A Tightrope for Growth

With markets in continual turbulence and competitive advantage transient, how do companies grow and thrive?

In her book, The End of Competitive Advantage, Rita McGrath contends that companies must continuously reconfigure. They do that by balancing flexibility with stability and thus avoid integration breakdown on one hand or stalling innovation on the other.

When facing extreme uncertainty for extended periods of time, most people become ineffective or even paralyzed with inaction. The high performing business today understands that and provides a ballast to stability in terms of social architectures. McGrath addresses several of these social structures:

• Ambition – using stretch goals to keep a company from becoming complacent with today’s market advantages
• Identity and Culture – investing in common corporate identities, culture, and leadership
• Deployment via Development – educating employees when shifting from one market focus to another
• Strategy and Leadership – establishing and reinforcing consistent strategic priorities and guiding principles
• Stable Relationships – maintaining long term relationships with past and present employees and partners

Despite the internal systems and social structures above, today’s high performance business must create processes that foster strategic agility. McGrath found that high performance companies do this via the following principles:

• Shape Shifting – leveraging industry evolutions and embracing the change rather than dramatic restructurings
• Fast Budgeting – centralizing flexible resource allocation to avoid budget hostage situations by powerful executives in the business
• Frequent Adjustments – adjusting strategy and changing resources quarterly versus annually
• Innovation is the Norm – innovation is continuous and mainstream for everyone rather than episodic
• Options Oriented Pattern to Market Exploration – entering markets to test response with small initial investments

McGrath found that the high performance companies “navigate seeming incompatible demands deftly”. While grand strategic priorities, values, and guiding principles are kept stable over time, the companies initiate prodigious amounts of experimentation and innovation.

The very stability of certain principles, culture, and leadership provide organizational energy enabling effective innovation in accordance with market evolutions as well as sheer change.