Wednesday, October 16, 2013

Transcendent Strategy

There seems to be a consensus building in the business world claiming that concepts like positioning and competitive advantage are becoming obsolete. This premise is based on the assumption that the business world is moving too fast. In such a fast-paced changing world, nothing lasts—including positions and competitive advantages.

This leads to the conclusion that if competitive advantages and positions have no lasting value, then it is a waste of time to focus much effort on them.

I tend to disagree. Here is my rebuttal to this point of view.

Yes, technologies come and go; products come and go. But the truly important issues endure.

Has the desire for value gone out of style? Has the desire for quality gone out of style? Have the desires for prestige and self-esteem gone out of style? No.

These eternal desires have been around or hundreds of years and will continue to be around for hundreds of years to come. Eternal values such as these do not become obsolete.

The problem is not that positioning and competitive advantages have to—by their very nature—become obsolete. No, there is nothing inherent in positioning or competitive advantages which creates obsolescence. Instead, the problem is that people are focusing on the wrong things to build a position or competitive advantage around. If you focus your position or competitive advantage on a particular “product”, “technology”, or “feature set”, then of course your position or competitive advantage will not last—because the best alternative in these areas is constantly changing.

By contrast, if you focus your position or competitive advantage around mastering and owning the enduring attributes of prestige, self-esteem, quality, value, etc., then your position and competitive advantage will endure. Advantageous strengths in areas like this transcend all of those ever-shorter life cycles in products, technology or feature-sets.

Your company lasts, survives, and thrives even if particular products come and go, because your position and competitive advantages in understanding and providing solutions to enduring desires allow you to better migrate to the next iteration of how that need is satisfied. You continue to win, because you have built your strengths around owning the solution itself (e.g., prestige) rather than merely owning the current manifestation of that solution (e.g., a smartphone).

Think of Virgin. The company is not linked to a particular product, industry, technology or feature set. Virgin is into hundreds of diverse businesses from media to transportation—even transportation into space. Instead of focusing on a particular product or technology, Virgin has built competencies and advantages in winning a position in the enduring values. Here’s how Richard Branson, founder of Virgin, describes it:

“We've become a sort of way-of-life brand. ... People think of Virgin — if they hear that Virgin's going into a new area, they know that the quality will be good, that we'll do it in a fun way, that we'll give good value for money. And so it gives us a leg up when we go into a new venture. People already [trust] us, and they'll give us a try and, generally speaking, people seem to like what they find.”

Virgin the corporation wins and endures, even when particular ventures come and go, because it is always on the prowl looking for the next evolution for its “way of life” solution. It takes its skills (competitive advantage) in imbuing these way of life values into an industry and wins.  

And think about Apple. Its popularity has transcended a wide range of obsolescence in products, technology and feature sets. People love Apple because it wins on enduring values. Status, elegance, simplicity, easy-integration, and being “cool” are all integral to everything it does. Apple built competitive advantages in pursuing these enduring traits. This allows the company to endure, because positions and competitive advantages in these areas endure.

The fact that Apple is hiring Angela Ahrendts, the CEO of the Burberry fashion house, to run its retail division shows that Apple is structuring its competency around status, elegance and “coolness” rather than particular products or technology.

So if you build your position and your competencies around the enduring values (like Virgin or Apple), you can have a competitive advantage which can last a relatively long time.

Winning positions and competitive advantages win because they best fit into the context of the environment in which they operate. The battle is decided in the marketplace. To win in the marketplace, you have to be designed to win within the context of that marketplace.

If we buy into the original premise that the business world is undergoing accelerated change, then that is the context where we must design a winning strategy. Therefore, a good way to win in this marketplace is by building competitive advantages in adapting to change.

Competitive advantages in adapting to change could include superior competencies in areas like:

  1. Monitoring the environment to get early detections in the direction of change.
  2. Building a flexible supply chain.
  3. Having an organization that can quickly reallocate resources (human, monetary, etc).
  4. Building skills around enduring values rather than temporal products and technologies.
  5. Speed in execution.
  6. Developing a tolerance for risk.
  7. Quickly building strategic partnerships in areas needed to adapt to the change.

Companies which can do things such as these better than anyone else will have an enduring competitive advantage within the context of a rapidly changing marketplace.

It is a false notion to claim that positions and competitive advantages can no longer be enduring. Yes, many positions and advantages will not be enduring, because they are linked to particular products, technologies or feature sets. But that is the fault of the people who picked the wrong things to focus their positions and advantages on. If, instead, one focuses on enduring values or adapting to change, then you can build enduring positions and competitive advantages.

Don’t blame the concepts of positioning and competitive advantage when your business becomes obsolete. These tools still work well if applied properly. Think of the axe. In the hands of a skilled lumberjack, the axe is a wonderful tool. In the hands of an axe murderer, it is a horrible tool. Are you more like the lumberjack (building enduring skills) or the axe murderer (focusing on products, technology and feature sets)?

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