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Tuesday, July 11, 2017

Why a Competitive Advantage Means Nothing


In a previous article, I wrote about the importance of being able to change.  That article focused on the need to transform individually and enterprise wide.  Neuroplasticity is the technical term given for making paradigm shifts in the brain.  In a book called, The End of Competitive Advantage, by Rita Gunther McGrath, she talks about how market dominance can be fleeting.  Companies unable to quickly change can
become obsolete.

In the book, she sights Sony as an example of a company that lost market dominance.  Sony was the leader in televisions.  She said an insider told her, “Sony was trapped by its own competitive advantages.  They wanted to protect their technologies.  When customers would ask former CEO Idei why the company didn’t make plasma or high definition televisions, he would say to them that Trinitron is superior technology.”  If you observe, Sony is not a leader in flat screen and HD TV. 

If Sony wants to enter that market, they will have to play catch up.  This is the fate for anyone or any company that would rather be right about their approach to career or business.  Part of what gets people stuck is they become fixated on being right.  They would rather defend their point of view than be open to other possibilities.  That creates blind spots.  And blind spots are a difficult trap to escape. 

In a rapidly changing marketplace, blind spots can drive a business to bankruptcy.  In a marriage it can end in divorce. 

While many believe change and technology is moving faster than ever, this may not be accurate.  John D. Rockefeller, Sr. created Standard Oil.  By far, his company was the largest in its industry and had clear competitive advantages.  Most households in the US purchased his kerosene.  However, someone outside of his industry threatened to make him obsolete.  Thomas Edison created electrical wiring that made indoor and outdoor lighting possible, thereby making light available 24 hours a day with the flick of a switch. 

Initially Rockefeller resisted the change.  He ran propaganda campaigns that showed homes catching fire because of electricity.  Nevertheless, more people continued to seek electricity in their homes.  At some point he conceded.  Instead of fighting the new technology, he looked at his operation to see what untapped opportunities existed.  When speaking to his engineers, they talked about the gallons of liquid they discarded into the rivers while making kerosene.  That liquid was gasoline.  Since Henry Ford focused on selling cars to most households, he was growing rapidly and so was the demand for gasoline.  Rockefeller quickly made the switch from his previous competitive edge to a new one. 

Rockefeller teaches a valuable lesson.  His company was the best and most efficient at producing kerosene.  Except, the demands of the marketplace changed.  If he would have taken Sony’s approach, he may have gone out of business.  Instead, he explored other opportunities and quickly changed his competitive advantage from providing liquid derived from oil for home lighting to fueling automobiles.  As a result, Standard Oil maintained market dominance. 

As you can see, becoming attached to a competitive edge can be an inescapable trap.  Thomas Edison later became a victim of that trap when he believed DC or direct current was the way to conduct electricity.  On the other hand, Nikola Tesla said AC or alternating current was more efficient and powerful.  Edison was wrong and suffered consequences.  Before you get stuck with being right about your career or company’s competitive advantage, be open to hear perspectives of others.    

What do you think? I would love to hear your feedback. And I’m open to ideas. Or if you want to write me about a specific topic, let me know.


2 comments:

  1. It's comforting to know one can teach an old dog new tricks. Neuroplasticity-It is possible for ones brain to form new and reorganize existing synaptic connections.This is amazing Ted. Wow! Breakthroughs also form new neuropaths.Amazing!!

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    Replies
    1. Thanks for the comment, Judith. And yes, breakthroughs can reorganize existing synaptic connections. It allows people to see possibilities that once appeared impossible.

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