In a recent HBR article, Rita Gunther McGrath wrote: “The dominant idea in the field of strategy – that success consists of establishing a unique competitive position, sustained for longperiods of time – is no longer relevant for most businesses. They need to embrace the notion of transient advantage instead, learning to launch new strategic initiatives again and again, and creating a portfolio of advantages that can be built quickly and abandoned just as rapidly. Success will require a new set of operational capabilities (2013, p. 65).”
McGrath reminded me of Henry Mintzberg’s classic, The Rise and Fall of Strategic Planning (1994), in which he pointed out that, in those times, staff specialists took about two years to complete strategic plans. He pointed out the obvious: By the time a strategic plan was completed, the world for which the plan was intended was now history. Since the people who supposed to use the plans were not involved in their creation, the planning process could produce such unintended consequences as destroyed commitment, restricted organizational vision, loss of hope for meaningful change, and the rise of a political culture. He described three faulty assumptions that supported strategic planning: (1) discontinuities can be predicted, (2) strategic planners need not be involved in the organization’s operations, and (3) the process of planning strategy can be formalized and routinized. Her article also reminded me of Peter Vaill who, in 1996, discussed strategies to survive in a world of perpetual while water. Vaill challenged the validity of the metaphor that change occurred during a limited period of white water that extended from a placid upstream flow, through a sharp decline over rocky streambeds, and emerged into another placid downstream flow.
McGrath does not cite Vaill or Mintzberg in her article. A rather sad comment on today’s younger generations of so-called “scholars.” But she does revive and illuminate an important point for all of us that assist leaders to enhance their own strategic thinking and strategic decision-making. I see too many leaders that think strategy development is an annual effort that may be precipitated by their organization’s urgent need to change and adapt to significant changes in their environment – e.g., disruptive innovations in technology, variable national and international economic conditions, and natural or manmade disasters. Leaders do not often direct some of their boundary spanning functions – e.g., procurement, HR, finance, legal, marketing, and post-sales service – to actively scan their external environment in search of small harbingers of emerging major, disruptive, radical, trans-systemic, transformational, and discontinuous changes (i.e., butterfly effects). Early detection of such changes could serve to stimulate the creation of multiple strategic innovations that capitalize on the opportunities and threats that such environmental changes produce.
McGrath reminds us of a five-stage product life cycle that she repurposes as a model of the “wave of transient advantage”: Launch, Ramp Up, Exploit, Reconfigure, and Disengage. The same leaders and managers are unlikely to be successful in every phase. Each phase requires people with different, distinctive qualities. The Launchphase calls for people who like to explore, discover, make mistakes and learn from them, and generate a lot of ideas about possible new ventures. The Ramp Up phase requires people who can access resources and produce the new venture quickly. The Exploit phase needs people who excel at creating efficiencies and making sound decisions. The Reconfigure phase requires people who make and enact difficult decisions in managing a declining product line. The Disengage phase needs people who are direct and make difficult decisions as they redeploy resources from declining business to those that are ramping up.
I think McGrath’s model is useful in that it reminds us — and the executives with whom we consult and coach — that “…high-velocity companies cycle rapidly through the stages of competitive advantage. They also need the capacity to develop and manage a pipeline of initiatives, since many will be short-lived (p.65).” Such organizations do not depend on a single initiative to create and sustain a long term strategic competitive advantage. The critical element is the careful management of a large portfolio of transient advantages, each of which is at a different place in their respective life cycles.
However, many companies do not require transient advantage. McGrath refers to companies like GE, IKEA, Unilever, Julius Berger, and Swiss Re as “…companies that [can] create a strong position and defend it for extended periods of time (p. 64)…” with their own portfolios of products that do sustain their competitive advantage over extended periods of time. Therefore, Action Learning coaches cannot make assumptions about the nature of our clients’ competitive advantage.
As I reflect on McGrath’s article, I have myself assuming that the future of an enterprise would have to be at stake. Then, at least one good Action Learning problem comes to mind. That is:
“In order to maintain if not increase its competitive advantage, how can the leadership of a complex organization plan and manage its transformation from a traditional strategically oriented system to one that is guided by transient advantages?”
References
McGrath, R.G. (2013). Transient advantage. Harvard Business Review, June, 62-70.
Mintzberg, H. The rise and fall of strategic planning. New York: The Free Press and Prentice-Hall International.
Vaill, P. (1996). Learning as a way of being: Strategies for survival in a world of perpetual white water. San Francisco: Jossey-Bass.
Arthur M. Freedman
