The End of Competitive Advantage


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Are you at risk of being trapped in an uncompetitive business? Chances are the strategies that worked well for you even a few years ago no longer deliver the results you need. Dramatic changes in business have unearthed a major gap between traditional approaches to strategy and the way the real world works now.

In short, strategy is stuck. Most leaders are using frameworks that were designed for a different era of business and based on a single dominant idea – that the purpose of strategy is to achieve a sustainable competitive advantage. Now, globally recognised strategy expert Rita Gunther McGrath argues that it’s time to go beyond the very concept of sustainable competitive advantage. Instead, organisations need to forge a new path to winning: capturing opportunities fast, exploiting them decisively, and moving on even before they are exhausted. She shows how to do this with a new set of practices based on the notion of transient competitive advantage.

This book serves as a new playbook for strategy, one based on updated assumptions about how the world works, and shows how some of the world’s most successful companies use this method to compete and win today.

In this session of We Read For You, Dr Steyn Heckroodt presents a synopsis of this book.

Published in: Business

The End of Competitive Advantage

  1. 1. 1 The End of Competitive Advantage By Rita Gunther McGrath Presented by Dr Steyn Heckroodt April 2014 Inspiring thought leadership across Africa
  2. 2. CHAPTER BREAKDOWN 1. The End of Competitive Advantage 2. Continuous Reconfiguration: Achieving Balance between Stability and Agility 3. Healthy Disengagement 4. Using Resource Allocation to Promote Deftness (swiftness) 5. Building an Innovation Proficiency 6. The Leadership and Mind-Set of Companies Facing Transient Advantages 7. What Transient Advantage Means for you, Personally 2
  3. 3. IN A NUTSHELL • Evolution of strategy • Sustainable competitive advantage • The growing gap between traditional approaches to strategy and the real world • Transient competitive advantage 3
  4. 4. CHAPTER 1: THE END OF COMPETITIVE ADVANTAGE • Your strategy is based on old assumptions • The new logic of strategy • Where to compete: Areas, not industries (GPS/Info) 4 Industry Arena Goal Positional advantage Capturing territory Measure of success Market share Share of potential opportunity spaces Biggest threat Intra-industry competitive moves Disruption of exiting model Definition of customer segment Demographic or geographic Behavioural Key drivers Comparative price, functionality, quality “Jobs to be done” in total customer experience Metaphor Chess Japanese game of Go
  5. 5. HOW TO COMPETE • Mind shift – Temporary, not sustainable competitive advantage The wave of transient (temporary) advantage 5 Launch Ramp up Exploit Reconfigure Disengage
  6. 6. HOW TO WIN • Research (pg. 15) • Major finding: Strategies with long-term perspective on where they wanted to go, but also with the recognition that what-ever they were doing today wasn’t going to drive their future growth • Rest of the book is shaped by the lessons learnt from these companies (pg. 17) – The new strategy playbook 6
  7. 7. CONTINUOUS RECONFIGURATION: ACHIEVING BALANCE BETWEEN STABILITY AND AGILITY 7 From To Extreme downsizing or restructuring Continuous morphing Emphasis on exploitation phase Equal emphasis on entire wave Stability or dynamism alone Stability combined with dynamism Narrowly defined jobs and roles Fluidity in allocation of talent Stable vision, monolithic execution Stable vision, variety to execution Evaluate your current way of working (pg.25) Example – Milliken & Company (Pg. 30) Using innovation gradually move from textiles to advanced to special materials and specialty chemicals
  8. 8. HEALTHY DISENGAGEMENT 8 From To Defending an advantage to the bitter end Ending advantages frequently, formally, and systematically Exit viewed as strategically undesirable Emphasis on retaining learning from exits Exits occur unexpectedly and with great drama Exits occur in a steady rhythm Focus only on objective facts Focus on subjective early warnings Example – RIM – Black Berry Reed Hastings – cheaper DVDs online Customers not ready – enraged – thus different disengagement strategies
  9. 9. RESOURCE ALLOCATION TO PROMOTE DEFTNESS 9 From To Resources held hostage in business units Key resources under central control Squeezing opportunities into the existing structure Organizing around opportunities Attempts to extend the useful life of assets for as long as possible Aggressive and proactive retirement of competitively obsolete assets Capital budgeting mind-set Real options mind-set Investment-intensive strategic initiatives Parsimony, parsimony, parsimony (prudence) Ownership is key Access is key Build it yourself Leverage external resources Parsimony example – Under Armour Material extension – authentic involvement over years
  10. 10. BUILDING AN INNOVATION PROFICIENCY 10 From To Innovation is episodic Innovation is an on-going systematic process Governance and budgeting done the same way across the business Governance and budgeting for innovation separate form business as usual Resources devoted primarily to exploitation A balanced portfolio of initiatives that support the core, build new platforms, and invest in options People work on innovation in addition to their day jobs Resources dedicated to innovation activities Failure to test assumptions, relatively little learning Assumptions continually tested, learning informs major business decisions Failures avoided and not discussable Intelligent failures encouraged Planning orientation Experimental orientation Begin with our offerings and innovate to extend them to new areas Begin with customers and innovate to help them get their jobs done
  11. 11. LEADERSHIP AND MIND-SET OF COMPANIES FACING TRANSIENT ADVANTAGES 11 From To Assumptions that existing advantages will persist Assumption that existing advantages will come under pressure Conversations that reinforce existing perspectives Conversations that candidly question the status quo Relatively few homogenous people involved in strategy process Broader constituencies involved in strategy process, with divers inputs Precise but slow Fast and roughly right Prediction oriented Discovery driven Net present value oriented Options oriented Seeking confirmation Seeking disconfirmation Talent directed to solving problems Talent directed identifying and seizing opportunities Extending a trajectory Promoting continual shifts Accepting a failing trajectory Picking oneself up quickly Japan and dairy
  12. 12. WHAT TRANSIENT ADVANTAGE MEANS FOR YOU, PERSONALLY 12 From To Emphasis on analytical strategizing Emphasis on rapid execution Organizational systems Individual skills A stable career path A series of gigs Hierarchies and teams Individual superstars Infrequent job hunting Permanent career campaigns Careers managed by the organization Careers managed by the individual EARLY WARNINGS OF FADING ADVANTAGE Read pg. 169