Strategic Shifts: The Science of Transient Competitive Advantage

The Changing Landscape of Organizations

Today’s organizations are vastly different from those operating in the pre-digital era. The rapid shifts in the business world have triggered many changes in organizational strategies, value propositions, cost discipline, revenue structures, and operating models. In this hyper-competitive environment, following outdated strategy concepts is a recipe for failure.

The Concept of Competitive Advantage

Since the inception of modern strategy, one of the core topics has been competitive advantage. Over the years, leaders and executives have spent countless hours envisioning the industry environment and building sustainable competitive advantage. However, the advent of digital technologies has blurred industry barriers, significantly impacting organizational strategies and competitive positioning. In today’s environment, where change happens at lightning speed, the notion of sustainable competitive advantage for most industries is just wishful thinking.

Transient Competitive Advantage

I am not arguing that sustainable competitive advantage is bad. If an organization can sustain its competitive advantage, it is undoubtedly an ideal state. However, the disruptive nature of the business world doesn’t allow competitive advantage to remain sustainable. Hence, the concept of transient competitive advantage is rising fast and is termed a game-changer for those who understand and adapt to it.

Understanding Transient Competitive Advantage

Rita McGrath, a globally recognized expert in strategy, is a prominent proponent of this concept. In her book, The End of Competitive Advantage, she explained the idea of transient competitive advantage. This concept means that in a fast-moving world, companies risk their competitive advantage being replicated by competitors. Thus, they need to be nimble to capture emerging opportunities, exploit them decisively, and then move on to the next one.

Companies must avoid complacency and should not be trapped by past success. Having a quality product, superior services, or a well-recognized brand doesn’t guarantee a sustainable advantage. Nokia and Blackberry had great products but were simply blown away by the speed at which change happened. Leaders and strategists need to learn about exploiting short-lived opportunities with speed and decisiveness. Today’s enterprises must be adaptable, forward-looking, and agile, as these capabilities are the bedrock to build transient competitive advantage.

Examples of Transient Competitive Advantage

There are many examples of companies that followed the notion of transient competitive advantage. Apple jumped onto the next big opportunity, and since then, they have quickly captured emerging opportunities. Amazon has evolved from a bookseller to an e-commerce giant and a Cloud-based company, and they haven’t stopped there. Amazon’s Cloud business has also evolved in a big way by embracing AI technologies into core Cloud offerings, and they are currently outperforming with their Cloud propositions.

Microsoft didn’t settle for their core MS Office products; it evolved into a cloud service provider and much more. Digital-only banks like Revolut and NuBank initially unbundled banking services and continuously adapted to re-bundle them. Ant Group’s initial advantage was driven by e-commerce payments, and it continuously discovered new competitive advantages by building digital business models in insurance, wealth management, credit services, etc.

These companies have quickly seized available opportunities, exploited them, and moved ahead with the next big thing. In most cases, they continued their core business, but the competitive advantage is not driven by the core business.

Shifting from Sustainable to Transient Advantage

The business world has practiced the concept of sustainable competitive advantage for decades. There are still a few industries and companies that can follow the traditional theme of sustainability of competitive advantage; however, it doesn’t apply to most industries. Companies operating in fast-moving industries must shift their thinking from building sustainable advantage to transient competitive advantage.

This shift requires time and cultural change. Companies need to foster a culture of adaptation and agility. They must organize for strategic foresight and innovation. Leaders must provide psychological safety to people and build an environment conducive to corporate entrepreneurship, experimentation, and innovation. The portfolio of experiments should always have a healthy count, and some cutting-edge ideas must reach the final league. The big bets and the potential sources of future competitive advantage must get adequate resources. Lastly, organizational learning is critical to building transient advantages.

The current era is characterized by change, and this change is likely to accelerate; hence, change must be seen as an always-on practice.

Author’s Profile

Danish is a strategy professional with 18 years of work experience in the financial services industry across various geographies. He is also pursuing a Doctorate in Business Administration from ISM, Paris. As a seasoned strategy professional and dedicated researcher, he is passionate about the domains of strategy, transformation, and emerging technologies. Danish’s relentless curiosity drives him to delve deep into these subjects, constantly seeking to unearth insights and unlock their potential. You may want to connect with Danish on LinkedIn, where he regularly shares knowledge on important subjects in the realm of management sciences.