In 2013 Rita McGrath published ‘The End of Competitive Advantage’ arguing that competitive advantage is temporary.  She coined the replacement phrase ‘Transient Advantage’ signalling that any advantage is undone at an increasing pace through competition.   As it applies to the cycle of product innovation, this makes sense.  Product, service, solution  (collectively ‘product’) innovation and/or customer experience requires regular renewal. Customer needs change and markets evolve. Standing still is not a safe long-term bet.  In this sense, competitive advantage needs to be actively sustained.

In the McGrath playbook, the source of competitive advantage is the capabilities and resources a business has to create and deliver the products, services, solutions and/or experience(s) that customers buy.  Investment is these capabilities and the culture to support them takes time and is not easy to duplicate.  Continued investment differentiates these capabilities and transforms them into competitive advantages that tend to be more durable and sustainable over multiple product cycles.  P&G for example has been an innovation leader performing above market for 20+ years on the back of the purposeful development of internal capabilities, employees and repeatable processes that builds the capacity to sustain growth.   The source of competitive advantage is not what you see but what you do not see.  This is what is hard for others to duplicate.

This perspective is not easy to grasp.  It requires time and focus to define what capabilities/people you already have or need to develop and how these capabilities can differentiate your  position in the market over time in a way that is easy to articulate so that it resonates with your people and your target customer.  It is a deliberate inquiry at the heart of your business strategy and how you make money. In other words, what do you need to be really good at to create value for today and tomorrow that motivates existing and new customers to buy from you and not someone else.  It is these capabilities that will also guide you through market turbulence when it happens. It is the same capabilities that will attract new talent to want to work for or with you rather than someone else.

Instead of asking whether competitive advantage is sustainable – because the answer is yes with purposeful investment – maybe the better question is how can a business develop and sustain a competitive advantage?

 

 

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