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Repositioning from sustainable advantage to transient advantage is a big leap for publishers

18 August 2013 · By Earl J. Wilkinson

A new book, “The End of Competitive Advantage,” presents a possible strategic framework for publishers to make innovation in continuous product development part of the new corporate culture.

How to structure continuous new product development at news media companies – notably the differences between innovating close to the core product and away from the core product – was the focus of a recent INMA report.

Innovators such as the Toronto Star, Schibsted, The Globe and Mail, Singapore Press Holdings, Dainik Bhaskar, Grupo Epensa, and The New York Times were among media companies identified as having developed strategies, systems, and processes to continually innovate with new products based on new business models generating new revenue streams.

Yet the report had one big flaw: It didn’t have a tidy bow to intellectually tie together how media companies must continuously pump out new products.

A new book by Rita Gunther McCrath, titled The End of Competitive Advantage may be that bow.

Here are the salient points to the book:

  1. The purpose of corporate strategy today is to attain a sustainable competitive advantage.

  2. Sustainable competitive advantage is eroding due to “volatile” and “uncertain” environments.

  3. Because of this volatility, strategy must increasingly be based on transient competitive advantage, exploiting short-term opportunities with speed and agility.

I believe this book hits newspaper and magazine publishes bang-on between the eyes because we are, obviously, an industry based on sustainable competitive advantage. And our culture continues to hold us back from innovating fast enough to get ahead of disruptions that are rocking the news industry.

Unfortunately for news publishers, the structures and systems behind today’s companies to gain maximum value from competitive advantage are liabilities when pursuing transient advantage: moving in and out of advantages over time.

McGrath points out that strategy and innovation have historically been considered separate disciplines. Whereas strategy was about “finding a favourable position in a well-defined industry” and exploiting long-term competitive advantage, innovation was centered on creating new businesses away from a business’ core activities.

Clayton Christensen’s The Innovator’s Dilemma in the 1990s connected strategy and innovation, with “discovery-driven planning” as central to the strategist.

“What was starting to happen was that the disparate fields of competitive strategy, innovation, and organisational change were all coming together,” McGrath writes in The End of Competitive Advantage.

Brought together, a new field of strategy emerges based on transient advantage:

  • Opportunity recognition enhanced in more systematic ways.

  • Facilitating learning through intelligent failures.

  • Rather than intractable markets that sway only on supply and demand, look to customer “jobs to be done” (with deference to the American Press Institute, which championed this, with good effect, in the mid-2000s).

  • Business model innovation on par with product innovation and research and development.

The net effect of this new way of looking at strategy is that companies must develop new leadership behaviours, McGrath says.

“The strategy playbook today needs to be based on the idea of transient competitive advantage – that is, where you compete, how you compete, and how you win is very different when competitive advantage is no longer sustainable,” McGrath says.

The pursuit of transient competitive advantages has represented a new call to action for many companies who now see the idea as a rally to innovation for employees.

McGrath cites now-disrupted companies like Sony, Blackberry, Blockbuster, and Circuit City as examples whose practices were built around the idea of sustainable competitive advantage.

Writes McGrath: “The fundamental problem is that deeply ingrained structures and systems designed to extract maximum value from competitive advantage become a liability when the environment requires instead the capacity to surf through waves of short-lived opportunities.”

Sound familiar, publishers?

In researching The End of Competitive Advantage, McGrath found that of the 4,793 publicly traded companies worldwide with market capitalisation of more than US$1 billion, only 10 companies were able to grow net income consistently by at least 5% annually from 2000 to 2009.

McGrath concluded that these 10 companies, unlike their competitors, were able to pursue strategies “with a long-term perspective on where they wanted to go, but also with recognition that whatever they were doing today wasn’t going to drive their future growth.”

Historically, strategy is based on two assumptions, McGrath says:

  • Industry matters most: Industries are stable, and five-year plans allow for good ROI by investing in analytical capabilities to spot industry trends and base strategy.

  • Once achieved, advantages are sustainable: All that is needed is to optimise systems and processes around sustainable advantages.

McGrath acknowledges there are advantages that can be sustained today based on deep customer relationships, making complicated products, and selling daily necessities.

Yet look to industries such as music, travel communication, consumer electronics, the car business, and education, and you see examples whereby “advantages” are now copied quickly, technology changes, or customers seek alternatives.

It’s a given that you can throw news, information, and advertising into this mix, too.

“The assumption of sustainable advantage creates a bias toward stability that can be deadly,” McGrath says. “My research suggests that rather than stability being the normal state of things and change being the abnormal thing, it is actually the other way around.”

Thus, “the presumption of stability creates all the wrong reflexes.” It facilitates inertia, power sources around the existing business model, routines, turf wars, organisational rigidity.

It is anti-innovation.

“Change management” is a weird concept that requires a 180-degree turn in attention in companies governed by sustainable competitive advantage.

Citing Blackberry as a perfect example of this, McGrathy says a “long track record of relatively stable success caused the ambition to hungrily search for new opportunities to atrophy.” Such a culture does not allow for strong responses “in the face of fast competitive onslaughts.”

The wave of transient advantage looks like this:

  • Launch.

  • Ramp-up.

  • Exploit.

  • Reconfigure.

  • Disengage.

Mindful that every product has a life cycle, the goal becomes how to extend the cycle for as long as possible – yet still have a process to wind down, disengage, and kill a product, something publishers are traditionally horrific at doing.

What the culture behind transient advantage allows for is seeing product life cycles more normally. Instead of seeing a reconfiguration after optimal performance as a bad thing, a transient advantage company sees it as necessary, useful, and natural.

Disengaging or killing a transient advantage product, meanwhile, is equally natural even as the objective is to manage the process with grace and speed. In a transient advantage culture, disengagement is not confused with business failure.

Disengagement in a transient advantage context is as central to business as innovation, growth and exploitation. Says McGrath: “Disengagement is seen as a way to free up and repurpose valuable resources rather than a dismaying signal of lost glory.”

The launch and ramp-up processes require people who are innovative and experimenters, comfortable with ambiguity and willing to learn. The exploitation phase requires “systems and processes” people. Disengagement requires people who can see early evidence of decline and are willing to make hard decisions fast.

In transient advantage companies, the CEO’s job is about “orchestrating how these waves are managed.”

The book is a masterpiece for news publishers, even if the author touches only lightly on the disrupted media business.

My only pause, in aiming to connect the book with the “innovate away from the core” elements to the Toronto Star and Deseret News case studies, is how much to integrate transient advantage into the legacy business. 

Deseret News executives would argue it can’t be done, and you need to create a company away from the legacy business. The Toronto Star has chosen to separate business model innovation “close to the core” and “away from the core,” yet they have done it within the company’s umbrella.

McGrath suggests a hard third way: Bite the bullet and change the company itself from strategy based on sustainable competitive advantage to transient competitive advantage. That requires a new kind of CEO, new people with new skill sets, and a new kind of culture.

Is transient competitive advantage a proper bow to tie around the need to develop a continuous product development machine?

Do newspaper and magazine publishers have what it takes to make this cultural and organisational transformation?


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About Earl

Earl J. Wilkinson is executive director and CEO of INMA. In his interactions with INMA members worldwide, Earl has one of the broadest views of newspapers of anyone serving our industry today. He is a trendspotter and a leading advocate for cultural change, transformation, and innovation. This blog represents his unique view of the emerging global news media industry.

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