The End of Competitive Advantage

The fundamental problem is that deeply ingrained structures and systems designed to extract maximum value from a competitive advantage become a liability when the environment requires instead the capacity to surf through waves of short-lived opportunities.

One of the biggest changes we need to make in our assumptions is that within-industry competition is the most significant competitive threat.

Using industry as a level of analysis is often not fine-grained enough to determine what is really going on at the level at which decisions need to be made.

“Continuous reconfiguration” explores how companies can build the capability to move from arena to arena, rather than trying to defend existing competitive advantages.

The reconfiguration process is the secret sauce of remaining relevant in a situation of temporary advantage, because it is through reconfiguration that assets, people, and capabilities make the transition from one advantage to another.

A pattern to look for in organizations that have mastered transient-advantage environments is the continual freeing up of resources from old advantages in order to fund the development of new ones.

Although dynamism and rapid change are all around us, people are not very effective when facing extreme uncertainty—it tends to be paralyzing.

Common to the outliers firms was a public commitment to world-class ambition, coupled with a clear sense of strategic direction in every case.

Growth outliers consciously set out to educate and up-skill their people.

Smart companies recognize that continuous training is a mechanism to avoid having to fire people when competitive conditions shift, and they invest in training even as they pursue deployment.

Outlier firms, relative to competitors, embed change in their normal routines. These firms accept industry evolution and embrace the changes in order to enter newer markets instead of cutting costs and divesting.

One of the more subtle implications of this transformation-without-wrenching-change approach is that the firms manage major resource allocations centrally.

Rather than heavy annual budgeting processes and efficiency-oriented values, outlier firms invest in increasing their flexibility, even if this might lead to a small degree of suboptimization.

At the outlier companies, adjustments to strategy and changes in resource allocation were not annual exercises. They are far more likely to be quarterly.

In the outlier companies, rather than innovation being an episodic, on-again, off-again endeavor, innovation is continuous, mainstream, and part of everyone’s job.

Relative to competing firms, outlier firms share an options-oriented pattern to exploring new opportunities. They make small initial investments to explore opportunities, following up later with more substantial investments as the opportunity warrants.

If you want to shape the way an organization behaves, the resource allocation process is key.

Firms built to thrive under transient-advantage conditions handle resources differently from firms designed for exploitation.

A broken innovation process guarantees that your organization will struggle to keep its edge as competitors catch up to whatever you were doing before.

Leadership in a transient-advantage world calls for a shift in emphasis from the core businesses dominating the agenda to options being equally important.

In a world of transient advantages, the ability to pick up on early warnings and to get the organization to pay attention is critically important.

Just as we would encourage companies to anticipate that their competitive advantages may go into decline, we would encourage people to anticipate this, and to plan their careers accordingly.

Just as companies need to be investing to discover the next wave of advantage, individuals need to be investing to maintain their skills, stay relevant, and have compelling stories of accomplishment to market their value to others.

Being well prepared for an engagement to end means much more than dusting off your résumé. It means being ready to start a permanent campaign for a new and better position.

In a transient-advantage economy, one of the few things that will endure are relationships. Access to a network is one of the most powerful ways in which people can maintain their value to others, find new opportunities, and create opportunities for others in exchange.

The growth outliers put a huge emphasis on the stability of their relationships with employees and with customers. Relationships are not important at work, but other types of network ties matter as well.

The reality of a transient-advantage economy is that you will sometimes find you’ll need to invest in yourself before you can make the next move, and that is going to require resources.

One of the big new developments in a transient-advantage world is that today it is entirely possible to generate multiple income streams beyond simply earning a salary.