The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business

The End of Competitive Advantage by Rita Gunther McGrathAs a strategist, a writer on strategy, and a teacher of strategy, the opening paragraph of this book resonated with familiarity: “If you dropped into a boardroom discussion or an executive team meeting, chances are you’d hear a lot of strategic thinking based on ideas and frameworks designed in, and for, a different era.”These frameworks are presumed to be truths, as obvious as gravity on earth.Topping the list is the imperative to find, retain, and sustain the company’s competitive advantage (Porter.) Following closely behind is the BCG’s growth-share matrix for analysing corporate portfolios, and then Hamel and Prahalad’s “core competencies.”All share one assumption: The purpose of strategy is to achieve a sustainable competitive advantage. This is a notion formulated in the 1980s! Then there were no mobile phones, let alone cell phones, no internet, your Walkman used audio-cassettes, and you wrote letters to your parents and friends on aerograms.The author of this valuable and timely book, Rita Gunther McGrath, is a professor at Columbia Business School. Her clients include Pearson, Coca-Cola, General Electric, Alliance Boots, and the World Economic Forum.The central thesis of the book is that a sustainable competitive advantage is now a debilitating illusion. Strategy must facilitate the quick exploiting of advantages that come and go, and organizations that will succeed are those that have been deliberately designed to achieve this purpose.“The strategy playbook today needs to be based on the idea of transient competitive advantage,” says Professor McGrath.The book is a description of the essential components of a company capable to moving rapidly from one advantage to another. Most of what was essential to a company built for sustainable competitive advantage is not merely irrelevant; it is a significant impediment to success.Small companies are able to turn about quickly and grab at the latest opportunity.Can a company employing thousands of people, with investments in materials, machinery, and infrastructure, do the same? Intuitively, the answer appears to be not, but the book sites case studies of companies, of considerable heft that have done just that.When the Hunt brothers managed to corner the silver market in 1979, they sent the price of silver soaring form $2 an ounce to $50 an ounce. Minoru Ohnishi, the CEO of Fuji Photo Film, was deeply troubled by this experience, with the photo industry so heavily dependent on silver. He wanted to be able to produce film without silver so that the company could never be held hostage. He began redesigning Fuji so that it would be able to seize advantages as they arose.Kodak, the giant of the industry at the time, stuck to their competitive advantage in silver based, celluloid based film.Today, Fujifilm is a significant player in health care and electronics and earns 45% of its revenue from document solutions and office printers. It grew into an industry giant during the decades when most other Japanese industries were stagnating. Today Fuji ranks 377th on Fortune’s Global 500 list, employs 78,000 people, and generates $ 25b in revenues. Kodak has declared bankruptcy.McGrath’s research team identified every publicly traded company on any global exchange with a market capitalization of over $ 1b as of the end of 2009 - some 5,000 companies. Only 10 managed to grow net income consistently by more than 5% over a five and ten year period.These consistent growth companies included Cognizant Technology Solutions (United States); HDFC Bank (India); ACS (Spain); Krka (Slovenia); Infosys (India); Tsingtao Brewery (China); Yahoo! Japan (Japan); and Indra Sistemas (Spain).All were operating with a new playbook for strategy based on new assumptions for competing. These new assumptions include continuous reconfiguration of the business rather than trying to defend existing competitive advantages. They were designed for “Healthy Disengagement” that is, a design intended, (yes, intended, ) to end advantages frequently, formally and systematically. They focused on building innovation proficiency and used their resource allocation to promote deftness by not allowing departments to control key resources. (Try wrestling resources of cash or skill from a strong department!) They were obsessed by rapid execution.All these design innovations presuppose a leadership mindset they all possessed: The assumption that existing advantages will come under pressure sooner or later.In passing, Professor McGrath tells of a somewhat counterintuitive idea shared with her by a friend working for a Brazilian company: “In Brazil,” he said, “we’ve been through it all— inflation, corruption, unpredictable governmental regulation, you name it. And you know, you get good at it.”Maybe South Africa is not only an exciting place to live and work in, but a unique training ground for businesses into a future without sustainable competitive advantages.Readability: Light ----+ SeriousInsights: High +---- LowPractical: High -+--- Low* Ian Mann of Gateways consults internationally on leadership and strategy.

Ms. McGrath provides a strategy for how to deal with turbulent times. Instead of trying to doing things cheaper and compete on price, she offers a strategy that's focused on seeking opportunities created by the changing needs of one's clients. One reviewer argued that her approach isn't applicable for companies that have large capital investments. I totally disagree because even companies with long track records of success and large capital investments still need to adapt to the current environment. In the book, she points out how Kodak didn't address the changing times and went bankrupt. Bethlehem Steel was a company with huge capital investments that went bankrupt because it didn't adapt to the changing steel industry. An important point she makes in the book is if you wait too long to make the necessary changes it might be too late. The size of a company offers no protection if it is not in touch with the current marketplace. Compare this to your health - if you catch a disease early enough you have a much better chance of being cured. The book explains that strategy is a journey - not a destination; therefore it's essential that companies are constantly tweaking their strategy in order to adapt to the changes that are occurring around them. Clayton Christensen explores the perils of disruptive innovation. Ms. McGrath provides a strategy for companies to deal with that reality. Jim Collins has pointed out that the most successful companies are realistic about conditions. This book provides a realistic solution to today's turbulent times. Hoping that conditions will return to the good old days places your company at risk! Not reading this book places your company at risk! Not heeding the advice in this book places your company at extreme risk! But it's not a book that attempts to create a one size fits all solution, but offers a strategy to maximize a company's flexibility and agility to deal with today's turbulent and rapidly changing times. Today, successful companies have a strategy to compete on innovation, instead of how to do things cheaper. As she states in the book, "Innovation is Central to Strategy."

Overall, “The End of Competitive Advantage” is a beneficial read for both managers involved in strategy development for a company and employees who want to keep up with today’s competitive environment. It is a thought-provoking book which looks at how some of the most steadily-successful companies stay ahead of the curve and weather the unforeseeable changes both within and outside their own industries. The book is very well organized and easy to follow. In the final chapter, McGrath even applies the concepts discussed throughout the book related to businesses, to a person’s own career choices.The book provides some very useful information about business and the new and changing dynamics of the competitive environment. McGrath gives some good advice as to what companies need to have and do to compete in this ever-changing environment. She also suggests specific measures that a company can take to gain the skills or management necessary to become more competitive in this environment. The book explores and supports the idea that competitive advantage is only temporary; there is no such thing as a sustainable competitive advantage.At times, the book can seem fairly redundant as the idea that “the only thing constant is change” is not necessarily a new concept. While the book does provide some examples, the examples seem to be too shallow and do not give much detail or go into depth. It would be valuable if the book had more examples of the principles being discussed and more in-depth detail and descriptions of how to apply the principles.

the premise of the book is interesting, and were it an article it would be worth the read. But the theme is stretched every which way, the advice is at times breathtakingly banal and it lacks any real data to be considered a serious piece of insight. The style of the book is very anecdotal, and underlines the weakness of any real research.

The concepts discussed in the book at novel and very thought provoking. However I felt the concept was stretched way too much to make it into a book. Anyway I am a big fan of Rita and love her understanding of current business dynamics.

Excellent stuff. Counter-intuitive and thoughtful. Andrew St George

Libro altamente recomendable sobre cómo imaginar la estrategia empresarial en un mundo cada vez más dinámico.La nueva forma de imaginar estratégicamente tiene implicaciones a nivel de la organización, de la innovación y,sobre todo, personal. Las personas podemos ser más importantes y beneficiarnos de un entorno inestable si tenemos una actitud abierta y proactiva.Muy interesante la insistencia de Rita en cuantificar las innovaciones como opciones (siguiendo lo escrito en Discovery Driven Growth).

It has been a fashion to talk about sustainable competitive advantage and/or durable economic moats but the moot point as this book makes it amply clear that sustainable competitive advantage is a thing of the past. It just doesn't exist anymore the way it did maybe five or three decades back! One must read it to rid oneself off such delusions! End of competitive advantage is a point well made.