Is Sustainable Competitive Advantage Enough?

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It’s the assumption at the core of GE, IKEA, and Unilever’s strategies; its presence, or lack thereof, guides the investments of billionaire Warren Buffett, among others. Sustainable competitive advantage sounds like something that every business, in every industry, would want to secure. With the advent of digitization and globalization, however, along with continual emergence of disruptors from every corner, is focusing on sustainable advantage still the best way to achieve success? Writing in the June 2013 issue of Harvard Business Review, Columbia Business School professor Rita Gunther McGrath, PhD,¹ argues that organizations should shift their focus to the constant pursuit, development, and exploitation of transient advantages. Her primary reason will sound familiar to leaders in the turbulent radiology industry. “In a world where competitive advantage often evaporates in less than a year, companies can’t afford to spend months at a time crafting a single long-term strategy,”1 she writes. Instead, if they are to stay ahead, they must begin new strategic initiatives over and over, constantly. Most organizations have become so rooted in the sustainable-advantage approach that they have become blind to the single most important means of identifying transient advantages: frontline employees. They, McGrath notes, “are rarely rewarded for telling powerful senior executives that a competitive advantage is fading away.”¹ Instead, obtuse administrations continue to pursue dated initiatives until it’s too late. As examples of companies that have fallen prey to this vulnerability, McGrath cites IBM, Sony, Nokia, and Kodak, where sustainable-advantage strategies ran aground, she observes, “despite ample early warnings from those working with customers.”¹ Risks and Misconceptions In fact, McGrath reports, as a business or industry’s offerings become commoditized—a process that has been underway in imaging for some time—transient advantages become more and more important. She offers a series of questions designed to provide warning signs that an organization is at risk of succumbing to sustainable-advantage myopia; here, these have been rephrased to apply to imaging. The first question that leaders should ask is whether they would turn to their own facilities for their care (or that of a loved one). Has the organization been investing in equipment, IT solutions, and personnel at the same or higher levels, only to continue losing market share? Are patients finding cheaper providers to be good enough, even if the quality associated with them is lower? Is competition emerging from unexpected corners? Here, McGrath cites Walmart’s planned entry into the clinic market. Circling back to the importance of frontline staff, is the organization not considered a top place to work by the kinds of employees it would like to hire—and, similarly, are the most valued current employees abandoning ship? Is your reputation continually undervalued? McGrath also outlines common misconceptions held by leaders still struggling to liberate themselves from the sustainable-advantage mindset. These include the beliefs that being first to market will guarantee success; that investment in established offerings can be minimal; that higher quality will always pay off; that resources should be committed to existing offerings, not new ventures; that innovation and experimentation are intangible concepts that don’t need a formal position in the organization’s structure; and that sporadic innovations will be enough to keep the strategy fresh. Transitioning to Transience To counteract some of these ingrained behaviors and misconceptions, McGrath offers specific steps for developing a pipeline of transient advantages, as opposed to relying on a single sustainable advantage that is anything but. Her first recommendation is to think of the marketplace in terms of arenas, not industries—for it is arena thinking that allows players such as Walmart to encroach swiftly on the health-care market. “Indeed, the very notion of a transient competitive advantage is less about making more money than your industry peers . . . and more about responding to customers,”1 she explains. This will be music to the ears of those already pursuing patient-centered models that focus on enhancing the customer experience of care. In fact, many of McGrath’s steps for the transition to transience focus on the customer experience; she points out that while products and services are easily duplicated, a well-designed experience is a customer craving that is rarely satisfied. She also highlights the value of employees who are gifted at understanding and responding to customers’ needs, and cautions businesses against the kind of drastic restructuring that can upend these gifted individuals’ confidence and undermine their initiative. McGrath emphasizes the importance of codifying, systematizing, and orchestrating innovation by building it into the governance and resource structures of the organization. “A big mistake companies make all the time is planning new ventures with the same approaches they use for more-established businesses,”¹ she writes. Instead, new approaches should be funded separately to avoid destructive resource competition, and they should be treated as experiments until their success has been proven. Most important, they should be cultivated and nurtured, on an ongoing basis, to ensure a healthy pipeline of overlapping transient advantages. Managing all of this will, of course, require a new kind of leader, and it is this concluding portion of McGrath’s prescription that will resound most deeply with those in the health-care field. “A strong leader seeks contrasting opinions and honest disagreement,” she concludes. “Fast and roughly right decision making will replace deliberations that are precise but slow. In a world where advantages last for five minutes, you can blink and miss the window of opportunity.”¹