vs. NeueHealth
Oscar Health
Narrow partner networks priced to win
- What it did
- Dropped costly NY hospitals, built Texas on Tenet and Baylor (2016)
- NeueHealth
- Same idea: one Care Partner system per market from Colorado (2017)
Trade-offs & activity fit
What is Trade-offs & activity fit?
A trade-off is giving up one thing so you can do something else well. Activity fit means the things a business does help each other work better. Together, these choices form what Porter calls an 'activity system': a way of running the business in which the parts support each other. In 'What Is Strategy?', he argues that running efficiently is necessary, but a strategy also requires doing different things from competitors, or doing the same things differently. A lasting advantage depends on choices that are costly to copy and work best together. Rumelt calls for 'coherent action', meaning actions that support the same plan. Martin and Lafley likewise describe strategy as a set of choices that work together.
How Trade-offs & activity fit works
A competitor may be able to copy one thing you do. Getting the same benefit from the whole set of choices is harder: it would have to change how its own business works and give up parts of its existing strategy. These choices also guide the development of Process Power: ways of working that a company gets good at over time and competitors struggle to copy.
How companies won with Trade-offs & activity fit
From the win chains in Strategy Canon case studies: what the winner did, and what its rival did at the same step.
vs. Digg · 2008–10
Lean team that kept siding with users, not publishers
- What it did
- Six staff and four engineers at 900,000 daily visitors (Sept 2010)
- Digg
- 70+ staff and a projected $5.3M loss (2008); v4 let publishers auto-submit and removed bury (Aug 2010)
vs. Wix · 2016–24
Squarespace
Same cash flow on a smaller, paying base
- What it did
- Net income every year 2016–21; $150M operating cash flow on $621M revenue (2020)
- Wix
- $148M operating cash flow on $989M revenue with a $216.5M net loss (2020)
vs. PayPal Here · 2011–15
Block
One simple rate inside a stack rivals copied piecemeal
- What it did
- No monthly, terminal, gateway or compliance fees and no long contracts (2015)
- PayPal Here
- PayPal Here matched price and reader at 2.7% plus 1% debit cash back (2012) without the rest of the stack
Also tagged: Adobe · AGNT / eXp · Carvana · Figma · Friendster · Jobber · Linode · Sermo
The question to ask of a company
What has the company deliberately chosen not to offer or do? How would adding it make the rest of the business work less well?
Who names it — 2 of the canon
| Author | What they call it / where it appears |
|---|---|
| Porter | Trade-offs; fit among activities; the activity system |
| Rumelt + | Coherent action; the kernel |
| Martin & Lafley | Strategy as an integrated set of choices |