Sustainable strategic advantage
Having a competitive advantage is having a difference, the choice of certain activities to deliver a unique value-mix to a selected market, thus the ability to perform particular activities and manage the linkages between activities is the key source of competitive advantage. Firms therefore have a natural tendency to rely heavily on current sources of competitive advantage. Richard D’Aveni coined the term hypercompetition back in 1994 to describe the new competitive situation where firms must continually innovate, developing new products and services for the customer. D’Aveni, a contemporary strategy guru, has argued that there is no such thing as a sustainable advantage and that in fact all competitive advantages are temporary. For D’Aveni, sustainable competitive advantage now requires firms to constantly develop new products to provide customers with increased functionality and performance (Henry, 2008). In his view, the only way to succeed is to develop a series of temporary advantages.
Sustainable Strategic Advantage: No Such Thing
Dramatic changes due to globalization, deregulation and technology have redefined the nature of business by increasing competition. Significant increases in the spped of competitive response and the number of competitive actions and price cuts have also resulted. Those indicators highlight the intensity of competition. Those trends are foreseen to continue unabated in the foreseeable future. Firms that have focused on developing effective response skills, as opposed to planning and forecasting skills, are best prepared to meet the uncertain challenges that lie ahead. Existing resources and knowledge, providing current superior industry performance, can develop into severe rigidities, making the development of new sources of competitive advantage highly difficult. Relying on sources of superior industry performance alone can be fatal. In many industries sources of sustainable competitive advantages are becoming increasingly short lived as competitors erode them through aggressive knowledge and resource development, and whole industries are vanishing or undergoing large-scale restructuring through the introduction of radical innovations. Simply renewing or adjusting resources and knowledge might not be enough to secure future competitive advantage. D’Aveni has a point as there is certainly no such thing as a strategy that will succeed forever; all strategies must be refreshed and renewed to respond to market and competitor changes. Companies can in result only build temporary advantages in order to sustain strategic momentum through a series of initiatives, rather than achieve ‘fit’ with the external environment. Also, firms that adopt simultaneous strategic thrusts need to focus on multiple value-creating drivers, involving innovative excellence in business operations, product development and customer service delivery.
If innovation is the foundation of successful strategies of re-creation, then in turn, strategic knowing is the foundation of innovation, or its necessary adjunct. Innovation necessarily requires learning of new things: creating new products, new processes to produce them, new messages to introduce them to the market, and possibly building relationships with new customers and suppliers. Thus innovation requires ongoing development, refinement and transmissions of new knowledge by organizations. Strategic knowing then becomes an element in the dynamic response to (or defense against) substitutability of static competitive advantage. Today’s environment of disruptive competition has several important consequences. The most important implication for this essay, however, is that the rules about how a firm should behave to build advantage must be reexamined and redefined. Traditional models of how firms build an advantage have emphasized the concept of sustainability or advantages that rivals cannot overcome. Yet research suggests that in the current business environment, most advantages will eventually be eroded in an environment of disruptive competition.
Henry, A. (2008). Understanding Strategic Management. New York: Oxford University Press.