February 6, 2014

Fast Breaks and the End of Competitive Advantage

Competing in today’s marketplace is a lot like playing basketball, which means being on guard against opposing players ready to steal the ball away from you and break for the basket before you can get it, just like in the video. In the business world, fast breaks happen when your competitor rolls out with a better product and cuts into your market share. 
That’s the message of Columbia Business School professor Rita Gunther McGrath’s new book, The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business (Harvard Business Review Press (2013)). For example, consider how Apple stole the ball from BlackBerry in 2007: The CEO of BlackBerry’s parent company (Research in Motion) “told a Reuters reporter that the launch of Apple’s iPhone wasn’t a major threat, simply the entry of yet another competitor into the smartphone market. Five years later, the company is at risk for its very survival,” McGrath wrote. And the rest is history…or current events.

 Where did Blackberry go wrong? It stuck to the tried and true when change was afoot. “The fundamental problem is that deeply ingrained structures and systems designed to extract maximum value from a competitive advantage become a liability when the environment requires instead the capacity to surf through waves of short-lived opportunities. To compete in these more volatile and uncertain environments, you need to do things differently” (emphasis added).  To switch metaphors, businesses have to learn how to surf.

What do McGrath’s ideas mean for state economic development policy? If McGrath is right about surfing the waves of short-lived opportunities, her ideas could serve as a framework for critically examining long-standing state economic development policies, plans, programs, and practices, especially those focused on retaining and expanding a state’s traditional economic advantages.