Chapter 4+ Transient Advantage + Customer Loyalty Is Overreated

Question 1

MP 3

Answer 1

All competitors react -> managing sustainable competitive advantage

Question 2

A good SCA meets the following criteria’s

Answer 2

1. Customer care about what SCA offers
2. The firm does it better than competitors
3. The SCA must be hard to duplicate or substitute

Question 3

3 sources of SCA

Answer 3

1. Brands: strong brands can create customer loyalty and a unique identity that is difficult to replicate (soft drinks, beer, fashion markets)
2. Offerings: innovative products and services that provide superior value are critical to maintain an edge in the market place (technology based businesses, software, electronics)
3. Relationships: developing deep customers relationships can create a bond that goes beyond just the product or price, making it more challenging for competitors to lure customers away. (B2B, services,complex products, test equipment, haircut, financial services)

Question 4

SCA définition

Answer 4

Being able to generate more customer value than competitive firms in the same industry for the same set of product so that competitors are unable to duplicate the firm’s effective strategy

Question 5

Competitors react in different ways

Answer 5

1. Technical innovations that provide competitors with a platform to launch a disruptive offering
2. Exploiting changes in customers desire due to cultural, environmental, or other factors
3. Individual entrepreneurship that constantly seeks a better way to solve a problem
4. Me too copycats that improve the efficiency or effectiveness of an existing execution

Question 6

Customer equity

Answer 6

Refers to the total of the discounted lifetime values of all its customers

Question 7

Customer centric accounting process

Answer 7

1. BOR equtities (Brand Offerings and Relationships) primary source of SCA
2. To make optimal decision, a firm needs a framework that measures, track and reports customer equities
3. Effective customer equity systems represent annSCA in their own right

Question 8

Process for managing SCA

Answer 8

1. AER strategies Acquistion, expansion and retention
2. Key trends
3. BOR equities Brands Offerings and Relationships

Question 9

Transient advantage

Answer 9

Traditional SCA: Focuses on building unique market position that can be defended and maintained over long periods, relying on stable strategies and enduring strengths

Transient CA: recognises todays fats paced , dynamic business environment, such stability is increasingly rare. Instead, businesses must continuously innovate, create, and rapidly cycle through multiple short term advantage, adapting quickly to changes in the market and customers needs. Defending a position to maintain a flexible, agile approach that allows companies to move from one temporary advantage to the next

Question 10

Lifecycle of transient Advantage

Answer 10

1. Launch
2. Ramp up
3. Exploitation
4. Reconfiguration
5. Disengagement

Question 11

1. Launch

Answer 11

Company identifies an opportunity and allocate resources to capitalise on it

Question 12

2. Ramp up

Answer 12

Business idea is scaled up and the organisation begins delivering on its promise

Question 13

3. Exploitation

Answer 13

Company captures profits and market share, often forcing competitors to respond

Question 14

4. Reconfiguration

Answer 14

As competition intensifies, company must adapt its business model or product offering to sustain the advantage

Question 15

5. Disengagement

Answer 15

Once the advantage is eroded, resources are reallocated to new opportunities and the lifecycle begins again

Question 16

Strategies for embracing transient advantage

Answer 16

1. Focus on arenas and not industries
2. Foster continuous innovation: leaders must build a culture that support expérimentations, learning from failure and adapting new info quickly
3. Create a pipeline of advantage: continuous develop and manage a portfolio of short lived advantages
4. Adapt metrics to support growth: use flexible measures such as real options that allow small investments with the potential for greater future commitment

Question 17

7 traps in transient advantage

Answer 17

1. First mover trap : doesn’t last
2. Superiority trap: early stage won’t be superior than something that took years of creation
3. Quality trap: stick to the level of quality that your customers are willing to pay
4. Hostage resource trap: no incentives to shift resources to new ventures
5. White space trap: opportunities don’t fit their structure
6. Empire building trap: belief the one asset and employees you manage, the better
7. Sporadic innovation trap: many companies do not have a pipeline of new advantages

Question 18

What do you need for long term competitive advantage

Answer 18

Cumulative advantage

Question 19

Cumulative advantage

Answer 19

Focus on making the company’s product the easiest and most instinctively comfortable choice for the customer. The goal should be to make purchasing decisions a habit rather than an conscious choice.

Question 20

4 steps to cumulative advantage

Answer 20

1. Become popular early: allow companies to build familiarity and develop habits among customers
2. Design for habit: create a product that become automatic choice for customers. Familiar packaging and consistent experience
3. Innovate inside the brand: when updating the product, companies should retain the cumulative advantage of the original, smooth transition from old to new habit
4. Keep communication simple: mind is lazy, simple , clear messages resonates with the subconscious mind and reinforce habits