Quotes from Joan Magretta

Competing to be the best leads inevitably to a destructive, zero-sum competition that no one can win. As offerings converge, gain for one becomes loss for the other. This is the very essence of "zero sum.

This, says Porter, is competitive convergence. Over time, rivals begin to look alike as one difference after another erodes. Customers are left with nothing but price as the basis for their choices. This has happened in airlines, in many categories of consumer electronics, and in personal computers, with the notable exception of Apple, the one major company in that industry that has consistently marched to its own drummer.

From the outside, business can look like "a seemingly mindless game of chance at which any donkey could win provided only that he be ruthless. But that is of course how any human activity looks to the outsider unless it can be shown to be purposeful, organized, systematic; that is unless it can be presented as the generalized knowledge of a discipline." —Peter F. Drucker

In industry after industry, Porter notes that economies of scale are exhausted at a relatively small share of industry sales. There is no systematic evidence that indicates that industry leaders are the most profitable or successful firms.

Companies only have to be "big enough," which rarely means they have to dominate. Often "big enough" is just 10 percent of the market. Yet companies under the influence of winner-takes-all thinking tend to pursue illusory scale advantages. In doing so, they are likely to damage their own performance by cutting price to gain volume, by overextending themselves to serve all market segments, and by pursuing overpriced mergers and acquisitions.

If rivals all pursue the "one best way" to compete, they will find themselves on a collision course.

Henry Ford famously chose to operate his own rubber plantation in Brazil in the late 1920s, a decision that did not turn out too well. Ultimately, choices like this, about how vertically integrated you want to be, are choices every company makes about "where to sit" in the value system.

The five forces framework explains the industry's average prices and costs, and therefore the average industry profitability you are trying to beat.

For Porter, strategic competition means choosing a path different from that of others. Instead of competing to be the best, companies can—and should—compete to be unique.

Whirlwind's configuration of activities produces a different kind of value with a different cost profile. Looking at competing value chains side by side highlights those differences. If your value chain looks like everyone else's, then you are engaged in competition to be the best.

Strategic competition means choosing a path different from that of others.

value is ultimately defined by customers.

Competing to be unique is unlike warfare in that one company's success does not require its rivals to fail. It is unlike competition in sports because every company can chose to invent its own game. A better analogy than war or sports might be the performing arts.

The real point of competition is not to beat your rivals. It's not about winning a sale. The point is to earn profits.

Seeing that gate turnarounds are a significant cost driver, you would then dive a level deeper, to the many specific subactivities involved in gate turnarounds. Here you'd be looking for ways to lower your costs without sacrificing customer value. This is how you drive an even greater wedge between your performance and that of your rivals.

than from the product itself.

But this way of thinking about competition is too narrow. The real point of competition is not to beat your rivals. It's not about winning a sale. The point is to earn profits. Competing for profits is more complex. It's a struggle involving multiple players, not just rivals, over who will capture the value an industry creates.

These five forces—the intensity of rivalry among existing competitors, the bargaining power of buyers (the industry's customers), the bargaining power of suppliers, the threat of substitutes, and the threat of new entrants—determine the industry's structure

Charles Schwab created the company that bears his name—and a new category known as discount brokerage—around a different value chain. Not all customers want advice, so why should they have to pay for it? Take away all the activities needed to give advice, focus instead on executing trades, and you can create a different kind of value: low-cost trades that make stock ownership accessible to a wider customer base.

Second, industry structure determines profitability—not, as many people think, whether the industry is high growth or low, high tech or low, regulated or not, manufacturing or service. Structure trumps these other, more intuitive, categories. Third, industry structure is surprisingly sticky.

The five forces framework zeroes in on the competition you face and gives you the baseline for measuring superior performance. It explains the industry's average prices and costs, and therefore the average industry profitability you are trying to beat. Before you can make sense of your own performance (current and potential), you need insight into the industry's fundamental economics.

Nomacorc clearly had what most managers would call a "core competence" in chemistry. But its competitive success in the wine market resulted from decisions to deploy those capabilities in activities that enhanced the design and manufacture of wine stoppers.

While there is absolute improvement in OE, there is relative improvement for no

Note that if an industry doesn't create much value for its customers, prices will barely cover costs. If the industry creates a lot of value, then structure becomes critical in understanding who gets to capture it. Industries can, and often do, create a lot of value for their customers or suppliers while the companies themselves earn very little for their efforts.