Friday, September 27, 2013

Is a sustainable competitive advantage still possible?

According to Colombia BS Professor Rita Gunther McGrath, achieving a Sustainable Competitive Advantage (SCA) (establishing a unique competitive position that can be sustained for long periods of time) is nearly impossible these days.

McGrath introduces a new term "Transient Advantage", which emphasizes that competitive advantage has become brief, temporary, passing, provisional, temporal. Companies must learn  to launch new strategic initiatives again and again, creating a portfolio of advantages that can be built quickly and abandoned just as rapidly.

To create an innovation pipeline or portfolio of advantages, companies need to apply eight shifts in the way they operate and think about strategy:
1. Think about arenas, not industries (threats can come from players outside of your industry)
2. Set broad terms and then let people experiment (allow freedom to be creative)
3. Adopt metrics that support entrepreneurship
4. Focus on customer experiences and solutions to real problems
5. Build strong personal relationships and networks
6. Avoid brutal restructuring and learn healthy disengagement
7. Get systematic about early-stage innovation
8. Experiment, iterate, learn.
And most of all: leaders must recognize that fast and roughly right decision making must replace deliberations that are precise but slow.

Source: Transient Advantage: Rita Gunther McGrath in HBR June 2013, p62-70