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This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive
Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); “Strategy and the Internet” (Harvard Business
Review, March 2001); and a forthcoming book. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or
by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Michael E. Porter. Additional information may
be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu.
Threat of Substitute
Products or Services
Threat of New
Entrants
• The worst error in strategy is to compete with rivals on the same dimensions
American Association of Museums 04/28/06 2 Copyright 2006 © Professor Michael E. Porter
Flawed Concepts of Strategy
• Strategy as aspiration
– “Our strategy is to have one million visitors…”
– “…double our endowment…”
– “…grow revenue…”
• Strategy as action
– “Our strategy is to expand the collection…”
– “… build a new building…”
– “… mount ten special exhibitions per year…”
Social Benefits
Value =
Resources
Expended
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Primary Activities
Firm Infrastructure
(e.g. governance, planning, budgeting, information tech., facilities)
Fundraising
(e.g. earned revenues, proposals, solicitations, events, donor relations)
Human Resource Management
(e.g. recruiting, training, compensation system)
Program and Content Development S
(e.g. scholarship, exhibit design, market research)
u
Educational Programs r
(e.g. local school outreach, adult classes, special tours)
p
Social
Benefits
Assembly and Exhibition Hospitality Marketing Visitor / l
Preservation Services & Sales Constituency u
(e.g., curating, Services s
(e.g., acquisition, display, support (e.g., shops, (e.g.,
authentication, materials) restaurants, promotion, (e.g., member
cataloguing) maintenance) advertising, outreach,
catalogs) special events)
Program D Program E
Operational Strategic
Effectiveness Positioning
Collection
Collection Visitation
Visitation
Visitor
Visitor
Education
Education Experience
Experience
Research
Research //
Scholarship
Scholarship
E.g., E.g.,
• Comprehensiveness • Number of visits
Collection
Collection Visitation
Visitation
• Rarity • Repeat visits
• Sophistication • Types of visitors
• Popular appeal (sophistication, age, etc.)
• Restoration • Time spent per visit
• Spending per visit
Visitor
Visitor
Education
Education Experience
Experience
E.g., E.g.,
• Whom to educate • Level of interactivity
– Children
• Amount and
– Enthusiasts
sophistication of
– Educators
information
– As many people as
Research provided
possible Research // • Extent of ancillary
• Means of education
– Didactic
Scholarship
Scholarship services
– Experimental
E.g.,
• Original vs. applied
• Scholarly vs. popular
• Conferences vs. publications
American Association of Museums 04/28/06 12 Copyright 2006 © Professor Michael E. Porter
Five Tests of a Good Strategy
•• A
A unique
unique value
value proposition
proposition
compared
compared to
to other
other organizations
organizations
•• A
A different,
different, tailored
tailored value
value chain
chain
•• Clear
Clear tradeoffs,
tradeoffs, and
and choosing
choosing what
what
not
not to
to do
do
•• Activities
Activities that
that fit
fit together
together and
and
reinforce
reinforce each
each other
other
•• Continuity
Continuity ofof strategy
strategy with
with
continual
continual improvement
improvement in in realizing
realizing
the
the strategy
strategy
• Natural, fresh, organic, and prepared foods • Well-lit, inviting supermarket store formats with
and health items with excellent service at appealing displays and extensive prepared
premium prices foods sections
• Produce section as “theater”
• Educated, middle class, and affluent
• Café-style seating areas with wireless internet
customers passionate about food as a part for meetings and meals
of a healthy lifestyle
• Each store carries local produce and has the
authority to contract with the local farmers
• Information and education provided to
shoppers along with products
• High touch in-store customer service via
knowledgeable, non-unionized, highly
motivated personnel
• Egalitarian compensation structure
• Own seafood procurement and processing
facilities to control quality (and price) from the
boat to the counter
• Donates 5% of profits to non-profits
• Each store has “green projects,” directed by
employees to improve environmental
performance
American Association of Museums 04/28/06 14 Copyright 2006 © Professor Michael E. Porter
Translating Goals into a Value Proposition
What
What Which
Which
Customers?
Customers? Needs?
Needs?
E.g., E.g.,
• Adults vs. children • Appreciation
• Enthusiasts vs. less • Experience
knowledgeable
patrons
• Participation
What
What Price?
Price?
• Tourists vs. locals
• Current vs. future
generations E.g.,
• Free
• Membership
• Fee per admission
•• A
A unique
unique value
value proposition
proposition
compared
compared to
to other
other organizations
organizations
•• A
A different,
different, tailored
tailored value
value chain
chain
•• Clear
Clear tradeoffs,
tradeoffs, and
and choosing
choosing what
what
not
not to
to do
do
•• Activities
Activities that
that fit
fit together
together and
and
reinforce
reinforce each
each other
other
•• Continuity
Continuity ofof strategy
strategy with
with
continual
continual improvement
improvement in in realizing
realizing
the
the strategy
strategy
•• A
A unique
unique value
value proposition
proposition
compared
compared to
to other
other organizations
organizations
•• A
A different,
different, tailored
tailored value
value chain
chain
•• Clear
Clear tradeoffs,
tradeoffs, and
and choosing
choosing what
what
not
not to
to do
do
•• Activities
Activities that
that fit
fit together
together and
and
reinforce
reinforce each
each other
other
•• Continuity
Continuity ofof strategy
strategy with
with
continual
continual improvement
improvement in in realizing
realizing
the
the strategy
strategy
Customers
chic but
Very cost-
Global
Little media frequent team of
conscious
advertising product trend-
changes spotters
Advanced
Production production
Extensive in Europe machinery
use of
store sales
data
Tight
Prime store
coordination Very
locations in JIT delivery with 20
high traffic flexible
wholly-owned
areas production
factories
system
• Allows the board and the staff to understand and embrace the strategy
• Establishes a clear identity with patrons, funders, and other outside entities
In contrast,
• Reinvention and frequent shifts in direction are costly and confuse everyone
American Association of Museums 04/28/06 20 Copyright 2006 © Professor Michael E. Porter
Barriers to Defining Goals and Setting Strategy
for Museums
• Multiple, conflicting, or unclear • Unpredictable or limited
goals revenue streams lead to
program proliferation or short-
term focus
• Lack of board consensus on
goals • Legacy collections and facilities
constrain future direction
• Donor / funder desires and
priorities • Tactical problems consume
managerial attention
Goal
Goal Definition
Definition
Strategy
Strategy Definition
Definition
Funding
Funding Geographic
Geographic
Outsourcing
Outsourcing Partnerships
Partnerships
Structure
Structure Coverage
Coverage