Citation
Day, G.S. (2013), "Surfing temporary competitive advantage – the new competence", Strategy & Leadership, Vol. 41 No. 6. https://doi.org/10.1108/SL-07-2013-0056
Publisher
:Emerald Group Publishing Limited
Surfing temporary competitive advantage – the new competence
Article Type: The strategists bookshelf From: Strategy & Leadership, Volume 41, Issue 6
The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business
Rita Gunther McGrath, Harvard Business Review Press, 2013
The portentous title of Rita McGraths latest book demands our attention. However, the reality between the covers is more nuanced and cautious. She is actually pronouncing the end of competitive advantages that are defensible, permanent and durable. This is not new "news" for students of strategy from Drucker to DAveni, or thoughtful practitioners such as Andy Grove and Jeff Bezos, who have long warned of the dangers of complacency, organizational rigidity, attachment to legacy assets, short termism and other maladies of status quo management.
The crux of her argument is that instead of emphasizing the extraction of the maximum value from competitive advantages, firms and their managers need a capacity to "surf through waves of short-lived opportunities." In an environment of transient advantages firms need to reconfigure continually to renew their advantages, because it is through such reconfigurations that assets, people and capabilities make the transition from one advantage to another. She employs an apt metaphor to observe that increasingly strategy making will be less like chess, and more like the ancient Chinese board game GO, that puts a premium on lateral rather than linear thinking.
Two features make this book especially useful to practitioners. First, she combines and organizes the reasons that advantages are increasingly temporary into a coherent argument. Second, and more important, the book offers a useful roadmap for building adaptive organizations. Among the features of this roadmap is a chapter on the resource allocation process, which counsels a mind-set shift from ownership of assets to access to assets. This requires recognizing that the competitive life of an asset will increasingly be shorter than the accounting life, and makes a good case for keeping key resources under central control. Another valuable feature of the book is the chapter on building innovation proficiency, grounded in an on-going, disciplined process to keep finding new opportunities. She wisely notes that the expertise to do this well and stay at the cutting edge requires sustained effort that is expensive to develop and is seldom rewarded with a clearly defined career path. Her suggested approach makes a compelling case for partnering with firms with deep expertise and the capacity to quickly take on new projects.
The strongest elements of the book are those informed by the authors previous work on discovery-driven planning, an approach that helps organizations face up to the irreducible uncertainty of innovation, and real options reasoning that encourages pilot projects, prototypes, experiments and small investments that accelerate learning without requiring expensive and irreversible commitments. Her wealth of consulting applications has shaped these themes into best practices that can be put to work advantageously by firms willing to make the effort.
This book has sweeping ambition. Its empirical foundation is based on McGraths interesting research question: how many of the 4,793 publicly traded firms with a market cap greater than a billion US dollars grew their revenues or net income by at least 5 percent in each year between 2000 and 2009? Surprisingly, only ten companies, or 0.25 percent of the population of firms, qualified. Questions about this research model abound: Was steady growth mostly organic or M&A based? Why does one slower growth year matter more than the 10 year CAGR? What is the relative contribution of industry category or arena growth, as well as growth in the home economy?
To highlight her core theme of transient advantage, she puts most of the weight on positional advantage – representing the customer value proposition and choice of target customers. Yet early in the book, she argues that the continuous reconfiguration or morphing of an organization, can only be achieved if there is tremendous internal stability in senior leadership ambition, strategic themes and brand and customer relationships – supported by investments in creating shared cultural values, identity and a talent pool. This sounds a lot like the evolution of the resources-based view of the firm toward dynamic capabilities that enable organizational fitness and help shape the environment advantageously, "by combining and transforming available resources in new and different ways or even adding new resources through alliance partnerships or acquisitions," as advocated by David Teece and his colleagues. These dynamic capabilities are repeatable and deeply embedded sets of skills and knowledge.
In sum, this is a smart, insightful and provocative book that will be potentially helpful for managers already coping with turbulence. The message will not only feed their paranoia, but offer effective guidance for the path forward.
George S. Day
George S. Day (dayg@wharton.upenn.edu) is the Geoffrey T. Boisi Professor and co-director of the Mack Center for Technological Innovation at The Wharton School, University of Pennsylvania. He is the author of Innovation Prowess: Leadership Strategies for Accelerating Growth (Wharton Executive Essentials, 2013).