- The holy grail of business has long been
to find and defend a sustainable advantage,
our own consistent, unoccupied position
on the competitive map.
But times have changed.
Rather than a simple consistent map,
we now have a complex, rapidly shifting,
and multidimensional melee where anyone can be disrupted
from any direction.
Our competitors have become difficult to identify,
as they don't necessarily look like us anymore.
Who would've thought that Amazon, a retailer,
would be taking market share from server makers
by launching Amazon Web Services?
Or that the iconic New York City cab
and taxis around the world would get squeezed by,
well, just about anybody with their own car and an app?
Or that an entire category of cameras, the point-and-shoot,
would be decimated by a phone?
A recent study by Fortune Magazine found that
"well over half of executives from across all industries
"say that their main competitor in five years
"will be a different company than it is today."
Inevitably, this changing nature of competition
has changed the life cycle of our businesses
and how they pursue and metabolize opportunity.
To get off the ground and thrive,
businesses go through a recognizable series of phases.
I'll map them out with a framework put forward
by Rita McGrath in her book,
The End of Competitive Advantage.
First, they launch by identifying an opportunity
and mobilizing the resources to capitalize on it.
Then they ramp up the business idea and infrastructure
to bring it to scale.
I'll insert here that, as we've discussed previously,
venture design is a valuable approach to leverage
in these initial phases of new venture creation.
Next, businesses move into a phase of exploitation,
capturing profits and market share.
As I mentioned before, until recently,
the holy grail of growth was to find a sustainable,
competitive advantage during the launch and ramp up phases.
Take Dell and their legendary supply chain
as an example of this.
With this competitive advantage in place,
the organization could focus on optimizing the business
and then extend this period of exploitation
for years, or even decades.
With a stable and growing business,
most innovation was focused on marginally,
incrementally expanding the core business.
To grow the bottom line,
companies focused on reducing expenditures
through cost optimizations, operational efficiencies,
and the like.
Needless to say, we've gotten very good
at these optimizations
and many of our businesses remain structured
around this focus.
There are two problems that challenge
these business norms today.
One is endemic and the other is emergent.
First, the endemic problem.
You can cost optimize your way to higher margins,
but you can't cost optimize your way to growth.
For that, you need to grow the top line,
and in order to do that,
you either need to deliver new value to current customers,
or find new customers to serve, or both.
This pursuit of growth is a constant force,
pushing companies to innovate.
Second, the emergent problem.
A number of significant technology-driven shifts
to our business environment
including the digital revolution,
or "software eating the world",
in the words of Marc Andreessen,
the dropping of barriers to entry,
and globalization have dramatically shortened the lifespan
of most competitive advantages.
We've moved from our more stable world
of sustained advantage to a more dynamic one
that McGrath has appropriately termed "transient advantage."
Today, our period of exploitation is far shorter,
rapidly eroded by fast followers,
if not completely upended by more orthogonal disrupters.
As this occurs, businesses need to move
into a reconfiguration phase to keep the advantage fresh
and extend the returns.
Sometimes the advantage is completely eroded
and the business needs to disengage
and reallocate its energy and resources
to a next opportunity and advantage.
To succeed in a world of transient advantage,
we need to constantly initiate new ventures to stay ahead,
building and exploiting many competitive advantages at once.
Though individually temporary, as a portfolio,
these advantages can keep us in the lead over the long run.
Clearly this approach requires us to get very good
at launching new ventures
and maturing them into viable businesses.
And this is exactly where venture design excels.
Take a moment now and refer to your exercise handout.
I've included a worksheet that will allow you
to map your organization's advantages
and where they might fall on the transient advantage curve.
This should help you to understand
where you're getting ahead of the curve
and where you're more vulnerable,
and also enable you
to prompt some productive conversations with your team.