Has a Flat World Rendered Sustainable Advantage Obsolete?

January 19, 2017  |  Mike Eaton

Healthcare

Consumer attitudes and purchasing behaviors are changing quickly across all industries. The rate of adoption of new technology and escalating expectations for on-demand convenience and constant connectivity are erasing the rules of engagement between companies and their customers.

In this rapidly changing dynamic, there is an open question whether competitive strategy as articulated by classic authors like David Collis and Michael Rukstad and focused on “where-to-play” and “how-to win” still has value. Instead, authors like Rita McGrath in her work on transient advantage argue that consumers are now too unpredictable for companies to sustain market advantage based on a singular position that competitors cannot easily imitate.

McGrath makes the case for companies to focus on shorter cycles of success driven by constant innovation. She believes that digital connectivity and the flattening of the world, to borrow from Thomas Friedman, have so reduced barriers to entry and compressed the innovation cycle that companies must constantly update their business models, strategies and communications to meet consumers’ addiction to change.

Is this emphasis on transient rather than sustainable advantage right? Has the classic practice of striking a meaningfully different position as a source of defensible advantage with a target set of customers been rendered as irrelevant as a dial-up modem? And, if so, what is the impact on three questions every business should be asking —

  1. Why would a patient choose our brand over a competitor?
  2. What will build loyalty to increase patient retention?
  3. Are we willing to disrupt our own brand and business model to capture more market share?

Sustainable Strength or Portfolios of Transient Advantages?

In their seminal 2008 work “Can You Say What Your Strategy Is” David Collis and Michael Rukstad argued that companies must clearly state their scope (where-to-play) and competitive advantage (how-to-win) in a way easily understood and consistently repeated by associates. The authors cited Edward Jones, the St. Louis-based brokerage house, as having an example of a strong strategy statement.

Edward Jones’ clearly telegraphed to associates the “where, who and how” it would grow business over a horizon of at least four years. It was not a vision for success based on a “transient” point of view on competitive advantage. But would Edward Jones’ focus on sustainable competitive advantage pass muster today? Or might the company be better served by continually reinventing a portfolio of transient advantages and building and abandoning those advantages as needed to keep pace with changing investor demand, such as through digital channels optimized to keep consumers well-informed as they self-manage their portfolio of investments?

And how is your health system approaching this question?

If the gap between market aspiration and competitive reality is strategy and execution — is your strategy to lock in a meaningfully differentiated and defensible competitive position and execute on it? Or, alternatively, are you trying to execute on a constant set of business model and service innovations and retrofitting brand strategy to those changes?

Do customers choose your health system brand as a rational decision that your product features are at least for right now best of breed in the market, or do they have an emotional connection to your brand that you can defend regardless of the most recent acquisition of new technology, buildings or doctors by your competitor? If you haven’t answered that question, now would be a good time to do so. The rate of change isn’t slowing and the number of new entrants competing for your share of the overall medical spend and health care market will continue to grow.

Learn more about how to assess your source of competitive advantage and its sustainability through strategy and execution.

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Mike Eaton
is a Senior VP at BVK

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