Competitive Advantage clearly defined


Excellent synopsis. Makes me want to read this book,The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, by Rita Gunther McGrath. Thanks.

The only question I have is how “competitive advantage” is defined, or not. It seems that a competitive advantage can be derived from any part of a business. Although this may be the case, I don’t think it goes far enough.

I would argue that competitive advantage is derived from the ownership or control of a particular asset. For example, a parcel of land might be more competitive than a neighboring parcels because of soil quality, sunlight, access to water and other such factors. This definition is consistent with the history of the world – most of it anyway – and the political, social and economic institutions that have been created. In other words, the asset owner can not only stake their rights to the property but the state will protect those rights. Based upon this certainty, a property owner can build a business that employs the asset if, and only if, it creates enough value to mitigate all the risks inherent in the business.

Over time, the asset may lose its innate qualities and consequently its competitive advantage or a new way of achieving the same benefit may make it less competitive or even obsolete. As the Fujifilm example illustrates a leader must be aware of these risks and manage them in a timely manner or become a Kodak.

By defining the competitive advantage in this way we take take the discussion from the general to the specific and better understand how leadership, strategy, processes, risks and market combine to create economic value.