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Is Competitive Advantage Actually Dead?

Professor Rita Gunther McGrath makes the audacious claim Is Competitive Advantage Actually Dead? in here book (The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business ) published in 2013.  I’m not sold that she proved her point.

At the outset, McGrath is quick to emphasize that the pace of play in the economy has increased at an exponential pace.  This higher ‘clock rate’ means that companies and businesses come in and out of existence at a much higher pace.  As such, she wants to prove that Michael Porter’s 5 Forces and other models of strategic analysis become increasingly impotent in driving corporate decision making.

The point she makes is that strategy is much more like surfing – and that companies need to think about riding a given wave and then changing.  To do that well, requires a nimble organization that can chase opportunities in a flexible fashion.

Where McGrath goes wrong is that she tries to make this argument by pulling together a set of companies that she believe demonstrate this, kind of Jim Collins, Good to Great style.  Her criteria were company that managed to grow over the 10 year period from 2000-2009.  No specification was made regarding organic vs. inorganic growth – or even took into consideration the financial crises that existed during that point in time.

The rest of the 200 page work reads more like a Harvard Business Review article run long.  Her key points are that companies need to manage capital expenditures and resource allocation decision centrally and not at a business unit level.  With senior management driving capex, there is greater opportunity to see obsolescence risk in an existing line of business, as well as make sure that innovation initiatives do not get starved for capital.

Two other interesting ideas she lays out:

Technology debt – once you have invested in a technological system, the requirement to continue to upgrade and improve on it, means that the capital requirements behave a lot more like a loan / interest payment.
Access to assets is now more important than ownership.  If you may not be in a business for a long-duration, scaling quickly via rental may be more powerful than owning your own capital goods.

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