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

Abstract

The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business Rita Gunther McGrath (Boston: Harvard Business Review Press, 2013) Porter's five forces and Hamel and Prahalad's core competencies remain central concepts in corporate strategy. (1) But in this book, Rita Gunther McGrath questions whether these ideas--both based on a belief in the need to create and defend a permanent competitive advantage--are still relevant. The 21st century has seen the emergence of such an intensely, globally competitive environment that McGrath believes that a transient advantage is all that is possible. In The End of Competitive Advantage, she explores how strategy should be approached when any advantage is temporary and all companies must be constantly preparing for new realities and moving beyond past successes to future strongholds. As McGrath points out, strategy and innovation have traditionally been seen and pursued as separate disciplines. In the past, it has been possible to strategize about the future without necessarily bringing new innovations to the table. This approach, she believes, will no longer work. In this new business environment, advantages will be based on innovation and remain advantages only as long as the corporate foundation remains innovative and defensible. Once that foundation has eroded, a company must abandon well-established advantageous positions and move into the unknown, looking for the next defensible position. This constant search for transient competitive advantage will characterize successful businesses in this century. To survive in this environment, McGrath prescribes a few key activities. The first is continuous reconfiguration, driven by a healthy willingness to disengage from existing businesses, products, and practices. Companies can no longer count on holding on to a product or even an industry. As an example, McGrath offers the dying Nokia of the 1980s--a company that abandoned all of its traditional markets to bet the entire company on cellular telephones, which were not its strong point at the time. Second is a practice of allocating internal resources based on the pursuit of new arenas of business, rather than on the market position of current products. The traditional practice of spending heavily in the company's largest market, says McGrath, will drain away the resources needed to pursue new arenas. McGrath cites as a successful example of this IBM's decision to exit the entire PC business in order to free up assets to pursue more promising opportunities in software integration and services. …

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