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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