Saturday, July 26, 2014

Competitive Strategy

Competitive advantage is that toward which strategic thinking aspires. Yet, ultimately, all competitive advantages are transitory.

What strategic thinkers are after is a strategy that will remain in vogue for a substantial period of time, and that will change and evolve to remain sustainable in the future.

This is not to say one can never arrive at a strategy, but rather that the development of competitive strategy is an ongoing process. Engaging in this ongoing process is what it means to be “competitive” – to be always assessing the situation, always analyzing, always adjusting and changing.

The identification of good competitive advantage requires deep thought and innate intelligence. Strategists need to possess both an understanding of cause and effect within specific business situations, and knowledge of the history of modern strategy. Brilliant strategy emerges from understanding what works, what doesn’t, why, and how to deliver the necessary performance.

-Every successful competitive advantage is predicated on some particular set of conditions that exist for a period of time and for a set of reasons. When the underlying factors change or are disrupted by new knowledge, science, technology, or creative insight, the power of the then winning competitive strategy is undermined and eventually unseated by new strategic thinking.

How do we achieve and sustain competitive advantage? First, by understanding what competitive advantage can provide, whether it be market position, business model, economy of scale or scope, vertical integration, acquisition, or brand position which leverages brand equity and core competencies. Then second, by understanding, through scenario planning, what could unseat competitive advantage, and where we will find competitive advantage tomorrow.

Strategists need to be able to unpack plans and activities in order to model, anticipate cause and effect, and predict where sustainable competitive advantage lies in the future.

What about “sustainable” competitive advantage? It is one thing to have a competitive strategy, and it is another for it to yield “sustainable” competitive advantage.

If all strategies eventually become obsolete, how can anything be sustainable? “Sustainable” doesn’t mean a strategy never changes and is always the same. “Sustainability” refers to the ability of strategy to change, and to leverage the changing situation. Most importantly, such strategy must possess foresight and prescience regarding its next form. In this sense, the only “sustainable competitive advantage” is the commitment to keep evolving one’s strategy to stay current with the times.

Time was when industries like the American automobile industry thought their barriers to entry, based on capital-intensive fixed assets and their economies of scale in manufacturing, would always confer dominance upon their enterprises. Then, the import automobile manufacturers arrived with new technologies, different approaches to management, superior design, and modular manufacturing to level the competitive advantage of the American, set-in-stone manufacturing processes.

“Sustainable” competitive advantage is only achievable for those who understand that the development of strategy is an unending process, and who recognize the need to have identified their next competitive advantage while the present advantage is still competitive.

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