140 Harvard Business Review | July-August 2008 | hbr.org
Competing on Resources AS RECENTLY AS 10 years ago, we thought we knew most of what we needed to know about strategy. Portfolio planning, the experience curve, PIMS, Michael E. Porter's ﬁ ve forces - tools like these brought rigor and legitimacy to strategy at both the business unit and the corporate level. Leading com- panies, such as General Electric, built large staffs that reﬂ ected growing conﬁ dence in the value of strategic planning. Strat- egy consulting boutiques expanded rapidly and achieved widespread recognition. How different the landscape looks today. The armies of planners have all but disappeared, swept away by the turbulence of the past de- cade. On multiple fronts, strategy has come under ﬁ re.
At the business unit level, the pace of global competition and technological change has left managers struggling to keep up. As markets move faster and faster, managers complain that strategic planning is too static and too slow. Strategy has also become deeply problematic at the corpo-
rate level. In the 1980s, it turned out that corporations were often destroying value by owning the very divisions that had seemed to ﬁ t so nicely in their growth/share matrices. Threat- ened by smaller, less hierarchical competitors, many corporate stalwarts either suffered devastating setbacks (IBM, Digital, General Motors, and Westinghouse) or underwent dramatic transformation programs and internal reorganizations (GE
and ABB). By the late 1980s, large multibusi- ness corporations were struggling to justify their existence.
Not surprisingly, waves of new approaches to strategy were proposed to address these multiple assaults on the premises of strategic planning. Many focused inward. The lessons from Tom Peters and Bob Waterman's "excel- lent" companies led the way, closely followed by total quality management as strategy, re- engineering, core competence, competing on capabilities, and the learning organization. Each approach made its contribution in turn, yet how any of them built on or refuted the
EDITOR'S NOTE: This inﬂ uential 1995 article (originally published as "Competing on Resources: Strategy in the 1990s") intro- duced the resource-based view of the ﬁ rm to practitioners hungry for a new approach to strategy. It brings together the strengths of Michael E. Porter's externally focused ﬁ ve-forces framework with those of the internally fo- cused competing-on-capabilities view. Ju
Best of HBR DAVID J. COLLIS AND
CYNTHIA A. MONTGOMERY
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142 Harvard Business Review | July-August 2008 | hbr.org
Best of HBR Competing on Resources
previously accepted wisdom was unclear. The result: Each compounded the con- fusion about strategy that now besets managers.
A framework that has the potential to cut through much of this confusion is now emerging from...