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Rita Gunther McGrath and the New Playbook For Strategy

August 18, 2014, 8:00 AM
Stability

The business world today bears little resemblance to that of 40-50 years ago. Yet for some reason many companies still clutch to the archaic dogmas of strategy developed during that time period. Rita Gunther McGrath, a professor at Columbia Business School and the author of The End of Competitive Advantage, advocates for a more modern strategy she deems "transient advantage" in this clip from her Big Think interview:

 

As McGrath explains, the first step to rewriting the playbook for strategy is to tear out the weathered pages of old. These are the pages that encourage companies to make foolish and dangerous decisions based on outdated allegiances to stability:

"Like focus[ing] excessively on your competition rather than really thinking about your customer.  Focus[ing] excessively on your industry rather than thinking really about the arenas in which you're competing.  And most dangerous of all focus[ing] on stability when what you need to really be thinking about is change in dynamism."

The old strategies were mostly developed during the Cold War era when American companies faced very little international competition. No China. No India. Most of Europe lay beneath the shroud of the U.S.S.R. The world isn't like that anymore and McGrath explains how time has sapped the old strategic creeds of their relevance:

"American companies had a pretty big period of stability in which they got to compete. And so the essence of competition back then was really about the classics: scale, scope, comparative advantage, optimization, running efficiently. Because that's what got you the real edge because you didn't have global competition, you didn't have the Internet, you didn't have digitalization, you didn't have some kid in a garage able to invent something that four weeks later is worth a billion dollars."

So the changing world and its many new phenomena laugh in the face of sustainable advantage. To McGrath, businesses that still employee it as strategy are victims of both inertia and faulty analytical thinking. She instead champions a newer set of practices and principles called transient advantage, which consists of six key elements:

1. Always Be Changing

"Continuously reconfigure what you're doing rather than depending on a huge seismic change that involves massive restructuring and downsizing."

2. Improve at Disengagement

"[Be] able to stop activities that are no longer relevant or stop ventures that you started that just aren't panning out the way that you had hoped."

3. Smart Resource Allocation

"What often happens in companies is powerful people running core businesses get to call the shots with regards to where the resources get spent.  And if you want to know how that ends up just look at BlackBerry or Nokia or any of those firms where powerful people tried to defend their advantages far longer than they should have."

4. Embrace Innovation

"Innovation has to become a proficiency.  It can't just be episodic; it can't just be something we do once in a while."

5. Adaptive Leadership 

"Leaders need to be increasingly discovery driven, meaning they have to be able to adapt their mindset as new information comes in and they have to be very candid and willing to have frank discussions about what's really going on."

6. Acknowledging Dynamism's Effect on Individual Career Paths 

"I think all of this has huge implications for individuals and how we structure our jobs, how we structure our careers, what we do both as employers and as persons who are working ourselves.  And I think the traditional career path for a whole lot of people is going to be radically different than anything we seen before."

Business conditions in 2014 are faster and more dynamic than ever before. Think of them as gusts of wind. Modern companies should embrace the gusts; grow wings, find ways to glide with the dynamism. Other firms that insist on setting their feet in cement for the sake of stability will get blown over time and time again, and come away with little more than fractured ankles.

 

Rita Gunther McGrath and th...

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