Adaptability: The New Competitive Advantage

Geary Sikich quoteNo wonder many of C-level Exec’s and institutions, that thrived in the industrial era, are “failing” in the Digital Age, when so much of what they held dear and used as justification for excessive remuneration and bonus packages, have been shown to be deeply flawed: economics; financial and risk management. Some do claim that they are now looking to “innovate” their way toward a brighter future but the evidence suggests that their idea of i-nnovation is more about re-packaging the same old “win/lose” propositions: destructive creation!

What IS required is the type of “creative destruction” that benefits stakeholders and leads to “win/win”: now that is I-nnovation that customers can understand and embrace. Alternatively, customers will look for VALUE from new entrants to a given marketplace…whether these be new players (without legacy issues) or established players from emerging markets.

My own interpretation is that, whilst adaptive behaviour is pretty readily understood, where evolution is triggered by external knowledge (from another system or environment) exaptation precedes the adaptation to facilitate system survival and growth.

Having stifled sources of creative destruction and become dependent upon excessively complex models – whose high growth [leveraged] strategies, in pursuit of market share, are as fragile as the financial institutions that spawned them: can they, first, demonstrate an exaptive instinct to adapt and thrive in an uncertain economy?

Or, are they STILL in denial about the cultural causes, drivers, nature and impact of the imminent paradigm shift

As has been spectacularly illustrated, in Financial Services, by such as, Lehman Bros, RBS, AIG, etc., the relentless pursuit of market leadership – even when you “manipulate the game”, employ thousands of, extremely clever and highly paid, economists, mathematicians, physicists and computer scientists – has proven to be an increasingly dubious prize: the once strong correlation between profitability and industry share is now almost non-existent in some sectors. According to our calculation, the probability that the market share leader is also the profitability leader declined from 34% in 1950 to just 7% in 2007.

The goal of most strategies is to build an enduring (and implicitly static) competitive advantage by establishing clever market positioning (dominant scale or an attractive niche) or assembling the right capabilities and competencies for making or delivering an offering (doing what the company does well). Companies undertake periodic strategy reviews and set direction and organizational structure on the basis of an analysis of their industry and some forecast of how it will evolve.

But given the new level of uncertainty, many companies are starting to ask:

How can we apply frameworks that are based on scale or position when we can go from market leader one year to follower the next?

When it’s unclear where one industry ends and another begins, how do we even measure position?

When the environment is so unpredictable, how can we apply the traditional forecasting and analysis that are at the heart of strategic planning?

When we’re overwhelmed with changing information, how can our managers pick up the right signals to understand and harness change?

When change is so rapid, how can a one-year—or, worse, five-year—planning cycle stay relevant?

via bcg.perspectives – Adaptability: The New Competitive Advantage.