65 January 14

Strategy... from competitive advantage to transient advantage

Approximate reading time: 15 minutes

Corporate strategy in the sports industry is in crisis. Many of long-term approaches are no longer valid in modern times. This article intends to overhaul the principles behind strategic thinking that any company in the sector should conduct periodically.

One of the great contributions to planning and strategic management of organizations comes from Michael E. Porter. He introduced the competitive advantage concept in 1980s that revolutionized the management of enterprises and allowed management to make decisions based on long-term effects of customer orientation from its conception. Thus, during the last three decades, the prevailing view has been based on getting a privileged position in the market sustained in a long period of time. To do this, you must analyze the organization - internally and externally- and focus to gain competitive advantage in one of the three existing generic strategies.

According to Porter's concept, an organization must ensure a clear strategic position in any of the three areas to qualify for acquiring a competitive advantage.

The current turmoil and uncertainty makes sustainable competitive advantage over time almost impossible today. The organization must understand the concept of transient advantage, learning to launch new initiatives that can be built up with agility while also enabling rapid withdrawal when necessary. Success lies in the operational management skills.

The acquisition of an advantage, whether competitive or temporary, always requires the same stages and management processes.

Strategies to gain competitive advantage

Uniqueness of service perceived by the client

Lowcosts

All sector Differentiation Cost leadership

Specific segment Focus

Launch. The organization identifies an opportunity and organizes its resources to capitalize it.

Ramp up. At this stage the business opportunity and becomes a positive and a quality experience by the first customers.

Exploit. Here the organization seeks to capture profits and maximize market share. Competitors are forced to react.

Reconfigure. On success, competition intensifies and appear similar services, a fact that undermines the advantage. Thus, the organization must reconfigure the service to maintain leadership.

Disengage. Sooner or later, the advantage is diluted and the organization must divest the initiative.

Each of these phases requires different skills, indicators and personal competences. In mature markets, such as the sports industry today, there is a tendency to focus resources on the exploitation phase. Thus, in a sector that values and rewards the exploitation of resources, chief executives of organizations are not encouraged or required to identify those competitive advantages are diluting. Instead, they rely on them to get the maximum profit and professional recognition until the problem becomes irreparable. For example, it is easy to argue that economies of scale that have obtained several chains of fitness centers are gradually ceasing to be a competitive advantage to new forms of sport and new business models with operating costs substantially lower.

To compete in a transient advantage market, one must be able to assess if current advantages of the organization are at risk and what lifespan is left. In industries where change occurs rapidly , organizations must learn to navigate nimbly the different stages of the process. In addition, given the speed of the process, they will need to have different initiatives and opportunities in portfolio to ensure a continuous process.

Launch Ramp up Exploit Reconfigure Disengage

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

'No one can be slave of their identity: when a possibility of change emerges, we must change'

Elliot Gould

When competing in the search for transitional advantages, focus on resources cannot only be based on the operational phase but a more holistic view with a balanced team and resources between phases is needed. The seven elements that should be taken into account to guide the organization into the management of transitional advantages are presented below. 7 elements to implement transient advantages

Think in competitive environments and not in industries. One of the most accepted ideas in traditional management is to analyze the information within the 'industry' and, therefore, look at the results of competing organizations. 'Competitive environment' can be defined as the combination of a customer segment, a specific service to be offered and a place where the service is offered.

Establish comprehensive analysis scenarios and let people experiment. The shift to a competitive environment analysis requires to modify the usual processes of management results analysis. The culture of the organization should change to integrate the concept of exploring rather than exploiting. Therefore, the organization should recognize those efforts on identifying new opportunities, regardless of their potential success.

Incorporate indicators to ease organizational growth. When the acquisition of an advantage is

temporary, traditional indicators may negatively influence innovation

processes. It must therefore reinterpret indicators such as ROI (return on investment) or the ones measuring the operational efficiency in resource management.

Guide the organization towards experiences and solutions to problems. In a competitive and technological world, any product or service can be copied in the

Launch Ramp up Exploit Reconfigure Disengage

Income

Process of a transient advantage blink of an eye. Once an organization has proved that demand for something is there, competitors will come quickly. What customers desire are well designed experiences and complete solutions to their problems. Organizations focused on acquiring transient advantages, are prepared to put on their customers' shoes and build from what they expect.

Create strong relationships and networks. One of the few barriers to entry that remain in environments of transient advantage relates to people and their networks of relationships. The organizations capable to manage networks are also recognized for their high levels of customer loyalty.

Systematize the early stages of innovation processes. If the advantage eventually disappears, management by transient advantage makes sense when there are different initiatives queuing in line. Organizations that excel in innovation have an organizational structure adapted to this purpose.

Experiment, iterate and learn. One of the most common errors in the current management is planning innovative projects with the same tools and concepts that are used for well-established concepts. We must change, with higher focus on experimentation and learning.

No leader can manage for himself the complexity of an organization working on initiatives under different competitive environments. Leadership is based, today, to be able to provide some basic principles in the development of the organization, establish appropriate processes for key activities such as innovation, and to manage their influence on some crucial turning points to direct the flow of activities in the organization. Competences of the leader have changed. They will need to ask questions of the initiatives to be put in place rather than to give answers, expect disagreements on issues within their team and capable to incorporate agility within the organization. In a world with

transient advantages, time gains prominence.

An element has not changed in pursuit of strategic advantage for the organization: the need to make hard decisions about what needs to be done and, above all, what not to do. The only stability in the organizational environment is permanent change.

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Idea based on the article: Rita G. McGrath, Transient Advantage. Harvard Business Review, June 2013.

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