As was mentioned in last month’s newsletter this month’s main article will be focusing upon Professor Rita Gunther McGrath’s writings about developing a transient advantage in business and how companies in rapidly changing industries should be undertaking innovation and strategy implementation. This article should be particularly useful for those business owners within the Fast-Moving Consumer Goods (FMCG) and the Travel / Tourism industries.
To begin with let’s summarise briefly what was covered last month in regards to creating a transient advantage. It was noted last month that business is becoming increasingly focused upon rapid, targeted evolution rather than longer term and broad planning. In many industries, in particular the FMCG and Travel industries business owners are beginning to realise that sustainable advantage is now becoming rare, where as transient advantage is becoming the norm. This means that innovation and strategy implementation is more often than not taking the form of quick cycle strategies or innovations rather than long cycle strategies, in order to evolve to a rapidly shifting marketplace. That summarises what was covered last month from here on out the rest of this article will be dedicated to discussing the implementation of a quick cycle, transient advantage innovation model. We will be doing this by looking at McGrath’s Wave of Transient Advantage and discussing some of the necessary skill sets and operational requirements needed to facilitate implementation of the optimal innovation model.
The first discussion point are the stages of developing a competitive advantage which simplified for brevity may consist of five distinctive phases which are:
1. Launch Phase
2. Development Phase
3. Exploitation Phase
4. Reconfiguration Phase
5. Disengagement Phase
These five phases all have a specific role to play in the strategic planning and integration of innovation and change within businesses, none more important than the Launch Phase. This initial phase is where companies focus on identifying opportunities for change andinnovation that may convey an advantage. It is also in this phase that the company allocates resources to develop the opportunity identified, these resources may include but not be limited to allocating staff, consultants, capital or simply time. This phase of innovation and strategic planning requires both the dreamers and managers. This is a phase which will benefit from employees who are ideas people and have the ability to test and adapt their ideas, while being able to manage and request the appropriate resources. It is this managing and requesting of the appropriate resources that leads to the Development Phase or colloquially known by McGrath as the “ramp up” phase. This is the phase when the initial launch idea is beginning to be initiated within the business to scale. This means that what may have started as a one department or one agent’s trial of the new innovation or program is now being resourced and delivered across multiple areas, staff or businesses. It is in this phase that the innovation process needs to be strictly managed and monitored by those with the authority to allocate resources. Following a successful phase of development and implementation there should be an Exploitation Phase. When transitioning to the exploitation phase it is important to bear in mind that the turnaround between launch and development should be fairly fast (weeks or a few months, always less than a year) to provide the maximum possible transient advantage.
It is during the Exploitation Phase that businesses should be capturing the majority of its profits, efficiency ratings and increased market share due to their innovation or strategy. So basically this phase is all about making money! Your company and its staff should be focusing on exploiting their new found competitive advantage and marketing their innovation to consumers. The more exposure and effective use of this advantage the more profitable your investment in its development becomes. While this phase is predominately about gain results or profit from your planning it is also the phase that has the most constant analysis and monitoring so I would argue it could equally be called the Exploitation and Analysis Phase.
The addition of Analysis to this phase is because in order to capitalise and assess the efficiency of your innovative practice or strategy there needs to be a large amount of analytic review of the businesses data. As a result this phase in particular requires employees or consultants with the ability to perform complex analysis of data and KPI information to determine the success, strengths and weaknesses of the implemented changes. This data may take the form of stock reports, sales reports, customer surveys or dashboard data analysis such as the one that Resurg operates. With that being said one of the clearest indications of the success of the innovation during this phase is that your competitors will react to your changes and seek to decrease your advantage. Ironically this means that the stronger the advantage you create the faster it may decline as your rivals throw resources into closing the competitive gap. It is this rapid decline in your recently acquired but quick declining advantage that leads to the Reconfiguration Phase.
This Reconfiguration Phase is very easy to explain in that it is fundamentally about making any changes to your existing strategy or innovation to keep it fresh and effective. That being said this is often one of the most difficult stages as it can be exceedingly difficult to rethink a business process or strategy and modify it to fit different circumstances. It is for this reason that often the Disengagement Phase will come shortly after or even during this phase. This last phase is when the innovative process, strategy or device has had its competitive advantage reduced to warrant the repeating of the five phase cycle to develop a fresh advantage. As you can clearly see some of these phases of innovation roll from one into the other, this is especially true for those businesses that undergo very rapid changes in market or data due to shifting market forces, consumer wants or seasonal supply and demand curves. Just explaining this best practice process of innovation makes it abundantly clear that companies must be looking at quick cycle innovation and strategic planning to stay ahead.
The whole idea of understanding these five distinctive phases of innovation and planning when seeking a transient advantage is so that your company can identify how it can create a pipeline for developing competitive advantages and innovative practices. By understanding what each phase entails it can help business owners and managers to understand what staff they need for each phase and what their goal should be for that phase.
In the second article of this newsletter we will briefly outline some of the key statements about whether or not your business is suffering a loss of competitive-transient advantage and provide some links to interesting further reading and viewing regarding developing competitive advantage in small businesses.