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Book interview: Rita Gunther McGrath 'The End of Competitive Advantage'

Doing things the way we always have is the road to disaster. But what's the alternative? We talk to an author whose new book describes a strategy for maintaining competitiveness.

These days it's hard to find a commentary on the commercial world of technology without at some point stumbling over the epithet 'fast-moving'. But while the term's ubiquity has become tedious, it's also true that technology has never forged ahead at such a rate as it does today. And it's only going to accelerate. If you think about it for a moment, it would have been very difficult a decade ago to predict where we are today.

But it's not just the technology that has changed in the early part of the 21st Century. Our approach to devising the background strategy for conceiving, designing and bringing to market new products has changed too. Or at least it should have, says Rita Gunther McGrath in her book 'The End of Competitive Advantage'. In it she argues that our old school approach to technology marketing strategy no longer works. This is because the game has changed, and if we don't change, then our strategies will become "stuck".

For McGrath, the notion of business being fast-moving is "a relative concept". She says that if you look at where strategy practice started, you'll see a lot of asset intensive manufacturing firms (such as Kodak), where competitive advantages really did last for years – even decades. In contrast, today the trend is towards asset light businesses. We find more "industries that are moving quickly, so the heavy analytical approach of the past simply takes too long".

McGrath says that the old way of doing things was to market the best product in terms of its features. But today there is a shift, which admittedly we have been aware of for some time; only the pressure to act upon this knowledge has never been more acute. "Customers are looking for complete experiences which allow them to easily and conveniently address the daily challenges they have. The whiz-bang tech innovations of the past don't really take experiences into account." At this point McGrath cites the introduction of nylon, where the only real benefit was that it wasn't as expensive as silk. Her comment on this is a not entirely sincere "Wow!".

Having introduced your bid for the top market slot the resulting strategy was normally to stand back and (hopefully) count your revenue until the product matured and then waned. After a while it would dawn on the company that there was a need to replace it with another market leader.

Problem is, when the business conveyor is moving quickly, the development of innovation needs to be strategic and concurrent. You may irritate a few end-users (I'm still happy with my iPhone 4 and my iPad 2, but most people moved on aeons ago), but to be a player these days you need a transient competitive advantage, and that's what McGrath's book is really about. 'Transient' is the key word here, and what this refers to is the idea that "companies increasingly will be developing pipelines of competitive advantages, capturing opportunities as they arise and disengaging from those that are exhausted on an ongoing basis".

The 'solutions' spectre

McGrath, a professor at Columbia Business School in New York where she specialises in strategy in uncertain and volatile environments, tells me that she wrote 'The End of Competitive Advantage' because "I think strategy has become hamstrung by our obsession with sustainable advantage.'The real issue is that we need to build organisations and institutions that can cope with the full life cycle of a competitive advantage – insight, incubation and launch, ramping up, exploiting and eventual erosion and disengagement".

While other books may examine individual components within this cycle, there are few if any that take this cradle-to-grave approach. McGrath's book is also assisted by the fact that while many strategy management books are congealed by screeds of analytics, this one is less formal and more accessible to the engineering manager who simply wants to get a steer on what to do next.

McGrath is at her most insightful when pondering the nature of change and the spectre that seems to haunt so many manufacturing companies that say they have innovation at their core, but don't really have it even at their periphery.

Businesses routinely trumpet that their mission is to provide (and here's another meaningless word) 'solutions', while they in fact don't even have the word 'innovation' as a budget head. McGrath argues that you can't just innovate when you feel the creative muse, or improvise because you have a gut feeling, or simply ask your best people if they've got any good ideas. Why not? Because it marginalises a process that should be core. Also, that was typical of the old way of thinking when we used to ask: Why can't we base our strategy on the single idea of competitive advantage?

"My goodness," says McGrath. You can't do that "because it creates all the wrong reflexes. For example, if you think your career is tied to the performance of the business that you are in, you'll devote resources to shoring up that business, even if it might be in the best long-term interest of the company to be investing in something new. People are reluctant to shift away from a previously glorious advantage".

Changing assumptions

'The End of Competitive Advantage' is one of the best business strategy books in recent years. It is readable, well organised and capable of delivering observations that can be absorbed the next strategy meeting. But beyond that it rather importantly updates our assumptions about what will and won't work in that "fast moving world".

McGrath draws on a number of case studies, including Fujifilm, Cognizant Technology Solutions, Yahoo! Japan and Atmos Energy. She writes deftly and with clarity of purpose that will enable corporations to rethink their strategy and assist them in creative concurrent strategies that will minimise the effect of maturing products hitting the end of their shelf life. But she also thinks about what transient strategy could mean for the individual: "You have to build skills, networks and exit strategies that ensure you aren't caught by surprise."

'The End of Competitive Advantage' by Rita Gunther McGrath is published by Harvard Business Review Press, £20

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