There Are Still Only Two Ways to Compete

Back in the early 1960s, the great Boston Consulting Group founder and strategy theorist Bruce Henderson asserted that there was only one way to successfully compete: gain a relative market share advantage over all competitors so as to have lower costs than all of them. The payoff is that it puts the firm in a position to drive those relative costs even lower as competition unfolds due to the learning curve advantage.

One then became two in 1980, when Michael Porter pointed out that there is another way to compete: differentiation. His view of the generic strategies for advantage gained considerable traction both in classrooms and boardrooms.

To someone like me, a micro-economist by training and at heart, the idea that all competition can be classified in terms of these two generic strategies corresponds well to the fundamental demand dynamics that companies face.

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