In a Harvard Business Review article (June 2013), Rita McGrath, professor of management at Columbia Business School, stated that long term sustained competitive advantage has been the dominant idea in the field of strategy for too long. With the turbulent changes companies and industries are undergoing, it is rare for a company to maintain a lasting advantage. The reasons are familiar: the digital revolution, a “flat” world, fewer barriers to entry, and globalization. In a world where advantage evaporates in less than 12-18 months, companies cannot afford to spend months developing a single competitive strategy.
McGrath proposes instead that companies continually start new initiatives, building and exploiting many transient competitive advantages. She sees the life cycle of competitive advantages as a wave, starting with launch, peaking at exploitation, and ending with reconfiguration and finally disengagement. Each phase requires different skills from the workforce and different metrics for process and success. To create a portfolio of transient advantages requires shifts in the way companies operate and McGrath suggests a guide to those shifts as follows:
- Consider arenas instead of industries – Today industry lines are quickly blurred and competition can come from outside your industry. Thinking about arenas considers customer segments, the offer, and the place of delivery.
- Let people experiment within broad themes – With a shift to arenas, simply analyzing markets is insufficient. You must add pattern recognition, direct observation, and evironmental weak signals to the mix.
- Adopt metrics supporting entrepreneurial growth – Rather than ROI, use affodable loss to evaluate new moves, for example.
- Focus on customer experience and solutions to problems – refrain from internally focused solutions versus well-designed experience and complete solutions to customer problems
- Build strong relationships and networks – investing in communities and networks strengthens the ties to customers and employees
- Learn healthy disengagement – find ways to continually adjust and readjust internal resources keeping downsizing to a minimum
- Systematic innovation – creating and continually filling a pipeline of innovations within the organization
- Experiment, iterate, and learn – the approach to new initiative is different than established business – discovery followed by business model definition and incubation.
Strategy is still useful and important, but it requires continual choices about where you want to compete, how you intend to win, and how you will move from advantage to advantage. As McGrath says, strategy is more important than ever.