Adaptability: The new competitive advantage

You make strategies to create and build competitive advantages and the approach to strategy assume a relatively stable world and static landscape.

With pain and sweat, you build an enduring competitive advantage by achieving scale, creating an attractive niche, or exploiting specific abilities and resources as a business. But globalization, new technologies, and greater connectivity and transparency have combined to upend the business environment. Sustainable competitive advantage no longer arises from brand positioning or the strength of resources. Instead, it stems from organizational abilities that foster rapid adaptation:

Challenge

The ability to read and act on signs of change, experimenting rapidly and frequently to maintain the position. We live in an era of uncertainty, instability and high risk demanding frequent adaptation to stay ahead of the curve. Your business plan is a living document that evolves with time, to ensure your venture adapts and keeps pace with the dynamic marketplace. For some businesses, it has become virtually impossible even to clearly identify in what industry and with which companies they are competing.

This uncertainty poses a tremendous challenge for strategy making. That's because traditional approaches to strategy - though often seen as the answer to change and uncertainty -actually assume a relatively stable and predictable world - I'm sure you have hands-on experience on this.

The goal of most strategies is to build an enduring long-lasting competitive advantage to deliver the best offering, doing what the company does well and better than the competition.

Managers undertake periodic strategy reviews and set direction on the basis of an analysis of their industry and some assumptions on how it will evolve. But given the new level of uncertainty, many companies are beginning to ask: When change is so rapid, how can a one-year - or, worse, a five-year - planning cycle stay relevant?

Sustainable competitive advantage no longer arises exclusively from position, scale, and first-order abilities in producing or delivering an offering. All those are essentially static. Where does it come from? It stems from the 'second-order' organizational abilities that foster rapid adaptation. Instead of being really good at doing a particular thing, companies must be really good at learning how to do new things.

Turbulent environment

Those that thrive are quick to read and act on signs of change. They have worked out how to experiment rapidly, frequently, and economically - not only with products and services but also with business models, processes, and strategies. They have learned to unlock their greatest resource - the people who work for them. Ability to read and act fast on signals is critical. In order to adapt, a company must have its antennae tuned to signals of change from the external environment, decode them, and quickly act to refine or reinvent its business model and even reshape the information landscape of its industry.

In this information-saturated age, when complex, varying signals may be available simultaneously to all players, adaptive companies must similarly rely on sophisticated point-of-sale systems to ensure that they acquire the right information. And they must apply advanced data-mining technology to recognize relevant patterns in it.

In addition to changing the way in which they conduct experiments, companies need to broaden the scope of their experimentation. Traditionally, the focus has been on a company's offerings - essentially new products and services.

But in an increasingly turbulent environment, business models, strategies, and structures can also become obsolete quickly. Adaptive companies are very tolerant of failure and becoming an adaptive competitor can be difficult, especially for large, established organizations.

Typically, these companies are oriented towards managing scale and efficiency, and their hierarchical structures and fixed routines lack the diversity and flexibility needed for rapid learning and change. Such management paradigms die hard, especially when they have historically been the basis for success.

The speed of adaptation is a function of the cycle time of decision-making. In a fast-moving environment, companies need to accelerate change by making annual planning processes lighter and more frequent and sometimes by making episodic processes continual.

The adaptive approach is no universal panacea. But if your competitive reality is uncertain and rapidly changing, as is true in an increasing number of industries, you need a dynamic and sustainable way to stay ahead. Your survival may depend on building an organization that can exploit adaptive advantage.

Adaptability is not merely a 'nice to have competency'. It is a competitive advantage for you, as an employee, leader and for your organization - think, be convinced and make a call today to build that organization.