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 / Winter 2013 / Issue 73(originally published by Booz & Company)

Business Literature: Best Business Books 2013

Best Business Books 2013: Strategy

Rebuilding the Temple Mount

Rita Gunther McGrath
The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business
(Harvard Business Review Press, 2013)

A.G. Lafley and Roger L. Martin
Playing to Win: How Strategy Really Works
(Harvard Business Review Press, 2013)

Nassim Nicholas Taleb
Antifragile: Things That Gain from Disorder
(Random House, 2012)

The temple mount of Great Management Ideas hasn’t much changed recently. The marble-columned edifice devoted to Business Strategy still stands in magisterial splendor, its priests silver-haired and slightly smug, if a little paunchy. Nearby, in the more modern Temple of Innovation, adorned with black glass, high-tech types in T-shirts attract a younger, livelier crowd. Across the way, in the rainbow-colored tents of the Sanctuary of Leadership, ex-CEOs emote, while in the more shadowy nooks, dreadlocked fakirs spout their wisdom, accompanied by the scratching of nearby chickens.

A reading of this year’s best business books on strategy suggests it’s time to bring in the wrecking ball and thoroughly rearrange the real estate.

Since its invention in the 1960s, modern corporate strategy has been about change. What company ever went looking for a new direction because its current course was proceeding swimmingly? The fresh insight this year, after more than a decade of emergence, is that nowadays strategy is change. Almost any competitive advantage is fleeting and you must constantly be managing your company with an eye toward innovation in not just your market offerings, but also your business portfolio and business models. Strategic leadership has come to consist largely of the continuous and deliberate navigation of change.

Transient Advantage

In The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, Rita Gunther McGrath provides much useful advice on the how of managing business strategy as continuous innovation but shorts her audience just a bit on the why. Not that most readers will miss the statistics, available elsewhere, on how quickly industry leadership turns over today compared to, say, three decades ago.

To be sure, skeptics will look at the rise of behemoths such as Apple, Amazon, Google, and Walmart and see a consolidation of corporate power and apparently unassailable competitive advantage. But for every skeptic, there are 10 or 20 warriors in the corporate trenches who believe their companies are under assault as never before and feel an unprecedented amount of change being thrust upon them. At least that would be my guess from talking to scores of executives.

For her evidentiary base, McGrath, a professor at Columbia Business School, and her research team scanned a list of every publicly traded company on any global exchange with a market capitalization of US$1 billion or more by the end of 2009. Looking for what she came to call “growth outliers,” she was able to identify precisely 10 companies that were able to grow their net income 5 percent annually from 2000 to 2009. A few of the names on the list are familiar (such as Cognizant Technology Solutions, Infosys, Yahoo Japan, and Tsingtao Brewery), whereas others are less so (such as Krka d.d. Novo Mesto, a pharmaceutical company from Slovenia).

In delving deeper into these enterprises, McGrath uncovered an intriguing combination of stability—involving identity, culture, and people development—and change. Each company’s identity served as a platform for a continuous reconfiguration of its portfolio of businesses and its activities within those boundaries. Her outliers are prepared to reorganize themselves repeatedly in order to systematically catch waves of competitive advantage that rise up quickly, peak, and then recede.

The outliers will, according to McGrath’s five-stage rubric, launch a small effort if they see an aborning market opportunity, then ramp up quickly if it proves out and they can capture territory. They’ll exploit the business as long as it’s robustly profitable, all the while looking for the first hints of decline, such as new competitors piling in or commoditization. Spotting trouble, they will see if they can reconfigure the business model to prolong returns, but if that doesn’t work, they’ll crisply disengage—exiting the business and deploying their resources elsewhere.

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