The End of Competitive Advantage
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Transcript of The End of Competitive Advantage
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The End of Competitive Advantage By Rita Gunther McGrath Presented by Dr Steyn Heckroodt
April 2014
Inspiring thought leadership across Africa
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
http://lectureonbusiness.com/talks_on_strategy/
6. The Leadership and Mind-Set of Companies Facing
Transient Advantages
7. What Transient Advantage Means for you, Personally 2
IN A NUTSHELL
• Evolution of strategy
• Sustainable competitive advantage
• The growing gap between traditional approaches to
strategy and the real world
• Transient competitive advantage
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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)
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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
HOW TO COMPETE
• Mind shift – Temporary, not sustainable competitive
advantage
The wave of transient (temporary) advantage
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Launch
Ramp up
Exploit
Reconfigure
Disengage
HOW TO WIN
• Research (pg. 15)...read...
• 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
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CONTINUOUS RECONFIGURATION: ACHIEVING BALANCE BETWEEN STABILITY AND AGILITY
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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
HEALTHY DISENGAGEMENT
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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
RESOURCE ALLOCATION TO PROMOTE DEFTNESS
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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
BUILDING AN INNOVATION PROFICIENCY
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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
LEADERSHIP AND MIND-SET OF COMPANIES FACING TRANSIENT ADVANTAGES
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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
WHAT TRANSIENT ADVANTAGE MEANS FOR YOU, PERSONALLY
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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