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Transient Advantage
Jaap de Jonge, Editor, Netherlands
According to Colombia BS Professor Rita Gunther McGrath, achieving a Sustainable Competitive Advantage (SCA) (establishing a unique competitive position that can be sustained for long periods of time) is nearly impossible these days.
Allthough that idea is not new (see for example this discussion on 12manage: Is Strategic Planning Passé? and compare Real Options and Emergent Strategy), Professor McGrath does introduce an interesting new term: TRANSIENT ADVANTAGE (TA).
Acronyms
TA = Transient Advantage
CA = Competitive Advantage
SCA = Sustainable Competitive Advantage
I looked up the word "transient", it means: brief, temporary, passing, provisional, temporal. Quite the opposite of sustainable if you think about it.
McGrath argues companies need to embrace the notion of TA instead of SCA, "learning to launch new strategic inititiatives again and again, and creating a portfolio of advantages that can be built quickly and abandonded just as rapidly".

What I liked most of this article is the seven dangerous misconceptions, most of which indeed I have witnessed several times over the years:
1. The first-mover trap (The belief that being first to market creates a SCA)
2. The superiority trap (The belief it is impossible to create a better product)
3. The quality trap (The belief that offering the highest quality provides a SCA - it won't because cheap and poor competitors will improve over time)
4. The hostage-resources trap (The habit of allocating most of the resources in a corporation to the big divisions / cash cows)
5. The white space trap (innovation don't fit anywhere in the org chart)
6. The empire-building trap (in many large firms, the top positions and rewards are for those managing the large operations, resulting in hoarding, bureaucracy, and resistance to change)
7. The sporadic-innovation trap (innovation is an on/off process; not a continuous pipeline).

To create an innovation pipeline or portfolio of advantages, companies need to apply eight shifts in the way they operate and think about strategy:
1. Think about arenas, not industries (threats can come from players outside of your industry)
2. Set broad terms and then let people experiment (allow freedom to be creative)
3. Adopt metrics that support entrepreneurship
4. Focus on customer experiences and solutions to real problems
5. Build strong personal relationships and networks
6. Avoid brutal restructuring and learn healthy disengagement
7. Get systematic about early-stage innovation
8. Experiment, iterate, learn.
And most of all: leaders must recognize that fast and roughly right decision making must replace deliberations that are precise but slow.
Source: Transient Advantage: Rita Gunther McGrath in HBR June 2013, p62-70
 

 
Transient Advantage Sounds like INNOVATION & CHANGE
Purna Chandra, Business Consultant, India, Member
To sustain CA, an organization has to continually innovate and change. It has to be very agile in detecting and adapting to the changing ecosystem, in terms of strategic planning, structural and cultural flexibility to support strategy.
Each new strategic initiative confers temporary advantage and a series of such initiatives would lead to SCA for the organization.
 

 
New Sights on Profit-seeking
In Ho Kim, Professor, Korea (South), Member
Will CA, SCA, or even TA guarantee a superior performance while an industry evolves into a new one with quantum jumps due to technological convergence?
For a situation like the above, in my opinion there must be a different indicator rather than the existing indicators like CA, SCA or TA.
In other words, even though a firm has achieved a very strong CA over major competitors, unless it adapts to the industry evolution well by possessing Adaptive Goodness as I describe in my book, 'Why Industrial Hegemony Shifts,' (Lambert Academic Publishing, 2010), it will never be successful. Nokia's case is a good example: in feature phones it was very sucessful; but in smart phones it is a total loser.
So when an industry evolves quickly, we have to pay more attention to Adaptive Goodness rather than CA, SCA or TA.
 

 
Adaptive Goodness
Jaap de Jonge, Editor, Netherlands
@In Ho Kim: Thank your for your reaction, which looks interesting. Could you please elaborate and explain what is Adaptive Goodness? Is it similar to agility? Thank you...
 

 
Arenas and Markets
Andrew Blaine, Business Consultant, South Africa, Member
I am inclined to agree with the principle behind the commentary of this topic. However, there are, in my opinion, a number of caveats.
1. I think that every business starts out in a defined market and, in this defined market, it is possible to realise a CA for sufficient time to become established in the market. Expansion generally follows on an expansion of demand from outside the market thereby creating a CA in an alternative market, even if it is only transient.
2. Very few ventures start immediately in the "world market" even if the initial start point is only "experimental".
3. Without an identified CA, the risk of starting a venture is compounded immensely, and
4. Without an actual SCA the chances of success of a venture are extremely small, unless there is sufficient power and support available to cover the establishment phase of the venture. .
 

 
TA & Adaptive Goodness
K.V.Narrasimham, Professor, India, Member
@In Ho Kim: Please let us know what is Adaptive Goodness (AG). AG it seems is a continuous process because you have to adapt to ever changing needs/requirements of customer and therefore it is always temporary. Keep on moving then.
 

 
Adaptive Goodness
In Ho Kim, Professor, Korea (South), Member
@Jaap de Jonge (Editor), @K.V.Narrasimham: In order for us to understand and explain value creation in a dynamic environment (since the internet / smart revolution that triggered to make customer needs becoming more sophisticated and evolving so frequently and by shifting power from firm to customer), we have to have a new management paradigm. This new paradigm (Adaptive Goodness) includes:
- Holism not Reductionism
- Synthesis not Separateness
- Dynamism not Static manner
- Based on a stronger Rationale borrowed from scientific fields not on just an Intuition
AG embraces almost all the existent ideas including CA, SCA and strategic agility.
 

 
'TA' versus 'Simple Steps'
Vivek Joshi
Some time back early in the last decade I recall reading a paper which said that Strategy by "Simple Steps" was an alternative to SCA & Resource-based Strategy (HBR). The principles were the same as for TA: rapid changes in environment & business necessitating rapid redeployment, innovation and entrprenerial spirit. Paper had foresight but was a little early, perhaps. The TA by Dr. McGrath is much better positioned.
 

 
SCA should be Left Behind in 20th Century
Indrajit Sethi, Professor, India, Member
TA spells a fresh approach!
The top leading organizations tend to slacken as they have tendency to sit and admire their laurels. They fail to notice competition emerging from new/unknown entities.
In rapid changing business world innovation and ability to see beyond is vital for short-term sustainable business.
The days of SCA are to be left behind in the 20th century.
 

 
Transit Advantage (TA) and SCA
taha2656, Analyst, Pakistan, Member
I feel TA and SCA are same as Objectives and Strategies.
SCA should give a direction while TA can be the mile stones same as Strategies give direction and objectives are the milestones.
 

 
TA, SCA etc. Come Much Later
Jagdish B Acharya, Consultant, India, Premium Member
@In Ho Kim: I agree with you. When a firm understands customer requirements better and provides AG, results in terms of good response and performance come. It is after these results accrue that we can recognize and celebrate TA, CA or SCA based on how long the advantage comes.
The initial trigger comes from AG only. TA, CA or SCA thus become a post facto classification based on effectiveness of AG.
Thus AG is the driver and TA, CA or SCA are results of the drive.
 

 
Recognition of Advantage
Andrew Blaine, Business Consultant, South Africa, Member
@Jagdish B Acharya: I am not sure that I agree with your sequence of events, and would rather suggest the following:
1. Before commencing operations a potential SCA needs to have been recognised. Without this potential, starting a business venture is overly risky. With it, planning to make the best use of the advantage can be completed.
2. Once operations have been going for a while, the SCA can be confirmed and further exploitation planning put in place.
3. Transient advantages are like opportunities - they pop up from time to time..
 

 
AG as a Result of Needs-Focused Innovation
In Ho Kim, Professor, Korea (South), Member
@Jagdish B Acharya: Thanks for your understanding of Adaptive Goodness(AG), which can be represented in terms of Product Fit as the indicator of expected revenue, and Process Fit as that of expected cost. Therefore AG can be used as the indicator of expected profit, for expected profit = expected revenue - expected cost.
The better Product Fit, the more expected revenue, and the better Process Fit, the less expected cost.
Both Product Fit and Process Fit can be improved by all kinds of innovations. However, unless an innovation can meet customer needs as fully as customer has willingness to pay(WTP), that innovation is of no use. In other words, needs-focused innovation can be regarded as only Driver for profit-seeking as well as for value creation.
In short, more exactly speaking, AG must also be a result of needs-focued innovation.
If AG has got, then TA, CA or TCA can also be got automatically as you indicated.
 

 
Transient Advantages = Opportunities to Exploit
Robinson M. Tenu, Entrepreneur, Cameroon, Member
Sometimes simple opportunities pop up during business operations that can be exploited. If such opportunities come up but are not used immediately, they may disappear and never come back.
They only last for a very short term.
 

 
What Makes a Transient Situation?
In Ho Kim, Professor, Korea (South), Member
When customers' needs change or evolve, a firm's strategy should also be modified. This could range from refining it slightly to changing it fundamentally, depending on the nature of the changes in the customer needs.
If we need to only refine it slightly, TA seems to make sense.
But how about the case of fundamental changes? I believe that is not a matter of TA, but of @Adaptive Goodness.
 

 
From Sustainable Competitive Advantage to Transient Advantage
Anneke Zwart, Student (University), Netherlands, Moderator
In the past decades, basically all businessess’ strategy frameworks have been incorporated with the aim of achieving competitive advantage. But since the environment and competition is changing and has become extremely dynamic and volatile, strategies of achieving competitive advantage are not always relevant in such contexts. In the words of Kotter (2014): “ The world is now changing at a rate at which the basic systems, structures and cultures built over the past century cannot keep up with the demands being placed on them”.

The extremely dynamic and ever-changing environment changes the pace of companies going through a product/industry life-cycle is much higher than before. Instead of going through one long cycle, companies now go through such cycles “wave after wave” (Leavy, 2014). Thus, the strategies of companies need to adapt to this changing environment. McGrath (2013) argues that instead of strategies with the purpose of achieving sustainable competitive advantage (or “long cycle advantage), a more relevant and effective strategy framework should aim to achieve ‘transient advantage’ (“wave after wave advantage”).

Such a “transient advantage strategy” recognizes that a new wave is likely to require different sets of knowledge and skills compared to former waves. Instead of searching for one singly long-term strategy, companies need to continuously seek for new strategies thereby developing and exploiting multiple transient competitive advantages at once. As advantage are fleeting, companies need to go through the cycle faster and more often. Therefore a great understanding of each steed is required so as to maintain competitiveness for a long time.

To summarize, transient advantage strategies deal with three fundamental challenges that are different from the purposes of sustainable competitive advantage strategy frameworks:
1. Building a firm in which there is a balance between stability and agility.
2. Building a business in which innovation is an everyday proficiency. A business in which all employees are trying to create innovations continuously.
3. Building a business in which creativity, passion and innovativeness is highly valued.
Such an approach is much more appropriate in the ever-changing competitive environment of today.

Sources:
Leavy, B. (2014) “Strategy, Organization and Leadership in a New “Transient-advantage” World” Strategy and Leadership Vol. 42 Iss. 4 pp. 3-13
McGrath, R.G. (2013) “The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business” Boston: Harvard Business Review Press
Kotter, J. (2014) ”Accelerate (XLR8): Building Strategic Agility for a Faster Moving World” Boston: Harvard Business Review Press.
 

     
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