Strategy in a World of Constant Change

Am I the only person to be getting a bit weary of hearing it repeatedly asserted that we’re living in a world of constant, accelerating change?  That competitive advantages are becoming ever more transient and that the secret to survival will be to the ability to transform on a dime?  Otherwise, what happened to Tom Tom will happen to you. Please!

Let me share a fun clip with you, sent to me the other day my former colleague Jonathan Rotenberg, founder of the Boston Computer Society. It chronicles Steve Jobs’ first public introduction of the brand new Macintosh, which happened in January 1984 at Jonathan’s Society in Boston.  The whole event was was a cool trip down memory lane.

The moment I loved most was during the Q&A when an older gentleman asked Jobs a challenging question about the mouse as user interface technology: did it really compare favorably to the traditional keystroke approach? It was fun to watch a younger, mellower Jobs give a patient, reassuring response and not insinuate that the questioner was a moron. Jobs turned out to be quite right in his answer, which was that once people gave the mouse a try, they would see that it was far superior to keystrokes.

The really interesting thing about the gentleman’s question was the fact that it was asked 19 years after the mouse was shown to be a definitively superior graphical user interface at Xerox PARC in 1965.  It didn’t become the default tool with the launch of the Macintosh in 1984, even though today the entire universe of computer users would be totally bereft if someone took away their mouse because it is acknowledged now to be so utterly superior to keystrokes. That didn’t happen until the release of Microsoft Windows 95, 30 years after it had given clear proof of superiority in 1965, as my friend and graphical user interface legend Bill Buxton likes to point out.

Science fiction guru William Gibson expresses this phenomenon very nicely: “The future is already here — it is just not very evenly distributed.”

His point, of course, is that when entirely new, transformative futures arrive (like the mouse in 1965) their effects take a long time to become evenly distributed — typically a long, long time even in the supposed fast-moving tech sector. Yes, Amazon is utterly transforming the way Americans shop, but 20 years after it was founded, it still has a fractional share of most goods other than books. Even in books, it took a decade for it to really hurt Barnes & Noble and Borders.

One lesson from this is that real competitive advantage is enormously long-lived. I remember helping Mike Porter with his terrific 1996 HBR article What Is Strategy? In it, he talked about the competitive advantage of Southwest Airlines, Vanguard Group and Progressive Insurance. Almost 20 years later, after huge changes in their industries, all three are still on top.

To be sure, first mover advantages can vaporize quickly, but not all first mover advantages are backed by a real competitive advantage.   So if I hear the demise of MySpace cited once more as evidence that competitive advantage has become more transient, I will puke. All it proves is the basic rule of business: that which can be built simply and quickly can be simply and quickly torn down.

Another lesson to draw from Gibson is that certain futures can be seen very early if you look carefully at faint initial signals. It is possible to say that the dominance of the mouse was inevitable even as of 1965 because it was just plain better. Betting on the mouse over keystrokes was probably a safe wager even in 1965, though assuming widespread adoption in no time would have been a losing bet.   Similarly, you could probably have concluded that wire line phones were headed for the trash bin as early as 1973 with the advent of Motorola’s Dyna-Tac mobile phone and that the creation of ARPANET in 1969 meant that print news was on its way out.

The danger, of course, is that in recognizing that a particular technology or industry is doomed you forget that they can take a long time to die.  Going short on wire line carriers in the 1970s, 1980s or even 1990s would have been a bad idea and it’s only in the last ten years that the Internet has really started to kill newsprint and newspapers.

Strategy is a balancing act; it’s about judging between a fate being sealed and its being realized.  Companies should not be in a hurry to abandon their competitive advantages in the wake of the hot new idea or technology.  They must pay it attention because it may contain the seeds of their eventual destruction. But there is probably plenty of time to figure out what to.  Thomson Reuters was both one of the world’s largest newspaper publishers and leading textbook providers as of 2000.  It saw the signals and began a measured transition to becoming a provider of subscription-based, online must-have information, getting completely out of both the newspaper and textbook businesses while both were still highly profitable.

Advantage is neither transitory nor immortal. Hence, strategy is not an either-or exercise about seeking flexibility OR sustainability. It is about both: seeking sustainable competitive advantage in a world full of far-reaching and tumultuous change.

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