Chapter 2

Adaptability: The New Competitive Advantage

Martin Reeves and Michael Deimler

Abridged and reprinted with permission. Copyright © 2011 by Harvard Business Publishing; all rights reserved.

Title Page

Globalization, new technologies, and greater transparency have combined to upend the business environment. Just look at the numbers. Since 1980 the volatility of business operating margins has more than doubled, as has the size of the gap between winners (companies with high operating margins) and losers (those with low ones). Market leadership is even more precarious. The percentage of companies falling out of the top three rankings in their industry increased from 2 percent in 1960 to 14 percent in 2008. Market leadership also is proving to be an increasingly dubious prize: the once strong correlation between profitability and industry share is now almost nonexistent in some sectors. And it has become virtually impossible for some executives even to clearly identify in what industry and with which companies they're competing.

All this uncertainty poses a tremendous challenge for strategy making. That's because traditional approaches to strategy actually assume a relatively stable and predictable world.

Think about it. 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 ...

Get Own the Future: 50 Ways to Win from The Boston Consulting Group now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.