Screening process

The selection process consists of two stages. In the first stage, the top ten single-business companies and the top ten business units (a total of 20 companies/business units) will be selected based on documentation submitted with the application. In the second stage, these twenty companies/business units will be asked to provide additional information, and interviews will be conducted to augment the selection committee information. The top five companies and top five business units (a total of ten) will be nominated as finalists, and the Porter Prize will be awarded to one single-business company and one business unit of a multiple-business company.

Confidentiality

Company and business unit information provided in conjunction with the Porter Prize application will not be used for purposes other than screening Porter Prize applicants. Specific company names and information will not be revealed without the prior consent of the company/business unit.

Selection criteria

First-stage selection criteria

(1) Superior sustainable profitability within the industry A sound strategy is manifested by superior sustainable profitability. Only by measuring strategy through sustainable profitability is there assurance that real economic value be generated. A company or business unit must demonstrate superior profitability in its industry to win this prize. The company or business unit must demonstrate superior ROS and ROA relative to the industry average and sustained superior performance over time.

(2) Unique /different value proposition; distinctive mix of products / services to a defined set of customers The company's strategy must enable it to deliver a different value proposition, or set of benefits, from those offered by competitors. Strategy is neither a quest for the universally best way of competing nor an effort to be all things to every customer. It defines a way of competing that deliver unique value in particular set of uses or for a particular set of customers.

(3) Strategic continuity over time A sound strategy involves continuity of direction. Without strategic continuity, it is difficult for companies to develop unique skills and assets, build strong reputations with customers, or align the behavior of employees. Strategic continuity and continuous improvement can occur simultaneously. A clear strategy makes change more rapid and effective.

(4) Innovations that enable the strategy The ability to be distinctive depends on innovations in products, processes, and ways of managing. The company must not only innovate initially, but demonstrate the capacity to deepen and reinforce its strategy over time through innovation. This makes the company's competitive advantage more significant and sustainable.

Second-stage selection criteria

(5) Utilization of capital analysis At the second stage, ROIC (Return On Invested Capital) will be the indicator. The DuPont Formula, a widely recognized framework of financial analysis, will be used to disaggregate ROIC into profit margin and asset turnover ratio. The winning company or business unit will utilize capital more effectively than its competitors. Efficient utilization of capital has been a major weakness of Japanese companies.

(6) Distinctive value chain An effective strategy is reflected in a distinctive value chain. To establish a sustainable competitive advantage, a company must perform, different activities than rivals or perform similar activities in different ways. The company must configure the way it conducts manufacturing, logistics, service delivery, marketing, human resource management, and so on differently from rivals and tailored to its unique value proposition.

(7) Trade-offs A sustainable strategy must involve "trade-offs". The company must forgo some product features, services, or activities in order to be unique at others. Such trade-offs are what makes the company truly distinctive. Trying to be all things to all customers almost guarantee that a company will lack any advantage. The company must choose "what not to do".

(8) Fit across activities An effective strategy involves fit across different activities in the value chain, so that the company's activities are mutually reinforcing. The way a company's product is designed, for example, can reinforce the efficiency of how it provides after-sale service. Fit across activities not only increases competitive advantage but also makes the advantage harder to imitate.

Selection Committee

A selection committee will be responsible for selecting the winning company/business unit. Its members consist of academics (representing such institutions as Keio University, Kobe University, Tokyo University, Hitotsubashi University) who are knowledgeable about competitive strategy. The Selection Committee is totally independent and its members prefer to remain anonymous.

Schedule

We will accept the application from May 1, 2008 until June 13, 2008. Please see the Japanese page for details.

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