Michael Porter was first economist to become a business guru. He used simple economic concepts to illustrate issues of corporate strategy. One of his most cited conclusions was the need to avoid being ‘stuck in the middle’. Companies, he said, must either gain a cost advantage or emphasise product differentiation. It was fatal to fall between the two stools of cost leadership and superior quality.

Jealous of Porter’s success, I argued that this claim was nonsense. Middle market positions were not only viable, but the preferred stance of many successful companies. In debate with Porter, the then chairman of Sainsbury’s defiantly displayed a model  truck carrying the slogan ‘good food costs less at Sainsbury’s – a celebration of being ‘stuck in the middle’. And when Tesco overtook Sainsbury’s in the UK marketplace, it was not by following Porter’s advice, but by beating Sainsbury’s at its own game .

And yet if we look at the UK supermarket sector today, the consensus view is that Porter was right after all. The most successful competitors are Waitrose, firmly at the top of the market, and Aldi and Lidl, which have placed themselves at the bottom. All the mainstream retailers are under pressure, apparently stuck in the middle. The transformation of fortunes is not confined to the food sector; the most remarkable phenomenon in UK high street retailing today is the rise of Primark, which sells clothes for less than a hotel charges to launder them. And the most successful company in the world, Apple, charges premium prices for premium products.

Like many business gurus, Porter wriggled out of the challenge of ‘good food costs less’ by adopting a slippery definition of his proposition. ‘Don’t be stuck in the middle’ can be interpreted as ‘unless you have some cost advantage or product differentiation, you are unlikely to be very successful’, a proposition so banal as to be almost tautological. But the claim that ‘you must emphasise either cost advantage or product differentiation, and if you aim at both you will not be successful’  is a different proposition altogether – and one that may be either true or false. It is disingenuous to use the self evident truth of the first proposition as support for the empirical validity of the second. And that, I argued back in the 1990s, was exactly what Porter was doing.

Business conferences typically proceed by competitive anecdote. But these debates can never be resolved by repeating slogans and telling stories; is usually possible to find some narrative to support all but the most outlandish assertions. The only means of finding answers is to use more comprehensive datasets, and the combination of market research and company financial statements made such analysis possible here. 

My empirical research drew on a database which enabled us to relate perceived market position to return on capital employed. We discovered, to no-one’s surprise, that  ‘high cost  with low quality’ was not often a successful strategy. ,  And ‘low cost with high-quality’ yielded the highest profits. Of course it did. But were you better off with low cost, low quality; or high cost and high quality, or being stuck in the middle with medium quality and medium cost? All these approaches produced similar returns.

The simple reality is that market position is very rarely a sustainable source of competitive advantage because market position can readily be imitated. What really matters is enjoying a competitive advantage in the market position you decide to pursue, and achieving such competitive advantage typically involves matching your market position to the distinctive underlying resources and capabilities of your business. Waitrose, Aldi and Lidl are not the beneficiaries, and Tesco, Sainsbury and Morrison not the victims, of any verity of business strategy other than the eternal one; the best strategy is to be good at whatever it is you do.