” by Michael Porter
Harvard Business Review (1996)
[excerpts]
The importance of fit among functional policies is one of the oldest ideas
in strategy. Gradually, however, it has been supplanted on the management
agenda. Rather than seeing the company as a whole managers have turned
to “core” competencies, “critical” resources, and “key” success factors. In
fact, fit is a far more central component of competitive advantage that most
realize.
Fit is important because discrete activities often affect one another…
There are three types of fit, although they are not mutually exclusive. First-
order fit is simple consistency between each activity (function) and the
overall strategy….
Second-order fit occurs when activities are reinforcing….
Third-order fit goes beyond activity reinforcement to what I call
optimization of effort….
In all three types of fit, the whole matters more than any individual part.
Competitive advantage grows out of the entire system of activities. The fit
among activities substantially reduces cost or increase differentiation.
Beyond that, the competitive value of individual activities -- or the
associated skills, competencies, or resources -- cannot be decoupled from
the system or the strategy. Thus in competitive companies it can be
misleading to explain success by specifying individual strengths, core
competencies, or critical resources. The list of strengths cuts across many
functions, and one strength blends into others. It is more useful to think in
terms of themes that pervade many activities, such as low cost, a particular
notion of customer service, or a particular conception of the value delivered.
These themes are embodies in nests of tightly linked activities.
Fit and Sustainability