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Travel Weekly PLUS interviews Rita McGrath

Travel Weekly PLUS, the thought leadership publication for senior executives in travel, published a two-part interview with Rita McGrath by their Editor in Chief Diane Merlino, excerpted below:

Sustainable Strategy Is Out. Short-Lived Opportunities Are In
Planning for long-term competitive advantage is a thing of the past

Merlino: Rita, not so long ago the golden rule of business strategy was based on developing a sustainable competitive advantage. The new methodology you propose is strategy based on creating transient competitive advantage. That’s quite a departure in thinking and practice.
McGrath: It’s challenging because a lot of what we’ve been taught in places like Columbia Business School, where I work, don’t really have good tools that make sense under conditions of high uncertainty or high volatility. Take something as beloved as the net present value rule. There are assumptions embedded in that tool that don’t make sense in an uncertain world.

The first assumption is that you can’t have any hope of accurately projecting cash flows out into the future. The second is that your core business is going to remain steady state; it doesn’t speak to what happens when your core business goes into decline. And the third assumption is that by starting a project, you’re committing yourself to carrying it all the way through.

With transient competitive advantage, net present value becomes very different. In fact it’s become almost option-like if you admit the possibility of being able to stop a project before it’s finished.

Merlino: What does transient competitive advantage look like in practice? What’s different about it?
McGrath: When I looked at companies that seemed to be doing a reasonably good job at this, I found a couple of things that are quite different from the way most companies are organized. The first was what I call continuous reconfiguration. I learned about this from a very rare group of 10 firms in my sample that had been able to grow their net income by at least 5% a year over an entire 10-year period.

 

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