Two restaurants on the same street.

Both accept orders online, serve meals quickly, keep an eye on costs, and try to reduce waste. Even the ordering and payment experience has become quite similar.

Operationally, both may be very good.

But when lunchtime comes, one fills up with customers while the other is still looking for ways to attract them.

If both companies operate efficiently, why does one outperform the other?

This question leads to an important idea in strategic management: being good at running your business doesn’t necessarily give customers a reason to choose you over a competitor.

One of the concepts covered in Dr. @Mahran Hafizullah’s strategic management course at Al Yamamah University is the distinction between operational efficiency and strategy. Improving operational efficiency matters, but on its own, it isn’t enough to build a sustainable competitive advantage.

When everyone gets faster

Put simply, operational efficiency means carrying out a company’s work more effectively.

A company might reduce the time it takes to serve a customer, make better use of its resources, cut waste, or improve its internal processes.

These things matter to every company.

The problem begins when competitors can do the same.

If one restaurant introduces a new system that speeds up ordering, another can use similar technology. If a company reorganizes its operations to move faster, a competitor can study its approach and try to achieve the same result.

In this way, an advantage that initially seemed exceptional can become standard practice in the market.

A few years ago, offering an easy-to-use ordering app might have set one business apart from another. But once the technology spreads among competitors, customers come to expect it; it is not necessarily a good enough reason to choose one particular company.

That’s where the difference between improving how you work and having a reason to outperform becomes clear.

This distinction is not new in strategic management literature. In his well-known 1996 article What Is Strategy?, Michael E. Porter distinguished between operational efficiency and strategy, explaining that performing activities more efficiently does not necessarily mean occupying a strategic position that differs from competitors.

So, what is competitive advantage?

The course raises two fundamental questions in strategic management: How should a company compete to gain a competitive advantage? And how can it build an advantage that is valuable and unique, and difficult for competitors to imitate or replace?

This shifts the discussion from inside the company to the market.

The question is no longer just:

How can we do the work better?

It is also:

Why should customers choose us in the first place?

The answer may lie in cost, in what makes the company’s offering different, or in how it serves a particular market. The strategic management course covers concepts such as cost leadership—the ability to compete on the basis of lower costs—and differentiation, or offering value or features that set a company apart from competitors in customers’ eyes. A company can also focus on a particular segment or compete across a broader market.

That distinction matters.

Cutting costs is not simply a matter of reducing expenses, and differentiation is not just about giving a product a different look. In either case, what the company does must translate into a genuine competitive value in the market.

The restaurants sell food—but not necessarily the same thing

Let’s return to the two restaurants.

Both may be fast, clean, and well organized. But the first competes by offering a good meal at a price that competitors would struggle to match, while the other has built a distinctive experience that makes a particular group of customers willing to return, even with plenty of other options nearby.

In both cases, efficiency is essential.

But it isn’t the whole story.

Customers don’t usually enter a restaurant because they know its internal operations are well organized. They go because they see value that makes them want to choose it.

This helps explain why companies continually invest in improving their operations while still needing a clear strategy.

Efficiency helps a company operate well; strategy answers the question: How will it compete?

The problem begins when success can be copied

Suppose a restaurant succeeds because it starts serving orders in five minutes instead of ten.

At first, that may give it a clear advantage.

But what happens when a competitor does the same?

If the entire advantage rests on a practice that others can easily copy, it may become less effective at setting the company apart over time.

This explains why strategic management is concerned with the question raised in the course: How can companies create advantages that are unique and valuable, and difficult to imitate or replace?

Competing successfully isn’t just about becoming better than the company was yesterday.

There’s another side to the equation:

Competitors are improving too.

And if everyone moves in the same direction at the same speed, the whole market may become more efficient without any one company necessarily gaining a sustainable edge.

Today matters—but what about tomorrow?

This tension also appears among the concepts covered in the strategic management course when discussing the balance between short-term efficiency and long-term effectiveness.

Managers need to focus on short-term efficiency and make the most of current markets and resources, while also exploring new opportunities that can help the organization achieve long-term effectiveness.

It’s not an easy balance to strike.

Focusing entirely on the present may make a company excellent at a business model that loses relevance in the future. On the other hand, concentrating on the future while neglecting current operations may undermine the performance the company depends on today.

That’s why strategic management doesn’t ask companies to choose between the two.

Instead, they need to know when to improve what they have and when to look for what will set them apart down the road.

When efficiency becomes a requirement, not an advantage

In competitive markets, a best practice today can become the minimum expectation tomorrow.

Fast service, easy payment, high-quality operations, or the use of technology may give a company an edge at a certain stage, then spread among its competitors.

At that point, efficiency doesn’t become worthless. On the contrary, it may become a requirement for staying in the competition.

But staying in the game is not the same as outperforming.

This allows us to understand the idea covered in Dr. @Mahran Hafizullah’s course more broadly: a company needs to operate efficiently, but it also needs to consider what makes its competitive position different, valuable, and difficult for others to copy.

So, when we see a fast, well-organized company using the latest tools, there’s a more important question than simply admiring its efficient operations:

If a competitor can do the same thing tomorrow, what will make customers choose this company?

Theoretical reference:
Michael E. Porter (1996), What Is Strategy?, Harvard Business Review, November–December 1996.

https://hbr.org/1996/11/what-is-strategy

Disclaimer: This material was prepared under the supervision of a “Yamamah Insights” editor with the assistance of AI tools for financial education purposes. It does not constitute a recommendation to buy, sell, or hold any security, and expresses the views of its authors, not those of the platform.