Transient Advantage

Question 1

Transient advantage

Answer 1

Business strategy that accepts that competitive advantages are often short-lived. It focuses on innovation strategies that continually build new advantages.

Question 2

CA lifecycle

Answer 2

1. Launch
2. Business idea is brought to scale
3. Exploitation (firm captures profits)
4. Weakining advantage (competition arises)
5. Disengagement process (resources are extracted and reallocated to the next-generation advantage)

Question 3

Misconceptions (traps)

Answer 3

1. First-mover trap: the belief that being the first to market and owning assets create a sustainable position, in most industries a first-mover advantage doesn’t last.
2. Superiority trap: companies don’t see the need to invest in improving their established offerings.
3. Quality trap: offer a higher quality level that customers are prepared to pay for.
4. Hostage-resources trap: executives have no incentive to shift resources to new ventures.
5. White-space trap: when opportunities don’t fit their structure, firms often simply forgo them instead of making the effort to reorganise.
6. Empire-building trap: the tendency to acquire more assets and employees promotes hoarding, bureaucracy building, and fierce defence of the status quo. It inhibits
   experimentation, iterative learning, and risk-taking.
7. Sporadic-innovation trap: no system for creating new advantages, causes a lack of innovation and makes the business vulnerable to swings in the business cycle

Question 4

How to build transient advantage

Answer 4

1. Think about arenas, not industries: An arena is a combination of a customer segment, an offer, and a place in which that offer is delivered.
2. Set broad themes, & then let people experiment: Today’s gifted strategists examine the data, certainly, but they also use advanced pattern recognition, direct observation, and the interpretation of weak signals in the environment to set broad themes.
3. Adopt metrics that support entrepreneurial growth: A real option is a small investment that conveys the right, but not the obligation, to make a more significant commitment in the future.
4. Focus on experiences & solutions to problem
5. Build strong relationships & networks: One of the few barriers to entry that remain powerful in a transient-advantage context has to do with people and their personal networks.
6. Avoid brutal restructuring; learn healthy disengagement: many of them seemed to continually adjust and readjust their resources.
7. Get systematic about early-stage innovation: They have a governance structure suitable for innovation: They set aside a separate budget and staff for innovation and allow senior leaders to make go or no-go decisions about it outside the planning processes for individual businesses.
8. Experiment, iterate, learn