The three kinds of leverage that anchor effective strategies

Asides / Strategy

Jason Cohen writing on A Smart Bear about one of the fundamental concepts of strategy, durable, differentiated strengths.

“Leverage” means generating a large effect from a relatively small effort, created by riding tailwinds of natural abilities or hard-won assets, rather than fighting a battle for which you are ill-equipped. […] Leveraging strengths is the only way to do great work. (Not “fixing weaknesses.”) Better yet, leveraging differentiated strengths means you beat the competition. Best is when that differentiation is durable over time.

Without leveraging strengths (rather than spending far more energy shoring up a weakness that still won’t be great), the company will not succeed in creating something great. Without leveraging differentiated strengths, the company will not surpass competitors, will have a hard time winning and keeping customers, and will have an even harder time justifying profit-generating prices. Without leveraging durable, differentiated strengths, the company’s success will be short-lived, differentiation will be temporary, and once again it will be reduced to out-spending on marketing or lowering prices until it is unprofitable.

A winning strategy explains which strengths the company will leverage, how it will side-step rather than “attack” its weaknesses, which strengths can be leveraged for differentiated sales today, and which long-term moats the company is constructing.

The three kinds of leverage that anchor effective strategies

Once you understand that a great idea is not a competitive advantage. It’s a bet that the idea is valuable and you’ll be able to execute better than anyone else. But once an idea is proven competitors will try to copy it. Then it becomes a question of whether the idea is actually tied to a strategic advantage that cannot be copied or compensated for. Then, and only then, you have a durable, differentiated strength.

My favorite quote from the article

How do you beat Bobby Fischer? Play him at anything but chess

Warren Buffet