; executing it is another.

Porter identifies three types of fit, which aren’t mutually exclusive. First-order fit ensures basic consistency across activities. Vanguard, for example, aligns everything around low costs, distributing funds directly to avoid broker commissions and tying employee bonuses to cost savings (Porter, 1996, p. 11).

Second-order fit occurs when activities strengthen each other. Neutrogena’s marketing to doctors (bolstering a medical image) and premium pricing (signaling quality) create a stronger brand together than alone. Notably, luxury hotels require other soap brands to use their name on packaging, but Neutrogena uses its standard packaging—a testament to its distinct position (Porter, 1996, p. 11).

Third-order fit maximizes efficiency by coordinating activities to eliminate redundancy. The Gap’s real-time sales data informs its supply chain, ensuring popular items stay stocked while minimizing waste. A simple choice—“keep staple items on shelves”—drives this powerful fit (Porter, 1996, p. 12).

IKEA is a favorite of Porter’s for good reason. Their success isn’t just cheap, stylish furniture—it’s how every element interlocks. Flat-pack designs cut shipping and storage costs, enabling massive warehouse stores. Self-service and self-assembly reduce labor expenses. Even Swedish meatballs keep customers in-store longer, boosting sales. Competitors can’t copy one piece (e.g., furniture design) without replicating the entire system—logistics, layout, customer involvement—making IKEA’s strategy nearly impossible to imitate. See the Activity System Map on page 12 of the article for how IKEA’s activities align (Porter, 1996, p. 12).

Porter’s “What is Strategy?” offers a college-level education in 19 pages, freely available online. It’s a classic that deepens with each read. Three principles underpin strategic positioning: be unique, make trade-offs, and ensure fit. Assess your business: How do your choices differentiate you? What trade-offs are you making? Is there a formal “fit” in your activities? If not, consider where you can stand out. Share in the comments how your business differs from the competition.

Reference Porter, M. E. (1996). What is strategy? Harvard Business Review, 74(6), 1-20.