Jb revitalize corporate performance, we need a whole new model of strategy.
by Gary Hamel and C.K. Prahalad
"oday managers in many industries are working hard to match the competitive advantages of their new global rivals. They are moving manufacturing offshore in search of lower labor costs, rationalizing product lines to capture global scale economies, instituting quality circles and justin-time production, and adopting Japanese human resource practices. When competitiveness still seems out of reach, they form strategic alliances-often with the very companies that upset the competitive halance in the first place. Important as these initiatives are, few of them go beyond mere imitation. Too many companies are expending enormous energy simply to reproduce the cost and quality advantages their global competitors already enjoy. Imitation may be the sincerest form of flattery, hut it will not lead to competitive revitalization. Strategies based on imitation are transparent to competitors who have already mastered them. Moreover, successful competitors rarely stand still. So it is not surprising that many executives feel trapped in a seemingly endless game of catch-up-regularly surprised hy the new accomplishments of their rivals. For these executives and their companies, regaining competitiveness wiU mean rethinking many of 1. Among the first to apply the concept of strategy to management were H. Igor Ansoff in Corporate Strategy: An Analytic AppToach to Bii.siness Policy for GrowJb and Expansion (New York: McGraw-Hill, 1965| and Kenneth R, Andrews in The Concept of Cozpoiate Strategy IHomewood, ni.: Dow Jones-Irwin, 1971).
the basic concepts of strategy.' As "strategy" has blossomed, the competitiveness of Western companies has withered. This may be coincidence, but we think not. We believe that the application of concepts such as "strategic fit" (hetween resources and opportunities), "generic strategies" (low cost vs. differentiation vs. focus), and the "strategy hierarchy" (goals, strategies, and tactics) have often ahetted the process of competitive decline. The new global competitors approach strategy from a perspective that is funda-
A company's strategic crthodoxies are mere dangerous than its well-financed rivais. mentally different from that which underpins Western management thought. Against such competitors, marginal adjustments to current orthodoxies are no more likely to produce competitive revitalization than are marginal improvements in operatGary Hamel is lecturer in business policy and management at the London Business School. C.K. Prahalad is professor of corporate strategy and international business at the University of Michigan. Their most recent HBR article is "Collaborate with Your Compeititorsand Win" (January-February 1989), with Yves L. Doz. 63
HARVARD BUSINESS REVIEW
ing efficiency. (The insert, "Remaking Strategy," describes our research and summarizes the two contrasting approaches to strategy we see in large, multinational companies.) ew Western companies have an enviable track record anticipating the moves of new global competitors. Why? The explanation begins with the way most companies have approached competitor analysis. Typically, competitor analysis focuses on the existing resources (human, technical, and financial) of present competitors. The only companies seen as a threat are those with the resources to erode margins and market share in tbe next planning period. Resourcefulness, the pace at which new competitive advantages are being built, rarely enters in. In tbis respect, traditional competitor analysis is like a snapshot of a moving car. By itself, the photograph yields little information about the car's speed or direction-whether the driver is out for a quiet Sunday drive or warming up for the Grand Prix. Yet many managers have learned through painful experience that a...