Print this pageCompetency Leads to Sustainable Advantage
Companies that create economic value, earning significantly more than their cost of capital, over the long run, are rare. This requires a competitive advantage that is developed and renewed in the face of persistent competition.
Making Strategy a Management Discipline
All organizations develop strategy, whether explicitly, implicitly, or both. Strategic management is about explicitly making the future. Rigorously pursuing a strategic management competency creates a management discipline that takes the mystery and randomness out of strategy formation and execution. Explicitly defining the strategic management process makes it accessible to measurement and continuous improvement. Without a strategy competency, including the accompanying innovation, other management competencies tend to dominate the organization.
Improving Toward Oblivion without Innovation
This need for strategic innovation was demonstrated in the 1990s and early 2000s with U.S. manufacturers. The U.S manufacturers outside of the high-tech and automotive industries were playing an end-of-life game. They did this by cutting costs and making continuous improvements while skimping on capital spending and innovation. These same manufacturers had years of unprecedented productivity growth in the late 1990s and early 2000s. Even with this growth in efficiency, factory shipments were down in the early 2000s, while competing imports were up significantly.
Innovation is the Ticket to Play -- Strategy is the Guide
Programs of continuous process improvement, while very critical to all businesses to remain competitive, are not by themselves sufficient to provide for the long-term survival of a business. There is a time to optimize. There is a time to innovate. Long-term survival requires investment in innovation guided by strategy. Strategic management focuses the organization on critical innovations and the investment of the organization's resources to bring about superior returns while responding to ever changing challenges.
Creative Destruction is the Norm – Renewal is Needed to Stay in the Game
Companies are continually challenged by their competitors' new business models. Retail jewelers are challenged by Blue Nile on line. Blue Nile can provide expertise and product variety without the cost of retail buildings and staff. Full-service airlines are challenged by low-cost airlines that serve a segment of the full-service customers and a market previously untapped. Companies like Wal-Mart and Dell roll along for years with highly successful business models, but even they must update their business designs over time.
Strategy is Continuous
Without the fact gathering and business model testing to provide foresight as to when a business model is becoming invalid, challenges to that model become evident only after it is too late to deal proactively with them. Strategic management deals with the facts that can indicate a need to change or reveal an opportunity to be pursued. There are several broad trends rapidly driving change and improvement in the way businesses are designed and operated. Facts regarding these trends must be gathered and proactive responses formed.
A Competency Journey
The pursuit of a strategic management competency starts by rearranging and tweaking an organization's current approach. Processes are added, removed, modified, and integrated, continually improving, until one day the flywheel of strategic innovation starts spinning, spinning ever faster as competency and advantage build.
Start Now
The discipline of strategic management is like any other discipline. Much like conditioning your body for athletic competition, the time to start is now, not when your competitors are sprinting past you.
