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May 15, 2014

Sustainable advantage, Transient Advantage and Organizational Change

In an insightful blog that is part of a series HBR is running on the intersection between Strategy and Innovation, editor Sarah Cliffe interviews colleague Don Sull, who argues that you can think of the “sustainability” school as the thesis, the “transient advantage” camp as the antithesis and the organizational change folks as the synthesis of the two, requiring a degree of ambidexterity on the part of managers.

In support of the ‘sustainability’ school, he points out, quite correctly, that some companies have been able to build advantages that last for a long time.  He cites IKEA as one (with which I would agree – I actually teach a case about IKEA) and Microsoft as another (a company that prints money despite having missed many major technological advances).  I certainly would never dispute that sustainable advantages are wonderful when you can assemble the right capabilities to find them.  The difficulty comes in when companies without the right to expect to have a sustainable advantage act as though they do.  This creates dysfunctional behavior, such as defending a declining core business, failing to adequately resource innovation, letting inertia build up until a massive and punishing restructuring is called for and using political power to basically wait things out until a disaster occurs on the next person’s watch.

What I was hoping to achieve, in the ‘antithesis’ of Transient Advantage was to offer leaders a different vantage point than the one we have often taken for granted.  Under certain boundary conditions, advantages are sustainable. Under others, not so much.  And in that second condition, it’s critical that we understand some key differences.

  • From defending existing advantages to the death to being prepared to reconfigure quickly
  • From clinging to a fading advantages to proactively disengaging
  • From resources being controlled by powerful people with in the organization to resources being deftly allocated across a portfolio
  • From episodic innovation to innovation as a core capability
  • From careers where people think they’ll be with most employers for a long time to a more entrepreneurial approach to career management

So the point really is to say that we can identify what it takes to compete when particular advantages come and go.

With respect to ambidexterity and other ways of bringing the future into current decision-making, I couldn’t agree more.  To keep a company healthy, you need to develop today’s business, figure out tomorrow’s and invest in options for the future.  But saying that strategy is just about managing organizational change misses the inputs that are needed in some critical questions:

  • Which arenas should we be attempting to compete in?
  • When will we know the time is right to make a move?
  • What kinds of moves should we make, given our capabilities and current positioning?

In a way, Sull finds himself leaning toward more of a transient advantage position (I would argue) as he finishes the interview by suggesting:

“The key to success in today’s volatile markets is strategic opportunism, which allows firms to seize opportunities that are consistent with the bundle of resources and capabilities that sustain their profits.”

Well, there you have it!

Filed Under: Insights and ideas, Strategy Dynamics, Strategy Execution, Transient Advantage, Uncategorized

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