Transient competitive advantage: this year’s sustainable competitive advantage
via Flickr © betsyweber (CC BY 2.0)
What is a ‘sustainable competitive advantage?’ It’s a phrase many of us have probably used and heard in business meetings time and again and we vaguely think it’s... well, what? Something not that quantifiable that the organisation has to accumulate collectively to prosper in the longer term? A set of qualities and market positions that the organisation can then defend and behind which it can launch products, safe in the knowledge that they’ll succeed?
Whatever the exact definition, we’re talking long-term and fairly vague. Sustainable competitive advantage isn’t something your manager is going to ask you to produce for the next meeting.
And that’s the problem, says Columbia Business School professor and strategy expert, Rita Gunther McGrath. It’s not that the concept has no validity, but in today’s fast-changing business environment it’s been overtaken by ‘agility’ as a key business quality. ‘Sustainable competitive advantage’, she says, is increasingly irrelevant in a world which moves so fast. By the time you think you’ve carved some out, the market in which you operate has moved on.”
Leadership Summit on the Future at the upcoming ITU Telecom World 2014
Rita will be joining futurist Gerd Leonhard, the subject of last week’s ‘Ultra-connectivity - Faust, the Devil and the Detail’ feature at the Leadership Summit on the Future at the upcoming ITU Telecom World 2014 in Doha, 7-10 December, where an impressive line-up of thought leaders will speak to a broad range of topics including the Internet of Things, Human-machine scenarios, hyper connectivity and hyper-efficiency, artificial intelligence and the future of privacy and digital rights (see the speaker list here).
Rita will talk about the notion of ‘transient competitive advantage’ and how telcos might re-think what they do to tap it. It’s that speed thing again: factors such as the rise of globalisation which enables competition to turn up from pretty much anywhere, anytime; and the freedom and flexibility bestowed by digitisation - especially for telecoms which is one of the sectors fostering it - all mean that advantage of any kind is fleeting.
But where does that leave us?
In telecoms to move the goal-posts from sustainable competitive advantage to more transient, short term opportunity-taking is surely a wrench too far? It’s difficult but it has to happen, Rita tells me.
“One of the challenges when you come from a regulated environment which now changes is that a lot of your people carry with them the DNA of the previous regime and so they really don't have the right reflexes: they hunger for stability and things like competitive advantage, so one of the dilemmas is: how do you teach people that the new environment is not necessarily one to be afraid of, but one that they can actually cope with?”
“I think that's a hard transition to make when you've got people who are looking around them going, ‘Well wait a minute this isn't the way we were told it was going to be.’ If you've never experienced this it's got to be terrifying.
"The concept of ‘industry blurring’ is important in telecoms too,” she says "The most significant competitors these companies are going to face are not from within their own industry and this is a pretty radical shift from the way we'd always thought about industries - and in telecoms especially because it's so carefully defined . Now you've got all these different companies - broadcasting, compute social media, you name it - and everyone is contesting the same chunk of revenue.
So hard to let go
“Part of what they have to do is let go of the legacy businesses - let go of the businesses that no longer drive their future.”
Part two is to get your innovation house in order. In many companies the idea of innovation is episodic. Every now and then some bright spark says, 'we need innovation around here’ and everyone runs around like crazy being innovative and they have innovation boot camps... it's great for my business by the way, everybody's got to be an innovator and they spend thousands on training sessions - it's fantastic.”
“But it usually doesn't produce much in the way of innovation, because to get innovation you need a process,” she says.
According to Rita, preparing for this uncertain future means moving away from older models, and may mean adopting a portfolio approach based on differing degrees of uncertainty in markets and technologies.
“With this approach lower-risk core business should be supplemented with fairly sure candidates for next generation core products and services. Investing wisely in higher-risk innovation for longer-term growth means getting smart at managing options, being willing to fail where necessary and kill a project, taking it as an experiment from which to learn, not an admission of defeat.
“Getting in early may mean investing in several competing new technologies before a clear winner is declared, automatically condemning several other options in order to reap the sizeable benefits of not waiting for the proven – and therefore expensive – success of one.”
And, she points out, this kind of agility and the ability to reconfigure quickly is at the heart of the move to software-driven networks through the application of SDN and NFV - these call for maximum flexibility and responsiveness across the whole system, sometimes at the expense of the optimization of one task or element within the whole.
Rita is regarded as one of the world’s top experts on strategy and innovation with particular emphasis on developing sound strategy in uncertain and volatile environments. Her ideas are widely used by leading organisations throughout the world, who describe her thinking as sometimes provocative, but unfailingly stimulating. Thinkers50 presented Rita with the #1 award for Strategy, the Distinguished Achievement Award, in 2013. Rita is in their top ten global list of management thinkers overall. Her best-selling book, The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, was recognized by Strategy+Business as the #1 business book of the year.
For more information on Rita, visit www.ritamcgrath.com.