Porterian and Peterian Effectiveness
(Adapted from mintzberg.org/blog, 13 July 2018)
What makes an organization effective? Michael Porter and Tom Peters became the most prominent writers about the performance of organizations, but with quite different perspectives. For Michael Porter, in his book Competitive Strategy, an effective organization positions itself in the marketplace for competitive advantage. For Tom Peters, in his book In Search of Excellence (with Robert Waterman), an effective organization executes excellently whatever position it has. Thus, for example, while one restaurant in the spirit of Michael Porter may offer a form of cuisine that appeals to a particular market, the other in the spirit of Tom Peters may do a rather conventional cuisine in a wonderful way.
Porter has described competitive advantage as either cost leadership or differentiation, namely providing lower prices or unique offerings, such as fast food fusion or high-end hamburgers. And both strategies can be pursued with a wide or narrow focus—for example, through a single outlet or a whole chain. Accordingly, in his writings on health care, Porter has been a fan of specialized hospitals (as in cardiac surgery), not general ones. In his terms, general hospitals hardly have strategy: they tend to be neither differentiated nor cost leaders.
But might Porter be looking for strategy in the wrong place? General hospitals have a focus that is very common. I call it “local producer.”1 From the corner shoemaker to the national post office, such organizations provide an undifferentiated service at regular prices in a place (a community, a country). In fact, I recall Peters being a great fan of just such an organization: a garbage collection company in San Francisco, whose CEO had a little garbage truck on his desk, and explained his success as being “…because I love garbage!”
Would you rather go to a hospital that does unique things, or that does ordinary things particularly well? That, of course, depends on whether you have an ordinary problem, like appendicitis, or a complicated one, like an unusual heart ailment. The choice would be made, in one case, on the basis of strategy, in the other, on the basis of location. But in both cases, the quality of the service would likely be uppermost in your mind.
Accordingly, in the ideal case, a Porterian organization is Peterian: it has a great strategy with wonderful execution. True, some organizations can get away with being more Porterian than Peterian: if their market position is really good: as customers, we tolerate imperfect execution.
A truly effective Peterian organization, however, need not be Porterian. Excellent execution can be enough. Both Porter and Peters might have preferred, not a differentiated garbage collection company in their community, maybe not even a cost leader one, but one that is clean and reliable. Thus, in this clash that I have concocted of these two titans, while together both win, apart, Peterian effectiveness may more often be preferable. How often do we need an effective strategy effected ineffectively? I used to seek out restaurants that were truly novel, until I realized that many of them failed to blend their fancy ingredients. (That, too, is about synthesis, beyond analysis.) Now I celebrate restaurants that offer, not just novel dishes, but also classic ones splendidly.
Porter does include customer service as a form of differentiation. Isn’t this Peterian? Not quite. For him, this is a strategic choice—calculated—perhaps to offer more extensive service, aside from more attentive service. For Peters, service is not so much a calculated choice as a driven imperative–a philosophy of doing business with soul. A management fixated on strategy from on high can lose sight of what is happening on the ground.
Too much calculation can get in the way of managing with soul. On the desks of people who manage like this, you are more likely to find a financial report than a garbage truck. What they love is Shareholder Value. But surely we have enough of such love in our societies. (See the Insight here on MORE.) So please: a little more attention to Peterianism, with or without Porterianism.
- See my book Managing the Myths of Health Care (2015) on strategy with regard to hospitals (pages 173-179). ↩︎