Markets are competitive, and firms that compete in them seek competitive advantage.
That’s how profit and survival are both achieved. The question at the start of competitive advantage is, “How will we achieve sufficient advantage over other firms in our markets or other markets to generate profits and survive?”
For decades, the answer to this question would be the source of all work done by the organisation in question - perhaps for years afterwards. Automotive companies generated multi-year vehicle platform strategies, property investment companies projected decade-long building use strategies, and governments created 5-year plans for growth and prosperity.
The plan was always straightforward. Work out the strategy, then transform the organisation to deliver against it. Indeed, Chandler and Mintzberg (1962) stated that structure follows strategy. At the time, it probably did…
Switch view to the modern competitive environment and business context, and a few differences are noteworthy.
Information travels quickly
Knowledge liquidity means that unique IP is not unique for long, competitors can copy quickly, and even IP protection is difficult when small changes mean differentiation is achieved. Fifty years ago, a novel manufacturing technique used by an organisation in Shanghai might be unseen by a competitor in Rio de Janiero for many months or even years, however today that advantage may only last for weeks.
Context changes quickly
The impact of Covid-19 was immediate, and unavoidable. No matter what contingency organisations had in place, business was interrupted. This is an example of a change to context that wipes out all strategy work conducted in advance, and requires a reconsideration of corporate direction. Put simply, every organisation’s strategy was impacted by this pandemic. Of course, the Covid-19 shock is extreme, but changes to consumer taste can occur overnight, social media influencers can redirect demand within hours, and customer reviews can change perception of a product and even brand. And those impacts may even be on a competitor, not on the organisation in focus, but the market still changes.
Resources are highly mobile
Key people in organisations are able to move between those organisations within a few months, contractually and geographically. Entire teams can be built by competitors within months, and capabilities transformed. This leads us to consider that a particular employee, partner, or other member of the organisation cannot be a competitive advantage. This can be extended to equipment, processors, storage, facilities, buildings and more. While a prime location on Times Square is difficult to replicate, using an Offshore Delivery Centre to reduce costs is relatively straightforward, and it is the latter that will be the experience of most organisations.
Faster supply, more IT
The movement of industry from heavy-machinery centric to tech centric means that the technology available to iorgansiations may be the source of advantage. While there is a long lead time on a heavy press in a steel-working factory, there is almost instant availability of the IT backbone that runs the entity. Even the production of that heavy press is faster because the supplier and supply chain are fully IT enabled. design, pre-production testing, and logistics are all more efficient, closing the time for advantage for the first mover in the market.
So, the competitive advantage experienced by a locomotive manufacturer in 1930’s UK may have been across a number of years, while the competitive advantage experienced by a recruitment firm with work from home patterns may be limited to days or even hours.
In this situation, we need to look back at Chandler and Mintzberg’s assertion that structure follows strategy. If this is the case, then each time strategy changes the structure will be reviewed and likely change.
Each time there is a change to senior leadership, each market context change, each demand pattern change, each innovation to processes or tools, each global political change, all of these events cause potential change to strategy. These changes are more frequent as well.
So should the organisation revise structure each time there is a change to these factors? The evidence I see every week is that organisation are locked in a cycle of structure trying to keep up with strategy. From separating run and change, through to ‘run-and-change’ practices, we see that strategy is a detached preface to the whole business. Leaders tell the organisation about direction, then expect it to follow, and when it doesn’t, strategy is often to blame.
Think back to the stories you heard (and maybe told!) about Nokia, Blockbuster, Toys R Us. What is the theme? They chose the wrong horse, the strategy was wrong, they didn’t identify changes to customer behaviour, they refused to pivot when the opportunities arose. And yet, the organisations were rich, successful, and staffed with intelligent business leaders ad team members.
So, maybe Chandler and Mintzberg were right about then, but less so about now?
Strategy thinking goes so far but…
Porter wrote that advantage is the result of a deliberate choice, taking a position within an industry structure, defined by bargaining power of suppliers, bargaining power of buyers, threat of substitutes, threat of new entrants, and the threat of current participants (rivals). So, a competitive advantage is observable at a point in time, and each factor is considered to give a view of attractiveness of market opportunity. This is not about long-term advantage, but about the availability of a potentially advantageous position in a market at a time.
Barney looked within the organisation and proposed that VRIN (valuable, rare, inimitable, and non-substitutable) resources, including people, were the key to achieving advantage in the market, however this is again at a point in time. There are not many people who satisfy VRIN today - perhaps famous leaders of organisations, the majority of people have certifications, experience, and expertise. People are highly mobile, and they can transfer and spread knowledge of process, market, and organisation decision-making within months, even with non-compete clauses in contracts.
Teece noted that change to context should be treated, and wrote that organisations must sense the change, act on it, and transform afterwards. This may leave the organisation in focus running behind those who make the market, with a lag between context change and sensing the change, then lags again to seizing the opportunity and transforming to establish a new position. and when change comes almost weekly, bottlenecks in this flow appear.
D’Aveni (writing more recently than those already mentioned) recognised the increased speed of change, and postulated that organisations could achieve competitive positions but these would not be enduring so they would lose leader status and need to rebuild regularly to remain ahead of others across rolling cycles of temporary advantage. To some extent the problem for Teece is alsom a problem for D’Aveni - should organisations be in a constant state of rebuilding towards a new strategy, perhaps starting a restructure each quarter?
The real-world
Organisations in market-leading positions restructure less frequently that the scenarios above would lead us to believe. Consider ‘Big 4’ consulting firms, ‘Magic Circle’ law firms, and major tech firms. how do they remain in market-leading positions?
Perhaps it is because they are so focused on what they do and how well they do it they focus less on strategy and definition of the business and use it as a directional device.
Instead of ‘We will restructure to become an AI-centred organisation’ they may state ‘AI is at the centre of the work we do’. Instead of restructuring, they modify their current operation to include the subject of the strategy. So, strategy is a layer in the organisation that assumes a great deal is already working well.
This brings an interesting advantage to the organisation. By changing some part of the entity, it is able to contend with rapidly changing environments and contexts, and assocaited change in strategic intent. The organisation is also able to smoothly deal with leadership and ownership change.
Looking forward, not back
The stories about Nokia, Blockbuster, and Toys R Us are interesting - great for smiles and smirks in a conference speech or training course - however they are limited by our viewpoint. We are looking for strategic issues in organisations we know have failed.
The question for consultants, academics, and business leaders now is, “How do we achieve a position of competitive advantage that is maintained across many reporting periods?” That is, how can organisations acheive the state of Maintained Competitive Advantage?
The organisation as the substrate
What if the strategy followed structure?
Barney was correct - the organisation cannot pursue a strategy if it lacks the needed resources. But what if the resources are replaced by the whole organisation in the phrase, and what if the organisation was capable of delivering against almost any strategy (within reason)?
What if we built an organisation to be the enabler for strategic intent, even as that intent changes?
Then we will have an adaptive organisation that can change with the needs of market, context, politics, anything.
The Five Levers of Maintained Competitive Advantage
For it to be a flexible substrate, an organisation must understand its ability to modify its competitive stance. The Five Levers of Competitive Advantage framework provides the basis for understanding current state, analysing competitor and market states, identifying near-term target state, proposing long-term aspirational state.
That is, the framework can be used to understand the availability of a Competitive Advantage position for an organisation, and serve as the basis for improvement.
Once the state of competitive advantage is achieved, the organisation maintains the state through ongoing reference to the framework, assessment, monitoring, and prioritised change to create an ever-adapting substrate.
Strategy is part of the framework, a key component of the Maintained Competitive Advantage state. In fact, there are Five Levers to consider:
Strategy
Leadership
Culture
Ways of Working and Execution
Strategic Architecture
And all the way through this framework, there is one element that drives the organisation’s thinking. Customer value. All Five Levers are animated in response to the passion of the organisation for satisfying the customers’ needs. Anything that threatens customer value is scrutinised and a response is generated. This in turn means that structures that affect the ability of the organisation to deliver that value should be changed.
Value streams
So, we begin with the most visible change that will be made by the vast majority of organisations that seek Maintained Competitive Advantage market positioning.
Siloed organisation structures encourage departmental targeting, air gaps in process, and limited consideration of final customer satisfaction. Hand-offs cause delays, and knowledge is ring-fenced. Eventually the customer received a diluted, or worse still unusable, outcome.
Flow-based working practices are well-established, and they are a critical component of organisation design for advantage over time. They seek to eliminate the disadvantages of siloed practices and improve customer value. When aligned with strategic intent, they are the direct link between work performed and strategy for the organisation. The Strategic Value Streams Body of Knowledge describes this well.
Organisational Viscosity
The benefit of Value Stream based working practices is the focus on flow of work, and reduction in hand-offs. In fact, every decision, wait, queue, meeting, and event in the organisation is a source of friction in delivery of value. Reduce friction and you increase speed, value, and happiness. This friction is termed ‘Organisational Viscosity’ and can be thought of as the conceptual measure of the ease of doing business in the organisation.
In some contexts, some friction keeps the organisation safe. Consider banks that survive financial shocks because they took decisions more slowly than risk-takers who failed. In other cases, that friction is the opportunity seen by new entrants who seek to exploit inefficiency in service. Consider vehicle producers that have been slow to respond to changes in technology and energy sources.
Changing the Value Stream
Projects and Programmes are not replaced in Value Streams, instead the project is run by the Value Stream, and Programmes that touch many Value Streams are staffed by seconded Value Stream members. Change should be caused by those who understand the change and its impact, and those who will live with the change over time. This is similar to a ‘run and change’ and DevOps mindset.
Conclusion
Maintained Competitive Advantage is not bought with analytical insight, and it is certainly not bought by accumulating initiatives with the word transformation in the title. It appears when strategy, architecture, governance, finance and delivery are aligned well enough to hold flow steady under volatility.
Porter on trade-offs, Barney on resources, Teece on capabilities, D’Aveni on instability: each considered part of the question.
Advantage decays when intent outruns architecture, when projects stand in for systems, and when funding logic fractures accountability. It is maintained when organisational form becomes a capability in its own right, so the firm can not only achieve distinction but renew it as the environment changes.
Which makes MCA less a strategic outcome than a structural accomplishment. It is not reached by aspiration. It is built.