Have competitive advantage lost their relevance

July 21, 2015 Torben Rick


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Business models can no longer be treated as stone tablets

One thing’s for sure, business models can no longer be treated as stone tablets divined by wise men on mountains to last for eternity. They have become increasingly perishable.

An important shift is happening with respect to strategy. In a world of rapid disruption, foundational concepts, such as core competency, 5 forces and competitive advantage are losing more and more of their relevance.

 

Have competitive advantage lost their relevance

Have competitive advantage lost their relevance

In mid-eighties, Michael Porter proposed that organizations pursue sustainable competitive advantage. By building key assets such as brand, culture, intellectual property and proprietary processes, companies could outperform the competition over a long period of time.

Since then, the central question of strategy has been how best to attain sustainable competitive advantage.  For example, in “Good to Great”, author Jim Collins suggested that advantage works like a flywheel.  Little advances combine over time to form an unbeatable model.

However, in “The End of Competitive Advantage”, Columbia Business School’s Rita Gunther McGrath argues that sustainable competitive advantage is no longer viable or even desirable. She points out that, “it allows for inertia and power to build up along the lines of an existing business model,” which will soon be defunct. In effect, business models no longer last.

Any advantage will be short lived

Instead, she suggests that firms pursue transient competitive advantage, knowing full well that any advantage will be short lived. The evidence would seem to bear this out. Innosight reports that every two weeks a company is replaced on the S&P 500 and the average lifespan on the index has fallen from over 60 years to less than 20.

Business-model innovation will be the new essential competency

 

Business model innovation in times of rapid change

 

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Torben Rick
Have competitive advantage lost their relevance

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