FEBRUARY 2015 / NO. 1
TAGS: ARENAS, SECTORS OF INDUSTRY, MANAGEMENT, RITA MCGRATH, THE END OF COMPETITIVE ADVANTAGE, WHERE-TO-PLAY, HOW-TO-WIN, COMFORT ZONE

Companies compete in arenas, not in sectors of industry

“Management must step back from the day-to-day hustle and ask the right questions. Are there new competitors from unexpected places? What barriers to entry are coming down? Where are there cheaper substitutes?”
“Competing in arenas needs new information systems that give the insights and foresight on what is going on in those arenas. Your current management information systems don’t give you this!”
Both the above statements are by Professor Rita McGrath of US Columbia Business School, whose book “The end of competitive advantage” was published in 2013. Management needs to get out of its defensive mode and must be open to intelligence and welcoming to news, even if it is bad news. Companies need different systems for managing their core business and for managing new opportunities. Industry analysis is part of the core business, while arena analysis deals with new opportunities. If you compete in arenas, you need information systems that give you a line of sight into what is going on in those arenas, and management needs to be able to move resources quickly, according to McGrath. She lists the following ten new dimensions as necessary to create temporary competitive advantage:
  1. Leveraging assets is the new phenomenon
  2. Reorganization versus consistently changing structures
  3. Information efficiency versus information effectiveness
  4. Flexibility over optimization
  5. People who are educable, rather than people who are deeply specialized
  6. Competitive position is about arenas rather than sectors of industry
  7. Competition comes from other industries
  8. Reframe where the company adds value and where it doesn’t
  9. Strategy changes into continuous reconfiguration
  10. Resources get trapped in the core business. Competing in arenas needs new information systems
It is difficult for companies to maintain their competitive advantage, because attractive opportunities are more visible to many more players. One can see this around one everywhere. Daily. Adapting to the ten new dimensions listed above means that companies can become more successful, because they are able to exploit temporary competitive advantage. Management should be much more challenged Where-to-Play and How-to-Win.
“Managers who are skilled at executing clearly defined strategies are ill equipped for out-of-the-box thinking and are lame ducks stuck within their comfort zone.”
Dont miss out on our Intelligence Briefings. Subscribe to these free Intelligence Briefings by clicking HERE.
If you like to read our previously published Intelligence Briefings, please click here.