You hear the word strategy a lot. It’s a big sounding word. It suggests complexity and cleverness, doesn’t it?

It’s a word so often repeated, one can’t help to become a little suspicious.

I sometimes find myself thinking: can ALL these people really be strategists?

And then I remind myself how simple effective strategy can be.

Sir Tim Bell, Margaret Thatcher’s PR man – the man who came up the famous, 1979 election-winning slogan Labour isn’t working – said that when it came to general elections, there were only two strategies.

Strategy one: it’s time for a change

Strategy two: it’s not time for a change.

In business, a similar reduction is possible. This is how it goes:

Strategy one: we are cheaper.

Strategy two: we are different.

In strategy one, customers see the value of the businesses offering as indistinguishable from competitors. In a market like that, there is only one way to gain advantage – lower costs.

In strategy two, businesses can charge more because customers make a trade off between the perceived value of the distinctiveness and the price.

If the firm can keep their costs more or less the same as less differentiated competitors, they will be successful.

Now, you may say, Hang on, Andy, it’s much more complex than that these days.

You might argue that global competition, better access to capital and greater information transparency has made it harder for companies to maintain competitive advantage.

You might bring up cool internet business models that are changing the very idea of competitive advantage.

Finally, you could claim that many firms find competitive advantage by collaborating with other firms in what’s often called an ecosystem.

You might have a point.

But I would argue that many companies with a competitive advantage in the ‘90s – Southwest Airlines, IKEA for example– still seem to enjoy one 19 years later. No sign of it dissipating there.

I’d add that many internet models are really just two-sided markets or platforms in which a firm gets paid for putting two groups together – think eBay, Match.com or Uber. According to Harvard Business Review, two sided markets have been with us for centuries. The only difference is that today they are easier and cheaper to scale because of the web.

And finally, I’d suggest ecosystems are just a tactic – alright, a strategy – to enable old fashioned competitive advantage: differentiation or cost advantage.

So yes, there are new ways of going about things, but the end is the same: either low cost or differentiation advantages.

As HBR points out, if you want to win, it’s important to realize these are the fundamental forms of advantage.

And nothing else.

Posted in: Infographic of the day