Cautionary Tales & A Dual Lens
Explore strategy through the competing lenses of Michael Porter’s analysis and Henry Mintzberg’s emergent view.
Almost everyone in the room already uses the word “strategy” at work. This session makes the word precise enough to be useful — and precise enough to be wrong, which is what makes it a decision tool rather than a compliment.
The three questions
Each question belongs to one reading. Porter answers the first, Collis & Rukstad give the test for the second, Mintzberg answers the third. The Tesla case is where all three get argued out loud.
What you will be able to do
By the end of this session, students should be able to:
Practise these outcomes through the productivity frontier, activity-system examples, strategy statement, strategy-pattern diagram and Tesla case discussion.
Question 01 · Porter (1996)
Porter’s argument (Porter, 1996) begins with a negative, and the negative is the useful half: being better at what everyone is already doing is not a strategy. Running the same activities faster, cheaper or with fewer defects is operational effectiveness. It is necessary, it is often urgent, and it is almost always copied.
Doing the same activities better than rivals do them.
Deliberately performing different activities, or the same activities differently.
Porter’s exhibit · operational effectiveness versus strategic positioning
Porter asks you to “imagine for a moment a productivity frontier that constitutes the sum of all existing best practices at any given time” — the maximum value a company can create at a given cost, using the best available technologies, skills, management techniques and purchased inputs (Porter, 1996). Operational effectiveness is how close you are to it. Strategic positioning is where on it you choose to stand.
Porter’s exhibit is conceptual and has no units. The positions and 0–100 scores here are illustrative; they exist only to make movement visible. A lower cost score means lower relative cost (further right); a higher buyer-value score means more value (higher up).
| Firm | Cost score | Buyer-value score | Behind the frontier |
|---|
1. A distinct position
Serving different customers, different needs, or the same needs through a different configuration of activities.
2. Genuine trade-offs
Choosing this position must make some other position harder to occupy. If a rival can add your move without giving anything up, it is not protecting you.
3. Fit across activities
The choices reinforce one another, so advantage rests on the whole system rather than any single part. Rivals must copy everything, or copying gains them little.
This is why Porter (1996) treats fit as the real source of durability. A competitor can hire your supplier, match your software or poach your head of operations. Reproducing a system of dozens of mutually reinforcing choices is a different problem entirely.
Decide before you read the verdict. The point is the reasoning, not the score.
Porter 1996 · from individual activities to a connected system
Operational effectiveness asks how well an activity is performed. An activity-system map asks which activities were chosen, how they support one another and what the position requires the firm to give up.
Porter asks how activities reinforce each other. Select a node to trace its links, then explain the mechanism. Copying one activity can improve execution; it does not by itself reproduce the benefits of a connected system. The map is a simplified teaching reconstruction of the Southwest example in Porter (1996), not a description of today's airline policies.
Select any activity in the map to trace its connections.
Simplified historical teaching map. Dark circles highlight central themes; light circles show supporting activities. Selecting a node highlights its links without fading other labels. On a small screen, use the activity selector and written explanation for larger text.
First-order fit
Consistency: each activity supports the chosen position. Ask whether any activity contradicts the promise.
Second-order fit
Reinforcement: doing one activity increases the value of another. Name the link and explain why it works.
Third-order fit
Optimisation of effort: coordination removes duplicated work or reduces the need for another activity.
These three mechanisms can coexist. They are not guaranteed levels of competitive advantage or a fixed ranking of imitation difficulty. The question is what the evidence demonstrates: alignment, reinforcement or coordination that reduces wasted effort.
A limited menu simplifies purchasing and preparation. Preorders can make batch sizes more predictable; timed delivery rounds can support reliable arrival. Ask which links are plausible, and what accepting a custom menu would disrupt.
Use the IKEA photo story and company sources to trace design, flat packing and customer choices. Which pair of activities reinforces the affordable-furniture promise? Which services are available today, and at what cost?
Use the DMart photo story and FY 2024–25 report to identify choices consistent with its position. Distinguish documented practices from your proposed causal links; consistency alone does not prove every form of fit.
Choose before reading the explanation. All six scenarios are fictional. Identify the mechanism most directly supported by the stated evidence; different forms of fit can coexist.
Practice score: 0/6
One-minute reflection: Choose a business, draw three activities and two connecting arrows, then explain each arrow. Use actual case evidence for a real company and label assumptions for a hypothetical one. Name one attractive opportunity the position would require it to refuse.
Let's start by looking at companies that once dominated but failed to adapt. What went wrong?
Nokia's operational excellence in hardware manufacturing built a global empire. But when Apple's iPhone (2007) and Google's Android (2008) shifted the battleground to software ecosystems and user experience, Nokia faltered.
Peak:
Dominated with >40% global market share via superior hardware & operational efficiency.
Downfall:
Dismissed iPhone/Android, clung to aging Symbian OS, failed pivot with Microsoft Windows Phone.
Porter's Lens:
Confused Operational Effectiveness (great hardware) with Strategy. Lacked a unique position when the game shifted to software ecosystems. Failed analysis of substitutes (smartphones replacing feature phones).
Mintzberg's Lens:
Rigid deliberate strategy (hardware focus) stifled internal emergent ideas (touchscreens, app stores developed internally years prior). Organization forgot how to learn and adapt its 'craft', ignoring warnings from engineers.
Kodak's 'razor-and-blades' model (cheap cameras, profitable film/printing) was a masterpiece of strategic 'fit' in the 20th century. But this very success blinded them to the digital disruption they pioneered in 1975.
Peak:
Mastery of 'fit' with razor-and-blades model. Market cap $28B (1996).
Downfall:
Feared cannibalizing film, suppressed own digital invention, half-hearted pivot focused on printing, bankruptcy (2012).
Porter's Lens:
Unwillingness to make the crucial trade-off: sacrifice highly profitable film for uncertain digital. Tried to straddle both (focusing digital efforts on printing photos), creating no clear position or reinforcing 'fit' in the new digital imaging world. Failed to properly assess the power of the digital substitute.
Mintzberg's Lens:
The powerful, established deliberate strategy (protect film) actively killed the brilliant emergent strategy (the digital camera born in its own labs). The formal planning process and culture were too rigid, crushing organizational learning and the ability to 'craft' a new future.
Yahoo was the gateway for millions in the early internet era. However, missed opportunities (failing to buy Google and Facebook), strategic indecision between being a media vs. tech company, and constant leadership changes led to its decline.
Peak:
The web's front door, human-curated directory, market cap >$125B (2000).
Downfall:
Missed Google/Facebook buys, unclear identity (media vs tech), leadership churn, acquired assets mismanaged (Flickr, Tumblr), sold core business for <$5B (2017).
Porter's Lens:
'Stuck in the middle' - tried to be everything (portal, media, search, tech) with no clear, unique position. Failed to make necessary trade-offs. Acquired assets (Flickr, Tumblr) didn't create reinforcing 'fit' with the core portal strategy.
Mintzberg's Lens:
Strategy was chaotic, not crafted or emergent. Constant CEO changes imposed disjointed deliberate strategies (the 'peanut butter manifesto' era vs. Marissa Mayer's tech focus). Internal conflicts (media vs. tech) prevented any coherent pattern from emerging or organizational learning to occur.
Synthesis · 5 minutes
You have just read three failures in detail. Before you watch the general argument, commit to a diagnosis for each one. Then watch, then come back and see whether you would still sign the same death certificate.
One primary cause each. You will be told when a second cause is also defensible.
The mechanism · Sull (1999)
The comfortable explanation for Nokia, Kodak and Yahoo is that they saw the threat and did nothing. Donald Sull went looking for that paralysis in firms that had fallen this way and reports finding almost none of it. Managers of besieged companies usually spot the threat early, analyse it carefully, and launch a flurry of initiatives. They fail anyway.
His name for this is active inertia, and the term is borrowed precisely. In physics, inertia is not only a body at rest; it is also a moving body’s tendency to persist along its existing path. The problem is not an inability to take action but an inability to take appropriate action — the response follows the grooves that produced the earlier success.
Sull identifies four things that make a company successful and then, unchanged, make it rigid. Select one to see how it showed up in each of the three firms above.
Why this matters for Session 1
Sull is describing the same failure Porter describes, from the inside. Porter says a position requires trade-offs and that competing only on operational effectiveness converges the industry. Sull explains why a capable management team cannot simply choose otherwise: the frames, processes, relationships and values that delivered the old position are still there, still working, and still pointing the wrong way.
It is also the answer to the smug version of this session. Every one of these firms was run by intelligent people who could see what you can see. Ask what your own organisation does superbly today that it would be unable to stop doing.
Both versions of Sull’s article are in the readings — the full Harvard Business Review treatment and a shorter Financial Times piece.
Now that we've seen the consequences, let's formally define the two strategic perspectives we used for analysis.
Porter views strategy as a deliberate, analytical process of positioning. Analyze the industry structure (Five Forces), choose a unique, defensible position (Cost Leadership, Differentiation, Focus), and build a reinforcing system of activities ('fit'). The key is making trade-offs – choosing what not to do.
Key Concepts:
Mintzberg pushes back, arguing that real strategy often isn't a grand plan but emerges organically. It's 'crafted' through learning, adaptation, and patterns forming from daily actions. Formulation and implementation are intertwined, like a potter shaping clay.
Key Concepts:
Porter identified three distinct sources from which a strategic position can emerge: needs, variety, or access. Let's see them in action.
Serving most or all needs of a particular customer group.
Need: Beauty shoppers need product choice, authenticity and help choosing.
Activities to examine: Beauty content, retail assortment and physical product discovery.
Interpretation: A needs-based lens is useful only if these activities differ from a general retailer's. Read the context and evidence.
Need: Furnish a home affordably while accepting some self-service.
Activities to examine: Room displays, flat-pack design and a coordinated shopping/assembly process.
Trade-off: Convenience is partly shifted to the customer or a separately chosen service. Trace the activity system.
Producing a subset of an industry's products or services.
Subset: Specialised eye-care services rather than every hospital speciality.
Activities to examine: Eye-care expertise, dedicated facilities and linked outreach.
Boundary: Specialisation is a starting point, not proof of advantage. Its outreach also invites an access-based reading.
Subset: Focus on automotive lubrication services rather than the whole repair market.
Activity logic: Specialised facilities and processes can serve that bounded job differently.
Lesson: Variety-based means a subset of services, not a large assortment. This is the article's historical illustration, not a current service catalogue.
Segmenting customers accessible in different ways.
Access barrier: Distance, awareness and affordability can keep patients from reaching eye care.
Different activities: Local community partners, screening camps and referral to hospitals.
Lesson: Lowering a price alone is not an access position; redesign how customers are reached. Read Aravind's account.
Access Barrier: No direct, cheap flights from small US cities.
Solution: Low-cost model using secondary airports.
Position: Affordable flights for underserved cities.
The three positions differ primarily in their starting point or focus, dictating how activities are structured.
| Characteristic | Needs-Based | Variety-Based | Access-Based |
|---|---|---|---|
| Primary Focus | Specific customer group | Subset of products/services | Unique customer accessibility |
| Segmentation | Customer needs/profile | Product/service itself | Geography, scale, channel |
| Target Market | Chosen group and relevant needs | Customers needing a bounded service | Customers needing a different delivery system |
| Starting Question | Whose needs shape the system? | Which services will we specialise in? | How must reaching customers differ? |
Consider a hypothetical lunch firm in an Indian city. The same market can support different positions. A customer label or a promise alone is insufficient: show how the kitchen, menu, ordering and delivery must work differently.
Story: office workers have plenty of food apps, but want one reliable vegetarian weekday lunch. Offer that limited service, not every cuisine or occasion.
Activity chain: narrow menu → pooled ingredient buying → batch preparation → predictable cost. Refuse customised dinner catering.
Compare: Porter's 1996 Jiffy Lube illustration focuses on a limited automotive service; Aravind's eye-care specialisation is an Indian starting point to investigate, alongside its access model.
Story: students in hostels need affordable meals, timetable compatibility and dependable portions. Design the bundle for that group; do not claim to meet everyone's needs.
Activity chain: hostel contracts → timetable-based menus → subscription ordering → common delivery slots. Refuse distant corporate events.
Compare: IKEA's affordable furnishing system and Nykaa's beauty-focused content/retail system show how a chosen set of needs can shape several activities. Read IKEA · Read Nykaa.
Story: factories on the city's edge need ordinary lunches, but scattered individual delivery is costly. Serve a cluster through an employer collection point.
Activity chain: pooled advance orders → one route → common collection point → lower delivery effort per meal. Refuse one-off doorstep orders across the city.
Compare: Allegiant describes service to underserved leisure-travel cities; Aravind uses community partners and outreach camps to address barriers to eye care.
Do not confuse variety-based positioning with offering lots of variety. It concerns a subset of services supported by a distinct activity system. Needs, variety and access can combine. Use the strongest starting point, then explain the activities and sacrifice.
"Fit" is how a company's activities interact and reinforce one another, making strategy sustainable and hard to copy. Porter identifies three levels.
Basic alignment: each activity is consistent with the overall strategy.
Strategy: Quick, affordable, consistent fast food.
Consistency: Standardized menu, store layout, drive-thru, operating procedures all reinforce speed and low cost.
Strategy: Low-cost, mass-market detergent.
Consistency: Cost focus in manufacturing, rural distribution, low-price ads, simple packaging all align with the low-cost position.
Activities actively reinforce one another; the whole > sum of parts.
Strategy: Low-cost, convenient, point-to-point travel.
Reinforcement: Single plane type simplifies maintenance/training -> quick turnarounds -> high utilization -> low fares.
Strategy: High-quality, aspirational watch brand.
Reinforcement: Stylish design + exclusive 'World of Titan' retail experience + quality after-sales service = reinforced premium brand image.
Coordination across activities eliminates redundancy and waste.
Strategy: Stylish, affordable, self-assembly furniture.
Optimization: Modular design -> flat-packing -> efficient logistics + customer self-service/transport/assembly = optimized low-cost system.
Strategy: Market leadership via superior supply chain.
Optimization: Advanced demand forecasting + small-batch production + frequent dealer deliveries + in-store tinting = minimized inventory/waste.
| Feature | First-Order Fit | Second-Order Fit | Third-Order Fit |
|---|---|---|---|
| Definition | Each activity consistent | Activities reinforce each other | Activities optimized across system |
| Purpose | Alignment | Synergy (Whole > Sum) | Max efficiency, eliminate waste |
| Analogy | Puzzle pieces fit edges | Intertwined chain links | Optimized, interlocked puzzle |
| Imitability | Depends on the activity and context | Copying one activity may miss the links | Coordination can raise copying costs; no guarantee |
Ten positions worth knowing
Start with the six photo stories: understand the situation, the decision and the activity mechanism. Then use the ten short position prompts to challenge a proposed trade-off. Company facts and teaching interpretations are distinguished; historical models are not current service guarantees.
June 2020–June 2023
In June 2020, Apple announced that Macs would move from Intel processors to Apple-designed silicon.
The decision: It set an approximately two-year goal and equipped developers for the transition. The new Mac Pro completed the lineup in June 2023.
The activity mechanism: A common chip architecture linked hardware, macOS and applications. Developer tools, universal binaries and Rosetta 2 helped carry existing software across the change.
The trade-off: Architectural control required investment and a managed transition for developers and Intel users; it was more than swapping a component.
Teaching interpretation: The announced direction supports a deliberate-strategy reading. Finishing later than the initial goal does not, by itself, establish an emergent strategy.
What would challenge this reading: Which decisions departed from prior intentions? What evidence would distinguish learning-driven changes from ordinary implementation delays?
Company sources: Apple announces Mac transition to Apple silicon · Apple unveils new Mac Studio and brings Apple silicon to Mac Pro
Before you move on: Can a strategy be deliberate if its timetable changes?
Flat-pack model from the 1950s; contemporary services distinguished
Furniture transport was costly and could damage products. IKEA adopted flat-pack and customer assembly as central parts of its model.
The decision: Product developers design for dense packing from the outset; shoppers can collect flat packs in a self-service area.
The activity mechanism: Design, packaging, transport, storage and customer assembly share one constraint: deliver useful furniture with less space and handling cost.
The trade-off: Packing requirements can constrain a designer's preferred form, while customers contribute time and effort to assembly.
Teaching interpretation: This illustrates coordinated effort across activities, rather than a magic benefit from one cheaper warehouse. A needs-based lens asks which budget-conscious furnishing needs the system serves.
What would challenge this reading: Would customers still choose the offer if assembly effort rose? Which savings survive when delivery or assembly services are added?
Company sources: How IKEA took flatpacks to a whole new level · What is the layout of an IKEA store?
Before you move on: What breaks if a rival copies only the flat pack?
Glitch development and the subsequent commercial pivot
Tiny Speck's team built an internal communication tool while developing the game Glitch.
The decision: After the game ended, the founders chose to develop that tool for wider use instead of returning to email-centric coordination.
The activity mechanism: An activity created to solve the team's own problem became a candidate product. Recognising its value was followed by an intentional commercialization decision.
The trade-off: A useful internal tool was not yet a dependable offer for other organisations; the team needed to serve customers beyond its own workflow.
Teaching interpretation: The opportunity emerged outside the original game offering. The subsequent choice to build a business around it was deliberate; 'accidental origin' does not describe every later decision.
What would challenge this reading: What repeated external use or customer feedback validated the opportunity? An origin anecdote alone cannot establish the whole realized strategy.
Company sources: What is Slack and how does it work? · Using Slack like a Slack developer
Before you move on: At what point does an emergent opportunity become a deliberate commitment?
FY 2024–25 disclosures
A grocery shopper can see a price, but cannot see the procurement and operating choices that sustain it.
The decision: DMart describes an everyday low-cost/everyday low-price model, supported by careful assortment, local sourcing and distribution capabilities.
The activity mechanism: Buying and operating costs support recurring low prices rather than occasional discount events. Assortment and logistics must remain consistent with that promise.
The trade-off: The model still carries inventory and real-estate commitments. Adding convenience features must be assessed against their cost, rather than assumed to fit automatically.
Teaching interpretation: This is a first-order-fit application: several choices align with value retailing. The report also records inventory and competitive risks, so 'flawless fit' is an unsupported conclusion.
What would challenge this reading: Track availability, inventory turnover and operating costs. Would lower prices still be sustainable if those activities weakened?
Company sources: Avenue Supermarts Annual Report FY 2024–25
Before you move on: When is a low price a strategy, and when is it merely a promotion?
FY 2024–25 beauty-business disclosures
Beauty shoppers need help choosing products and confidence in their source, not simply an online checkout.
The decision: Nykaa reports content-led education, an inventory-led beauty model sourced from brands or authorised distributors, and a physical-store network.
The activity mechanism: Education can support discovery; sourcing addresses authenticity; stores permit trial and advice. Their reinforcement is a testable strategic proposition, not proof that content automatically converts.
The trade-off: Owning inventory and operating stores create costs and working-capital exposure alongside the intended trust and availability benefits.
Teaching interpretation: Use a needs-based lens for beauty shoppers, then test second-order fit among education, sourcing and retail experience. This does not classify every Nykaa business identically.
What would challenge this reading: Would repeat purchase and contribution improve across channels after controlling for discounts? What evidence shows one activity strengthens another?
Company sources: FSN E-Commerce Ventures Integrated Annual Report 2024–25
Before you move on: Which link in this trust system would be hardest to copy?
2010 intentions; 2015–16 online-ordering learning
Foodiebay started as restaurant information, but its founder's 2010 account already described ambitions beyond directory listings.
The decision: Zomato launched online ordering in 2015. Its 2016 accounts describe learning by doing and developing support and delivery capabilities.
The activity mechanism: Discovery traffic could feed ordering demand, while order failures created a need for support and fulfilment coordination: new activities had to connect to the existing platform.
The trade-off: Taking responsibility for a transaction introduces reliability and fulfilment costs that a restaurant-information service does not carry in the same way.
Teaching interpretation: This supports a story of learning alongside intent. The founders' earlier ambitions and delivery experience prevent a confident 'purely emergent' label.
What would challenge this reading: Find dated plans and repeated operational changes. Which patterns preceded formal commitments, and which implemented an already chosen direction?
Company sources: Foodiebay – Second Innings · Two million meals on, here's what we've learned from our online ordering business · Our Unit Economics for Food Delivery in India
Before you move on: Does a new business line prove emergence, or do we need evidence of prior intentions?
Photographs identify a company, product or setting; they do not prove the proposed strategic mechanism. Open a story for source evidence, interpretation and a question to challenge it.
A promising position names a customer benefit, the activities that support it and a valuable opportunity that becomes harder to pursue. These are hypotheses to test, not permanent labels. Ask which links a rival could reproduce, what has changed since the example's source period, and what evidence would reverse your judgement.
Question 02 · Collis & Rukstad (2008)
The blunt answer: without a strategy, every function optimises locally and the firm competes on whatever the loudest customer asked for most recently. Collis and Rukstad (2008) make the point diagnostically — most executives cannot state their firm’s strategy in a single clear sentence, and a strategy nobody can state cannot guide anybody’s choices.
Objective
A single measurable end, with a deadline. Not “be the leading provider” — leading on what, by when?
Scope
Where you will and will not compete: customer, geography, product, stage of the value chain. Scope is where the word no appears.
Advantage
Why the chosen customer picks you and keeps picking you — the customer-facing promise and the activities that make it deliverable.
All three are useful and none of them is a strategy. They do not tell a product manager which segment to drop. The test is simple: if the sentence cannot be used to refuse an opportunity, it is not doing strategic work.
Pick any firm you know well. Fill all three and read it back.
Question 03 · Mintzberg (1987)
Mintzberg’s objection (Mintzberg, 1987) is not that planning is wrong but that it is an incomplete account of where strategies come from. He describes the work as crafting — closer to a potter at the wheel, hands on the material, adjusting as the shape reveals what it will and will not do, than to an analyst producing a plan for others to execute.
Intended, articulated in advance, and realised roughly as intended. Requires a predictable enough environment for the intention to survive contact with it.
A pattern that forms through a stream of decisions without anyone having intended it up front. Recognised in hindsight — then, if it is working, adopted on purpose.
The pattern the firm actually followed. It can contain deliberate and emergent strands; the framework does not require both in every case. An intended strand that never happens is unrealised.
If strategies can emerge, then a central managerial skill is detecting a pattern already forming in your own organisation — usually in a corner of the business that nobody is presenting at the review. The manager’s job is less to invent the future in a planning cycle than to notice which experiments are quietly working and decide which of them to make deliberate. That skill is diagnostic, and it is the one a purely planning-led view trains out of you.
An original hypothetical example: a lunch firm plans office subscriptions and event catering. Over three months it delivers office lunches, drops catering and repeatedly accepts student orders that staff discovered locally. Read the diagram against the dated plan and the actual decisions.
Launch weekday office subscriptions and a catering service. Intention is evidence of a plan; it is not proof of execution.
Office subscriptions are delivered repeatedly, as the original plan specified. This is the realised part of the original intention.
Catering never launches because the same kitchen cannot support both promises. This strand does not enter the realised strategy.
Staff repeatedly serve nearby student groups although the original plan did not target them. One surprising order alone would not establish a strategy.
Office subscriptions + the student-serving pattern. Management may now make the student offer deliberate for the next period.
Mintzberg in business history · Four timeline cases
Breaking down a company's timeline reveals the gap between boardroom planning and market reality. Compare these global and Indian business stories with the hypothetical lunch firm above. Before opening each story, predict what survived the original plan and what changed.
Intended is the prior plan. Its realised part is deliberate; its unfulfilled part is unrealised. A consistent pattern of organisational action without that prior intention is emergent. Realised is the pattern actually followed, whether commercially successful or unsuccessful.
Fix the actor and time window. A surprise, customer reaction or new idea is a learning signal, not automatically a strategy. Prior intention can be informal; a written plan is not required. Once a new intention is formed, its later execution can be deliberate. The mappings below are teaching interpretations of the linked histories; the evidence does not establish every category in every case. Read the supplementary Mintzberg & Waters (1985) framework.
The story. Steve Chen, Chad Hurley and Jawed Karim first explored video dating. Chen recalls that the dating proposition attracted no uploads, so the founders deliberately opened the service to any video. Later, embedding and sharing brought varied clips to new audiences. “Tune In, Hook Up” was an early slogan, not a different company name.
Manager's question: Which came first: the new intention, the repeated action or the customer signal? A single zoo video does not settle that sequence.
Evidence: Steve Chen's IEEE interview · Founders' Sequoia oral account. Retrospective accounts support the sequence; the category labels are our interpretation.
The story. Starbucks began in Seattle selling high-quality coffee beans and equipment for home brewing. Howard Schultz's 1983 visit to Italy suggested another offer: prepared coffee and a social café experience. Starbucks tested espresso in 1984. Schultz then founded Il Giornale in 1985; it acquired Starbucks' assets in 1987 and adopted the Starbucks name.
Manager's question: An idea can be unexpected for an existing organisation and deliberately executed by a new owner. Changing the actor changes the classification.
Evidence: Starbucks' dated company timeline · Official Il Giornale history. Historical illustration, not a claim about today's store model.
The story. Ratan Tata's affordable-car vision addressed families unable to own a car, including those travelling on two-wheelers. Tata developed and launched the Nano. The 2009 ₹1 lakh promise applied to the Standard BS2 model's ex-factory Pantnagar price, excluding transportation and VAT—not every buyer's on-road bill. Later GenX versions added equipment and an automated-transmission option, yet official May 2018 reporting recorded only 11 units produced and 20 domestic sales that month.
Manager's question: Compare affordability, customer aspirations, distribution and trust before claiming one cause of failure. These histories do not establish that Nano caused Tata's later company-wide design or safety direction.
Evidence: Tata's launch account · Qualified price promise · 2015–16 annual report · May 2018 production/sales disclosure. The monthly figures describe that period, not current sales or a lifetime total.
The story. Pfizer initially investigated sildenafil for cardiovascular uses, including angina and hypertension. The angina programme became less promising, while trial observations and developing scientific knowledge suggested an erectile-dysfunction application. A redirected clinical programme followed; Viagra received FDA approval and launched in 1998. The unexpected observation was a starting point for research, not an instant commercial success.
Manager's question: Separate discovery, exploration, a new commitment and execution. The historical case illustrates strategy formation; it offers no treatment advice.
Evidence: Research history coauthored by Pfizer's Ian Osterloh · FDA's published approval record · Pfizer's company history.
Eight short decisions connect the real histories with a hypothetical café. Choose an answer, read the explanation, then reset for another attempt.
0 / 8 correct
The lunch firm's staff discover student demand. Management then writes a plan to serve students and follows it for the next year. Explain why the first period can contain an emergent strand and the second a deliberate one.
Now choose one real case. Name the actor, the period and the evidence you would need to distinguish a consistent unplanned action pattern from a deliberate pivot. Defend what the available history can—and cannot—establish.
Return to the five-term lunch-firm diagramThe case · Elon Musk at Tesla (2024)
Bring the case having formed a view, not a summary. These prompts are written for this session and map onto the three questions above — the case supplies the evidence, and you supply the argument.
Note on the case. “Elon Musk at Tesla” (Serafeim & Migdal, 2024) is a Harvard Business School case and is not reproduced here — obtain it through the course pack. The prompts below are original to this session; full references are listed at the end.
Name the trade-offs Tesla has actually made — the things it has chosen not to do that a conventional carmaker does. For each, say what it would cost a legacy manufacturer to copy it. If a rival could adopt it on Monday without giving anything up, it is operational effectiveness, not position.
Write Tesla’s strategy statement in the Collis and Rukstad (2008) form — objective, scope, advantage — in under 35 words. Then write the same statement for a legacy carmaker’s EV division. Which one tells a manager what to refuse?
Tesla’s 2006 plan — sports car, then cheaper car, then cheaper still, plus power generation — is publicly documented. How much of what Tesla became was in that plan, and how much emerged? Energy storage, the charging network, direct sales, software margin: deliberate or emergent?
Is Tesla’s advantage the activity system — batteries, software, charging, direct distribution, manufacturing — or is it the founder? Both readings of the evidence are defensible, and they imply opposite things about durability. An activity system survives its architect. A founder-dependent advantage has a succession problem disguised as a strategy.
Take a side before class. You will be asked which specific evidence would change your mind — a position you cannot imagine losing is not an argument, it is a preference.
The exhibit workshop · 22 minutes
It is early 2018. You sit on the board of an established carmaker. Your chief executive says: “Tesla loses money on every car it sells. We are profitable. There is nothing here to learn.” You have the case exhibits in front of you. Decide.
Figures are from the assigned case workbook, FY2017, $ millions. Compute before you reveal — the reveal is worth nothing if you have not committed to an answer first.
| Firm | Revenue | Gross profit | R&D | Operating income | Gross margin | Operating margin | R&D % rev |
|---|---|---|---|---|---|---|---|
| Median, excluding Tesla | — | — | — | ||||
Finding 1
Ordinary at the gross line
Tesla's gross margin is 18.9% against an incumbent median of 17.7% — below Honda's 22.4% and Daimler's 20.0%. Whatever is happening here, it is not that Tesla builds cars unusually profitably.
Finding 2
The loss is a spending choice
From 18.9% gross to −13.7% operating is a fall of 32.6 points. R&D alone is 11.7% of revenue, 2.3× the 5.1% median — on a revenue base one-tenth the size. That is a decision, not a manufacturing failure.
Finding 3
Meanwhile it took the segment
Model S volume rose 76% from 2014 to 2016 while nine established rivals fell 25% between them, in a segment that shrank 8%. Share went from 16.7% to 31.9%.
Every figure below is computed from Exhibit 2 above, not quoted from anywhere else.
Research intensity vs research budget
Tesla spends $1,378m on R&D, which is only 17.2% of Ford’s $8,000m — yet as a share of revenue it is 2.3× Ford’s. A small budget spent at a very different intensity.
Return on each research dollar
Tesla earns $1.61 of gross profit per dollar of R&D. The median rival earns $3.84. Tesla is buying something that has not arrived yet — which is either a position being built, or money being burned.
Scale, and who is actually profitable
Tesla’s revenue is 7.5% of Ford’s. It lost $1,606m at the operating line, while 0 of 8 rivals posted a loss; their median operating income was +$7,994m.
Notice what none of this settles. A firm building an activity system and a firm failing at a conventional one produce similar-looking statements for a while. The question to take into class is which set of numbers would look different in 2022 under each reading.
| Model | 2014 | 2016 | Change | Share 2016 |
|---|
The chief executive is reading an income statement as if it were a strategy. The loss is what holding the position costs; the volume shift is what it buys. Whether that trade is worth making is the argument — that it is a trade rather than incompetence is the finding.
The opposite case is also defensible, and you should be able to make it: a firm losing 13.7% at the operating line on one-tenth the revenue has proved nothing durable, and one model in one segment in one country is thin evidence. Note that the BMW 7-Series rose 33% over the same period.
Name the refusal
What is Tesla choosing not to do that every rival does?
Name who pays
Buyers, suppliers, shareholders, employees — which, and how?
Give the number
What figure would change your recommendation?
Apply what you've learned. Make the strategic calls and see the consequences.
Imagine you are the CEO of 'VideoBarn', the dominant video rental chain in 2005. A small startup called 'Netflix' is mailing DVDs and has started talking about "streaming." What is your strategic move?
You run a successful regional newspaper with high local readership and ad revenue (circa 2008). Online news sites are gaining traction, often giving away content for free. What's your move?
Your budget airline is known for rock-bottom fares. A consultant suggests adding free checked bags and snacks like major carriers to attract more customers. According to Porter, should you do it?
You are launching a new electric car company in a market dominated by legacy automakers. You have limited capital. Choose your path step-by-step.
From study note to decision
Use the three study notes in a fictional Indian meal-service setting. Compare the original plan with a record of actions, connect activities to consequences, and defend a position through its costs and refusals. All scenarios and numbers are original educational assumptions, not company data or business forecasts. Your answers stay in this page; nothing is uploaded or saved.
Inspect an intended plan, recurring observations and the actions that actually follow. Read the Mintzberg note.
Test how fixed menus, preorders and clustered routes connect. Read the fit note.
Compare a service subset, a needs bundle and a reach constraint. Read the positioning note.
In the room
One partner names a firm and its supposed advantage. The other plays a well-funded rival and has three minutes to describe exactly how they would copy it. If the copy is straightforward, the “advantage” was operational effectiveness. Swap and repeat.
What to hand in
One sentence: the single choice that made the copy expensive.
Roles: CEO (states the strategy in one sentence), CFO (asks what we stop funding), Head of Sales (brings a large customer who falls outside scope), Director (asks what would have to be true for this to fail). The CEO may not answer any question with “both”.
What to hand in
The opportunity the CEO refused, and the reason given.
Every class ends with a graded quiz on its three questions and the case. To be ready, check that you can do three things without notes: define strategy without using the words best, leading or world-class; name one trade-off your own employer has made; and name one strategy there that emerged rather than being planned.
Test your understanding of the core strategic concepts.
Knowledge check
Answer first; the reasoning appears immediately. A wrong answer here is cheaper than a wrong answer in the exam.
Your Session 1 study notes
Use these four supplied companion notes alongside the assigned articles. The examples on this page distinguish documented company events from teaching interpretations, and clearly label fictional scenarios. A changed outcome alone does not prove emergence, and a coherent activity system does not guarantee profit.
Compare the original intention with repeated actions. Identify deliberate, emergent and unrealised strands before naming the realised pattern.
Trace consistency with a promise, reinforcement between activities and coordination that reduces duplicated effort. Explain the causal link rather than awarding a company a permanent fit label.
Start with a specialised service, a particular set of customer needs or a different way of reaching customers. Then specify an activity system and a costly refusal.
Test the new note's classifications against current evidence. Product ranges, customer groups and distribution channels change; a business can combine positioning lenses. The three applications below distinguish company facts from our teaching interpretation.
Context: India's wider mobility market includes different vehicle and fuel types. Ather's electric scooter catalogue addresses multiple rider segments, while its charging guidance describes home and public charging.
Teaching interpretation: Electric scooters form a product subset within that wider industry. Engineering, software and charging can reinforce this focus; charging access and investment remain constraints. This is not a claim that Ather serves only performance riders.
Defend the lens: Which activity would become harder if Ather also built petrol motorcycles? What evidence would you need?
Context: People actively managing fitness and recovery need more than an activity count. WHOOP's membership offer combines a wearable, sleep, strain and recovery insights, and personalised coaching.
Teaching interpretation: The connected bundle can serve a particular set of needs. Recurring membership costs and sustained engagement are trade-offs to investigate. A focused feature list alone does not establish needs-based positioning.
Defend the lens: Which needs are served together, and which customers might prefer a different bundle?
Context: Remote households can need the same connectivity as urban households but face different delivery economics. Starlink's 2025 progress report describes rural and remote connectivity; its installation guide requires a clear view of the sky.
Teaching interpretation: Satellites and user terminals provide a different system for reaching customers. Equipment, installation and capacity are constraints. This example does not imply universal coverage or availability in India.
Defend the lens: How does reaching these customers change activities and costs, even when their basic needs are similar?
Company sources checked 12 October 2026. These lenses are hypotheses to defend, not permanent labels or proof of competitive advantage. Apply the same reasoning to the fictional lunch-service scenarios before returning to actual case evidence.
Links open the original Drive resources. Use your course account if access is requested. Assigned articles and case-pack PDFs remain subject to their publisher/course access terms; this page hosts original teaching applications, not copies of those readings.
Preparation
Read the case last, after the three articles — it is the material you argue with, and the articles are the tools you argue with. The four required items are obtained through the course pack, and the recommended ones are in the session folder; none is reproduced on this page. The companion notes above help you practise the concepts before the case discussion.
Elon Musk at Tesla (2024)
Harvard Business School. The session’s anchor case.
Porter, M. E. (1996). What Is Strategy? Harvard Business Review.
Operational effectiveness versus positioning; trade-offs; fit.
Mintzberg, H. (1987). Crafting Strategy. Harvard Business Review.
Deliberate and emergent strategy; strategy as craft rather than plan.
Collis, D. J., & Rukstad, M. G. (2008). Can You Say What Your Strategy Is? Harvard Business Review.
The strategy statement: objective, scope, advantage.
Sull, D. N. (1999). Why Good Companies Go Bad. Harvard Business Review, 77(4). (Reprint No. 99410)
The source of active inertia and the four mechanisms — frames becoming blinders, processes becoming routines, relationships becoming shackles, values becoming dogmas. Read it against the three Fallen Giants above.
Sull, D. N. (2005, October 3). Why good companies go bad. Financial Times.
The same argument in a few pages, with a wider set of examples. Start here if you are short of time, then read the 1999 article for the mechanisms in full. Sull also wrote the Tesla industry case used in Session 2.
APA 7th edition. Cited in the text by author and date.
The HBR articles and the Harvard case are reproduced nowhere on this page; obtain them through the course pack. Sull and Reavis (2019) is published under a Creative Commons Attribution–NonCommercial–NoDerivatives licence, so it may be shared unmodified with attribution for non-commercial teaching use.
Public reference used in the Tesla prompts
Tesla’s 2006 master plan is published by the company and is worth reading in the original before class: The Secret Tesla Motors Master Plan (just between you and me).