Columbia Professor Rita McGrath Says Procter & Gamble Faces The End Of Competitive Advantage

NEW YORK, June 4, 2013 /PRNewswire/ -- With the announcement that Procter & Gamble (P&G) CEO Bob McDonald is stepping down and former CEO AG Lafley is returning to helm the dipping corporate giant, P&G faces many difficult decisions.  THE END OF COMPETITIVE ADVANTAGE: How to Keep Your Strategy Moving as Fast as Your Business, by Columbia Business School professor Rita McGrath, hits bookshelves today and addresses the very issues P&G is facing and offers a roadmap to success for P&G and other companies struggling in the transient advantage economy.

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In a recent column for Forbes.com Steve Denning wrote of THE END OF COMPETITIVE ADVANTAGE that, "Professor McGrath's book is a landmark contribution to the strategy field." McGrath's contribution offers a diagnosis and solution for the issues facing P&G and so many other companies today.

"The transient advantage phenomenon can affect even extremely well run companies like Procter & Gamble," said McGrath.  "The company has been lauded right, left and center as a winner, but not so much since 2009.  Its top-line growth in the last few years has languished, despite formidable brands and strong market presence.  Its strategy – premium prices for beloved brands in existing markets – is today seen as outdated." 

However, McGrath explains that Lafley has an opportunity to turn things around. Pointing out that in a recent article published in Fortune, Lafley is quoted as saying "strategy doesn't last forever."  This is the right attitude for P&G at this time according to McGrath. 

"I would argue that what happened during the McDonald years is what happens to a lot of firms in the transient advantage economy," McGrath explained. "Exploitation takes over.  Innovation takes a back seat to efficiency.  Budgets favor the existing business.   Talented senior executives are stifled and leave. Real information – brutal truths – are hidden as long as possible because the boss doesn't want to hear them.  And innovation suffers."

The strategy frameworks that are used in boardroom discussions and executive meetings are built on tools that were designed for a different era. From "five forces" to "core competencies" – virtually all strategy methods are based on a single dominant idea: that the purpose of strategy is to achieve a sustainable competitive advantage. This idea is strategy's most fundamental concept. It's every firm's Holy Grail. And it's no longer relevant.

In THE END OF COMPETITIVE ADVANTAGE: How to Keep Your Strategy Moving as Fast as Your Business (June 4, 2013), McGrath takes on the fundamental notion of sustainable competitive advantage – and argues that executives need to stop basing their strategies on it. She offers a perspective on strategy that is based on the idea of transient competitive advantage: that to win in volatile and uncertain environments, executives need to learn how to exploit short-lived opportunities with speed and decisiveness.

According to McGrath, the deeply ingrained systems that executives rely on to extract maximum value from a competitive advantage are liabilities—outdated and even dangerous—in a fast-moving competitive environment. Based on her research and work with firms like General Electric, Qualcomm, Novartis, Underwriter's Laboratories and IBM, McGrath defines the new transient lifecycle of competitive advantage and shows how firms can manage through it by using her updated philosophy. Her book is peppered with examples of global companies such as HDFC Bank, KrKa of Slovenia, Infosys and Brambles of Australia.  McGrath's new playbook for strategy helps companies with:

• Continuous reconfiguration: How companies can build the capability to move from arena to arena, rather than trying to defend existing competitive advantages.
  
  
• Using resource allocation to promote deftness: How companies re-allocate assets quickly and re-organize fast.
  
  
• Building an innovation proficiency: How to make innovation a continuous, core, well-managed process rather than the episodic process it is in many companies.
  
  
• Leadership and mind-set: As the pace of competition becomes faster, decisions that are made quickly and in "roughly right" mode are likely to beat a decision-making process that is more precise, but slower.
  
  
• Personal meaning of transient advantage: How leaders and employers should be thinking about personal career strategies in light of transient advantages.  

THE END OF COMPETITIVE ADVANTAGE offers a bold new set of principles for competing and winning in volatile and uncertain environments. I hope you will consider this book for review.

Rita McGrath, a Professor at Columbia Business School, is a globally recognized expert on strategy in uncertain and volatile environments. Her thinking is highly regarded by readers and clients who include Pearson, Coca-Cola Enterprises, General Electric, Alliance Boots, and the World Economic Forum. She is a popular instructor, a sought-after speaker, and a consultant to senior leadership teams. She's been recognized as one of the top ten business school professors to follow on Twitter (@rgmcgrath).

SOURCE Rita McGrath