Good strategy as a source of competitive advantage

1. Strategy:
Smarter Conquers Better
By
Dr. Michael McDermott
mcdermottm1@nku.edu

2. But business success is
simply about being
better. Isn’t it?
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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3. The “Being Better” Argument
• In order to succeed, it’s true you do need to
possess at least one advantage:
• Better
• Cheaper
• Faster
• Richer
• Stronger
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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4. The “Being Better” Argument
• But simply ‘being better’ provides only shortlived success
• The ‘better’ is based only on operations
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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5. Three Questions
1. What biblical story do you most associate with an
underdog defying expectations to beat a more impressive
opponent?
2. Who is the greatest boxer of all time, and indeed
considered the greatest sportsman of the 20th century?
3. Who are considered the greatest ever football (i.e. soccer)
team?
4. Greatest band of all time?
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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6. 1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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7. What explains their success?
Their success was based
upon Genuine Strategy
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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8. Example 1: David vs Goliath
David
• Youthful
• Inexperienced in hand-tohand conflict
• Physically weak
• No protection
1/16/2014
Goliath
• Mature
• Experienced in hand-tohand conflict
• Physically strong
• Heavily protected
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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9. Example 1: David vs Goliath
• If David is to win, he
only had one
option…and his insight
enabled him to identify
that fact
• Goliath – classic case of
‘brawn and no brain’
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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10. Lessons from David vs Goliath
Smarter can
beat better
• Good strategy comes
from fresh insight into
strengths and
weaknesses, and
opportunities and
threats
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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11. Facing ‘Goliath’
• So developing a strategy to topple the
‘invincible’ is not easy
• Do you try and copy the best – but the core
competence of the best is always hard to
imitate
• Or do you have to invent a superior solution?
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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12. Example 2: Ali vs Foreman
World Heavyweight Championship Fight, Zaire, October 1974
1/16/2014
The Challenger
32 years of age
© Michael McDermott, 2014;
mcdermottm1@nku.edu
The Defending World Champion
25 years of age
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13. Ali vs Foreman:
Comparison Based Upon the ‘Better’ argument
Ali
Foreman
• Former World Champion
• Past success was based on
being ‘better’
• Past his peak in terms of
being ‘better’
• 32 years of age
• Making a comeback after
years without competitive
fights
• Defending World Champion
• Present success was based
on being better
• At his peak
• 25 years of age
• Getting better with each
fight
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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14. Who is Going to Win?
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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15. What’s Missing?
We have not identified a crucial
difference!
Only one boxer had a genuine
strategy
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© Michael McDermott, 2014;
mcdermottm1@nku.edu
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16. Ali vs Foreman:
Comparison of Strategy
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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17. Ali vs Foreman
•
•
•
•
•
Two boxers
One, the defending world champion
The other, the former, older champion
One Common goal
Two Different Strategies
– Ali – Good Strategy
– Foreman – Bad Strategy
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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18. Ali vs Foreman
Ali Practiced Good Strategy
• diagnosed his critical problem
• He could no longer “float like a
butterfly, sting like a bee” over
15 rounds against a younger
opponent
George relied on Bad Strategy
• The 3D Effect
• So he developed an action
plan to overcome his critical
weakness
• “Rope-a-dope”
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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19. Rope a Dope
Ali Wins by a
Knockout in
Round 8.
Foreman had
run out of
steam.
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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20. Ali Interview
• http://youtu.be/AY3yIIxXvy4
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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21. Two Vital Lessons from
Ali vs Foreman
1.
Even the very best
are eventually
overtaken;
2.
If they are to
continue winning,
they need genuine
strategy
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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22. Lessons from “Rope-a-dope”
• Exhaust your rival’s
resources through
suckering them into
constant expenditure of
ineffective yet
debilitating effort
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• When you look at the
market for some
products, do we see
that the market leader
is employing the “ropea-dope”?
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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23. Example 3:
Barcelona’s Dominance of World Soccer
• The present Barcelona side, Spanish and
European champions, are considered the greatest
team of all time;
• It features Lionel Messi (born 24 June 1987), the
World Footballer of the Year (2009, 2010)
• Spain, current European and World Champions, is
heavily dependent upon Barca players
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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24. Example 3:
Barcelona and Spain’s Dominance of World Soccer
This example shows that this success is
based upon a genuine strategy that
was developed 40 years ago
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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25. Example 3:
Barcelona and The Dutch Legacy
• In the early 1970s, Barcelona was managed by
Dutch coach, Rinus Michels
• He bought the player Johan Cruyff – ‘the Messi’
of his generation
• Cruyff managed Barcelona in the late 1980s-mid
1990s
• One of his key players was Josep Guardiola,
manager of Barcelona since 2008
• Today the present Barca team are hailed as the
greatest ever side
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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26. Example 3:
Barcelona and The Dutch Legacy
• In 1970 Brazil beat Italy 4-1 in the soccer
World Cup final in Mexico
• The Brazilian team was considered invincible
• The next World Cup was in Germany in 1974
• But how could anyone beat Brazil?
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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27. Example 3:
The Dutch Influence on Soccer
• Rinus Michels, the coach of the Dutch national
team, concluded that no one could match
Brazil
• So a radical new approach was required
• He invented ‘total football’
• At the heart of this new system was the player
Johan Cruyff
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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28. Total Football Defined
• In Total Football, a player who moves out of
his position is replaced by another from his
team, thus retaining the team's intended
organisational structure. In this fluid system,
no outfield player is fixed in a nominal role;
anyone can be successively an attacker, a
midfielder and a defender. The only player
fixed in a nominal position is the goalkeeper.
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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29. The Immediate Outcome
• In 1974 Holland beat Brazil but were beaten in
the final 2-1 by the host country Germany
• In 1978 Holland was again beaten in the final
by the host nation Argentina
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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30. Barcelona F.C:
The Lasting Legacy
• Michels introduced ‘total football’ to
Barcelona
• The commitment to ‘total football’ continued
under Cruyff
• Cruyff recognized the exceptional ability
required to implement ‘total football’
• He thus established in 1978 “La Masia”, the
youth academy to train young players in the
system from an early age
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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31. Barcelona F.C:
The Lasting Legacy
• One of the first graduate from ‘‘La Masia” was
Guardiola, exceptional player and manager;
• Today’s current midfield of Xavi, Iniesta and
Fabregas are all graduates of “La Masia”;
• Messi is also a product of the youth academy
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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32. Barcelona F.C: The Lasting Legacy
Barcelona F.C.
• When Barca won the
European Champions
League in 2009, 8 of the 11
players were graduates
from the youth system
1/16/2014
Spanish National Side
• When Spain won the 2010
World Cup the 22 man
squad included 8 Barca
players and 6 were in the
starting 11 for the final
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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33. The Lasting Legacy:
From Total Football to Tiki-taka
Tiki-taka has been variously described as
• "a style of play based on making your way to the back of the net
through short passing and movement"
• a "short passing style in which the ball is worked carefully through
various channels, and
• a "short passing, patience and possession".
•
The style involves roaming movement and positional interchange
amongst midfielders, moving the ball in intricate patterns, and
sharp, one or two-touch passing.
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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34. The Lasting Legacy:
From Total Football to Tiki-taka
• One of the weaknesses of Spanish sides and the
national team was that their players were often
much smaller and less physical than players from
other nations (e.g. Northern Europe, Africa);
• Tiki-taka focuses on movement, possession and
skill
• Some of the best players for Barcelona and Spain
are physically small
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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35. Barcelona and Competitive
Advantage
Differentiation
• Barcelona competes
through innovation – it has
developed a unique style or
brand of football
Low Costs
• The youth academy enables
Barcelona to produce the
world’s best players at low
costs;
• This reduces the club’s need
to spend in excess of $50m
per player
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
35

36. Barcelona and Competitive
Advantage
Competition:
• competitors have so far failed
to overcome the Barcelona
system;
• This is despite the fact that
arch-rivals, Real Madrid have:
• acquired the world’s most
expensive player ($132m);
• the world’s highest paid soccer
manager (about $20m)
1/16/2014
Customers:
• Barcelona is the world’s
most popular club as its
style is uniquely
entertaining;
• It has 20m ‘likes’ on
facebook, narrowly beating
Real Madrid
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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37. Barca Has Clear Core Competencies
• “Core competencies
• It can be leveraged
are the most significant
widely
value creating skills
• It’s hard for rivals to
within your corporation
imitate
and key areas of
• It’s of great value to
expertise which are
customers
distinctive to your
company and critical to
the company's long
term growth”.
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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38. Multiple Lessons from Barca and its
Genuine Strategy
1. It arose from a foreign idea (i.e developed in Holland)
2. It involved honest internal analysis and identification
of weakness;
3. Indeed the essence of the new strategy is to render
weaknesses that cannot be overcome obsolete;
4. It has received constant commitment over 40 years –
even in ‘difficult’ times;
5. It is now delivering the best ever results as the
original business model (i.e. total football) evolved to
‘ticki-tacka’;
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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39. Multiple Lessons from Barca and its
Genuine Strategy
6. It is centered upon differentiation (i.e.
innovation);
7. The commitment to innovation compelled a
focus upon New Product Development (i.e.
the youth academy)
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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40. Multiple Lessons from Barca and its
Genuine Strategy
8. New superstar brands (i.e. players) are
developed at low cost and sourced locally
and internationally;
9. Costly acquisitions are seldom required
– and even when they are they are graduates of La
Masia who were allowed to join other clubs
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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41. Multiple Lessons from Barca and its
Genuine Strategy
10.Even when Barca is briefly overtaken by a
‘better’ team, it is without equal strategically,
so the strategy is a constant that ultimately
prevails
11.Barca may not always win, but its strategy
always delivers exceptional value to its
growing number of customers globally
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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42. Barca vs Real Madrid
Barca
Real Madrid
Genuine strategy
Commitment to core values
Consistency
Succession planning
Relies primarily upon
organic growth (i.e.
development of players and
managers)
• Continuity is key
• Genuine Strategy – or all
about goals;
• Lacking core values
• Inconsistency
• Absence of succession
planning
• Relies primarily upon external
growth (i.e. acquisitions of
players and managers)
• Change is key
•
•
•
•
•
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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43. Apple:
the corporate Equivalent to Barca
• Apple has a genuine strategy;
• At one time it struggled badly yet remained
totally consistent to its strategy;
• It seized opportunity (i.e. the iPod) and has
refined its original strategy with each
successive product and/or service
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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44. Apple:
the corporate Equivalent to Barca
• Apple can/should expect to be overtaken
briefly in some areas;
• But by applying its genuine strategy it can
expect to once again come out tops
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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45. Conclusions
1. Strategy is not defining growth objectives
2. Strategy is about problem-solving
3. Strategy demands identification of the key
problem
4. Strategy develops a well-conceived action plan
to address the problem
1/16/2014
© Michael McDermott, 2014;
mcdermottm1@nku.edu
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