A Good Affiliate Doesn't Need A Strategy.

In 1979, Michael Porter published a seminal article in the field of business strategy: “How Competitive Forces Shape Strategy." Porter identified five forces that affect corporate strategy within any given industry:

• The treat of new entrants
• The bargaining power of suppliers
• The bargaining power of buyers
• The treat of substitute products or services
• Rivalry among existing competitors

Porter argued that these forces result in three generic business strategies; and that the most successful businesses were those that stuck to one or at most two of these:

• Overall Cost Leadership (compete on price)
• Differentiation (create something unique)
• Focus (on a particular type of buyer)

Dozens of books and hundreds of case studies followed. Entire business school courses revolve around Porter’s work and to this day, Michael Porter is probably the best known and most cited academic in the field of business and economics.

Twenty five years later, Bruce Greenwald (who had been my favorite professor in business school) and Judd Kahn published Competition Demystified. Reading it today, I can see the influence Greenwald had on me.

“We agree with Porter that the five forces—Substitutes, Suppliers, Potential Entrants, Buyers, and Competitors within the Industry—can affect the competitive environment. But unlike Porter and many of his followers, we do not think that those forces are of equal importance. One of them is clearly much more important than the others. It is so dominant that leaders seeking to develop and pursue winning strategies should begin by ignoring the others and focus only on it. That force is barriers to entry—the force that underlies Porter’s Potential Entrants.’”

Any affiliate owner knows that there are not significant barriers to entry for new CrossFit affiliates. There is a great deal of complaining among box owners that it is too easy for new affiliates to pop up down the block. Many affiliates try to develop a unique competitive strategy that distinguishes them from everyone else. Such strategies are a waste:

“If there are no barriers to entry,then many strategic concerns can be ignored. The company does not have to worry about interacting with identifiable competitors or about anticipating and influencing their behavior. There are simply too many of them to deal with.”

“Life in an unprotected market is a game played on a level field in which anyone can join. In these  markets, often but mistakenly identified as ‘commodity’ markets only the very best players will survive and prosper and even they will have to be continually be on their toes. Without the protection of barriers to entry, the only option a company has is to run itself as efficiently and effectively as possible.

Operational effectiveness might be thought of as a strategy, indeed as the only strategy appropriate in markets without barriers to entry. However, operational effectiveness, identified by Michael Porter as doing what rivals do but doing it better is an internal matter. According to our definition of strategy it is tactical rather than strategic. That does not make it insignificant. Operational effectiveness can be the single most important factor in the success, or indeed the survival of any business. . . . [T]he pursuit of operational effectiveness does not require the consideration of all external interactions that are the essence of real strategy.”

What this means is that it simply doesn’t matter what other affiliates or other gyms are doing in your neighborhood. You cannot make any significant moves to preempt your competitors. You cannot make it costly for your customers to switch. You cannot lobby the government or CrossFit HQ to keep competitors out.  The only thing you can do to survive and thrive is run your affiliate as efficiently as possible.  All you can do is pursue excellence.

When we started CrossFit NYC, we were the only affiliate in Manhattan. Now there are twenty four, six within about a quarter mile of us. We have about another dozen boutique gyms within walking distance, all offering various “high intensity” programs. Every time another gym opens, we ask ourselves how we should respond in the market, and the answer is always the same: we shouldn’t respond. We should look internally and get better at what we’re doing. Better at coaching. Better at scheduling. Better at cost control. Better at customer service. Better at facilities management.

The answer is never to match or counter our competitors. We aren’t adding yoga or boot camp classes just because other gyms have yoga and boot camp classes. We aren’t going to compete on who can have the most luxurious locker rooms or the best shampoo. (Yes, this is a thing around here.) We aren’t going to worry that a nearby affiliate is sending a team to the Games. We aren't adjusting our pricing based on anyone else's pricing. All we concentrate on is on getting more efficient.