Creating A Sustainable Competitive Advantage

Look around the world of business and you will see many stories of businesses which, either never got off the ground, or businesses like the fluid power company that attained leadership positions in their industries and then faltered when market changes occurred.  Even the biggest and best companies, such as IBM and Hewlett Packard, have been through the experience of falling from prominence.  See Mr. Lou Gerstner’s wonderful book[1] for a great account of how IBM ascended to prominence during the mainframe era, lost its leadership position when desktop revolution swept through the computer industry, and regained its leadership with the advent of the Internet and global networking.  IBM then fell behind once more and is currently staging a resurgence in the world of services, cloud computing, big data and artificial intelligence.

Building a business into a leadership position and sustaining leadership over time is one of the most challenging missions that can be undertaken.  It is a lot like winning the national championship in college football.  Once you have done it, you can be sure that you will get every team’s best game when you play them.  Knocking the leader off is a highly motivating goal in both football and business.

In today’s business world, it is exceedingly difficult to find sources of sustainable advantage.  The best technology is no guarantee of success.  Myriad examples abound of superior technologies that lost out to lesser technologies coupled to superior marketing or execution.  Beta lost to VHS in video. Informix lost to Oracle in databases.  OS2 lost to Windows in operating systems.  Blackberry lost to Android and Apple.

To win consistently, a business must do many things well to out execute its competition and create value for its customers and investors. It must:

  • Attract and retain great talent.
  • Understand its customers and its competitors.
  • Be driven by quality and customer service.
  • Have a clear strategic focus.
  • Adapt quickly, redeploying resources to take advantage of trends and opportunities in its business environment.
  • Innovate in both its internal processes and its products and services.
  • Be structured, networked and effectively integrated by culture, business processes and management systems so that the knowledge and skills that people possess can be quickly and effectively mobilized to solve problems.
  • Create and sustain a learning environment in which employees can continuously re-skill and improve themselves to keep up with the high rate of change characteristic of the world today.

In short, to win consistently in business, or sports, requires a high performance organization.  It requires an environment in which people with diverse needs, preferences, values and capabilities work effectively together to set and achieve goals. It must be a place in which people focus their energy and creativity on superior performance in a context of learning. Lester Thurow, past dean of the MIT Business School, has captured this eloquently:

 “Knowledge employed through the skills of people has become the
only source of long-run sustainable advantage.”[2]

 As have business executive Larry Bossidy and strategy consultant Ram Charan:

“An organization’s human beings are its most reliable resource for generating excellent results year after year.  Their judgments, experiences and capabilities make the difference between success and failure.”[3]

A high performance organization is difficult to create and once created it is hard to duplicate. Therein lays the sustainable competitive advantage.

And, who is responsible for building high a performance organization?  It’s the CEO; it’s his or her job, isn’t it?

The Power of Executive Leadership

Executive leadership is the key factor that drives an organization’s effectiveness and performance.  After more than forty years of experience with executive leadership, I am still amazed at the impact that one person in a key executive role can have on an organization.

One has only to look at the impact of Lou Gerstner at IBM, Larry Bossidy at Allied Signal, Steve Jobs at Apple, or Alan Mulally at Ford, to see how a highly capable executive can restore a sick business to health.  On the other hand, instances such as Enron, J.C. Penney and Tyco show us how disastrous incapable executives can be for a corporation and its employees, shareholders, suppliers and customers.

Two of the best illustrations of the importance and impact of executive leadership are the very fine research programs carried out by Jim Collins and presented in his two exceptional books, Built to Last and Good to Great.[4]

In Built to Last, Jim reported on his research on companies that rose to prominence in their industries and then sustained their industry leadership.  These companies far outperformed comparison companies in their own industries.  In Good to Great, Jim repeated his research with a group of companies that were able to transform themselves and distance themselves from their competitors. The companies, that made the jump from good to great, significantly outperformed comparison companies in their industries.

In both of these investigations, the role of executive leadership was prominent.  In the Built-to-Last companies, each had one, or more highly capable CEO’s that focused and led their companies to prominence in their industries.  In the Good-to-Great companies, CEO’s possessing superior leadership capabilities designed and executed strategies and operational plans that resulted in their companies substantially outperforming their competitors.  Great companies result from great leadership!

How does a CEO build a High Performance Organization?

Building a High Performance Organization

A High Performance Organization produces sustained long-term performance.  Its financial, product and service quality and customer service results are consistently superior to its competitors.  It anticipates and adapts quickly to changes and trends in its business environment.  It innovates in both the products and services it provides to its customers and its internal processes and practices.  Its internal effectiveness and efficiency allow it to use speed as a competitive weapon.  It continuously improves.

Building a High Performance Organization is an arduous journey.  It requires thinking and working with a complex social system.  The path for this journey encompasses:

  • Strategic leadership
  • Superior customer experience
  • Highly capable people who possess the right competencies
  • Corporate culture that supports high performance
  • Clear strategic focus
  • Highly effective unit and team leadership
  • Effective structure and networks
  • Effective and efficient management systems and business processes
  • Appropriately designed jobs, roles and assignments

The challenge of creating sustainable advantage falls squarely on the shoulders of the man,or woman in charge.

Continue on to: Strategic Leadership

[1] Gerstner, Louis V., Jr. Who Says Elephants Can’t Dance?

[2] Thurow, Lester. The Future of Capitalism.

[3] Bossidy, Larry and Charan, Ram, Execution: The Discipline of Getting Things Done.

[4] Collins, Jim and CC, Built to Last. And Collins, Jim, Good to Great.

© Copyright 2017, A. Lad Burgin, Ph.D. All rights reserved.