Sustainable competitive advantage is a Trap

For years, businesses have focused on building a strong advantage to stay ahead. They believed that if they had the best product, the best technology, or the best customer service, they could dominate the market for years. But today, things have changed. Markets are shifting faster than ever due to technology and unexpected disruptions. Competitive advantages no longer last forever, and companies that fail to adapt quickly often find themselves left behind.

Take Kodak, for example. It was once a leader in photography, but it failed to adapt when digital technology replaced film. Meanwhile, Fujifilm, its direct competitor, saw the change coming and shifted its focus to digital imaging and other industries. Today, Fujifilm is thriving while Kodak struggles. This shows that success is no longer about holding onto a competitive edge, it’s about continuously reinventing yourself. The idea of sustainable competitive advantage, where businesses create an innovation and enjoy long-term dominance is no longer valid in today’s fast-moving economy. Instead, businesses must deal with transient advantage (or temporary advantage), where opportunities come and go quickly.

"If you need change management, you’ve probably waited too long to change" - Rita Mcgrath

Why Businesses Must Adapt Constantly

Businesses that wait for big changes to happen before they react are already too late. Instead of making one big transformation every few years, successful companies make small, continuous adjustments to stay ahead. The key is to build a system that allows for constant reinvention.

One company that has done this well is John Deere. Originally known for making plows and tractors, the company now integrates advanced technology like GPS and data analytics into farming equipment. Rather than waiting for competitors to disrupt their business, they embraced change and evolved. This kind of thinking is what keeps companies ahead in a fast-changing world.

In a world where new ideas and competitors can emerge overnight, that approach no longer works. Businesses need a dynamic strategy, where leaders meet regularly, discuss market shifts, test new ideas quickly, and pivot when necessary. Companies that can spot changes early and adjust before their competitors will be the ones that survive and grow.

5 Key Steps to Stay Ahead in a Changing Market

To thrive in a world where competitive advantages are short-lived, businesses must focus on adaptability and continuous innovation. Here are six important steps companies should take:

1. Move from sustainable competitive advantage to transient advantage

   Instead of relying on sustainable competitive advantage or waiting for a crisis, businesses should make small, ongoing changes and shift toward transient or temporary competitive advantages. Regular strategy updates and quick decision-making allow companies to respond to shifts before they become major problems.

   
   

2. Recognize oblique/indirect competition

   Competitors are no longer just within the same industry. Many disruptions come from unexpected areas. To stay prepared, companies should maintain an up-to-date map of both direct and indirect competitors, including emerging and unexpected players. Sharing this map across the organization ensures everyone understands the broader competitive landscape, enabling quicker responses to threats and new opportunities.

   
   

3. Encourage risk-taking and reward failure

   Employees should not be afraid to try new things. A company that punishes failure will discourage creativity. Instead, businesses should reward learning from mistakes, which can lead to breakthrough innovations. This is an important element of create a culture of everyday innovation.

   
   

4. Spot Early Signs of Market Change

   Train employees to notice shifts in customer needs, competitor actions, market trends, and broader economic or industry news. This information should not only help leaders make better decisions but also be shared with all employees. When employees are kept updated about the ecosystem and environment around them, they feel more connected to the business's challenges and opportunities. This transparency encourages innovation at every level and equips teams to act early, preventing bigger problems down the line.

   
   

5. Let go of declining markets early

   Companies should be willing to shift budgets, teams, and priorities when necessary. Holding onto old projects or business models for too long can drain resources. The best companies constantly reallocate their investments to what’s working today, not what worked in the past.

   
   

One important take away from this article is that; "The key to long-term success isn’t competitive advantage. It’s developing the ability to change before change becomes necessary."

Resources

1. End of Competitive Advantage Book - Rita Gunther McGrath

2. Strategy in a Time of Turbulence. (April 2023) by Martin Reeves, Georg Wittenburg, Kevin Whitaker - Harvard Business School

3. John Deere: Pioneering the Future with Agricultural IoT Technology. (Aug 2023) by Maurice Klaehne - Counterpoint

4. Make key strategic growth bets to scale your tech business. (Sep 2024) - Gartner