Note: This article is updated at Strategy Must Be Dynamic.
"However beautiful the strategy, you should occasionally look at the results." -- Winston Churchill
Competitive advantage is a moving target. Static strategies fail in the long run. Strategy needs to be dynamic.
The challenge never ends.
Strategy is an ongoing game where the playing field changes over time.
In the book, The Strategist: Be the Leaders Your Business Needs, Cynthia A. Montgomery writes about how strategy competitive advantage is a changing thing and how strategy needs to be dynamic.
The Unfolding Story of Apple
Montgomery uses the story of Apple to help illustrate how it could be easy to fall into the trap of complacency or get a false sense of security.
“Given the grand transformation, it's appropriate to ask: 'Is Apple there yet? Despite its late-century troubles, does it now have a sustainable advantage?' I often ask EOPers this question when teaching the Apple case. It is tempting to shout, "Yes!," as classes often do, or maybe even retort, 'Do you have to ask?' Apple has reinvented its innovative purpose and, taunting them for their lack of creativity. Case closed?
I think not.
In 2010, Apple's computer market share soared to about 11 percent, but that's hardly the mark of a dominant industry player. Otherwise normal people will camp outside an Apple store for the latest iPhone, but smartphones based on Google Inc.'s Android software substantially outsold the iPhone in 2010, according to NPD Group, a market research firm. Windows-based competitors to the iPad are coming fast and furiously. Such tablets might well become the fourth golden age, replacing the traditional personal computer as the center of the digital hub while becoming products sold largely on price. And there's no guarantee that the iPad, the iCloud ecosystem, or their successors will be the ones that head the pack a couple of years from now.”
Long-Term Sustainable Competitive Advantage is Rare for a Reason
Competitive advantage isn’t a durable thing, even though some exceptions might make it appear that way. The greatest advantages show up during the times of the greatest changes.
“Conventional wisdom would say that the goal of strategy is a long-term sustainable competitive advantage. I challenge that view. Such advantages are rare and for good reason. As Schumpeter showed, peaks in market growth and profitability often come from change, not stasis. Henry Ford dominated care sales with a single, affordable model until Alfred Sloan's General Motors beat him with a line of differentiated products. Polaroid owned instant photography until digital imaging shut it out; many broad-service hospitals were monopolies until low-cost focused providers started chipping away at their base; colleges with sprawling campuses owned higher education until community college, for-profit organizations, and distance learning challenged them with different economic models.”
Sustainable Competitive Advantage Misrepresents the Strategists Challenge
You can’t count on one competitive advantage to win the ongoing game. Strategies aren’t “fire and forget” and they should not be set in concrete.
“Zeroing in on one competitive advantage and expecting it to be sustainable misrepresents the strategists challenge. It encourages managers to see their strategist's challenge. It encourages managers to see their strategies as set in concrete and, when spotting trouble ahead, go into defensive mode, hunkering down to protect the status quo, instead of rising to meet the needs of a new reality. To be sure, competitive advantage is essential to strategy, and the longer it lasts, the better. But any one advantage, even a company's underlying system of value creation, is only part of a bigger story, one frame in a motion picture. It is the need to manage across frames, day by day, year over year, that makes a leader's role in strategy so vital.”
Whatever Constitutes Strategic Advantage Will Eventually Change
Whatever is a competitive advantage will change over time. The need to add value will continue to shape it.
“This organic view of strategy recognizes that whatever constitutes strategic advantage will eventually change. It underscores the different between defending a firm's added value as established at any given moment and something far more important: ensuring that a firm continues to add value over time. This is what endures -- not a particular purpose, a particular advantage, or a particular strategy, but the ongoing need to add value, always. The ongoing need to guide and develop a company so that it continues to matter.“
Value Has to Be Measured by the Current Environment
Your products and services need to change with the times, to keep adding value in the changing environment.
“This is not to say that great resources and great advantages are not built by businesses that enhance their core differences over time. But the products and services that embody those differences must evolve and change, as Apple learned, the hard way, their value has to be measured by the present environment, not the one that once was.”
Straining to Navigate While Keeping the Ship Afloat
The challenge is building the plane while you’re flying it, or sailing the boat while you’re fixing it. It’s a balance of being in the thick of things, while at the same time, taking a look from the balcony.
“Quite painfully, that may mean that, like the shot of Theseus, the keel may need to be rebuilt or the ship may need to sail in a very different direction. As my executive students like to point out, this challenge rarely happens when you're sitting in a dock. It's a hard realization that the planks have to be changed while you're sailing, while you're also straining to navigate and working hard to keep the ship afloat.”
The Challenge Never Ends
Staying in the game means the challenge continues.
“On his return to Apple, Jobs had to remake the computer company plank by plank while also keeping it from bankruptcy -- rebuilding not in a rainstorm, but in a hurricane on the high seas. He got it right for the most part, but as even its archrival -- the once undauntable Microsoft – has discovered, the challenge never ends.”
Personally, I’ve been a fan of strategy. After all, as Zig Ziglar said, "People do not wander around and then find themselves at the top of Mount Everest."
But it’s the Agile strategist that helps a venture survive and thrive for the long haul.
And, a ruthless focus on the customer and flowing continuous value is the North star.
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