Thought Leader Interview: Rita McGrath
Sustainable competitive advantage sounds like a good thing to most people—but you believe companies need to stop basing their strategies on it and embrace a new strategic logic. Please explain.
The high degree of change in today’s environment means that organizations have to adapt their strategy to new situations much more frequently than ever before. Historically, the preoccupation in strategy has been with seeking a long-term competitive advantage that is not easily duplicable by others in an industry, but we must all accept that this is an age of transient advantage. Previously, the sequencing has been: Identify a unique position in an attractive industry, throw up entry barriers like crazy, and then devote the rest of your efforts towards exploiting that position. In more and more areas of the economy, this approach no longer works. Either the position doesn’t have enough entry barriers and it erodes; new forms of competition come in and take over; customers change; or your position just wasn’t sustainable to begin with.
What does it take for an organization to thrive in an age of transient advantage?
I did a study a few years ago of a very unusual group of firms that I call ‘outliers’. My study population was ‘every publicly traded firm on any stock exchange with a market capitalization of over $1 billion’, and of that entire population, only 10 companies were able to grow their net income by at least five per cent per year for 10 years in a row.) to an Internet service provider () to a massive construction-oriented firm ( of Spain). What they all seemed to do really well was to combine elements of with elements of . For example, leadership, culture, values and people might remain quite stable over a lengthy period, but resource allocation, job assignments, market explorations and assets were being moved around quite dynamically.
