Competitive advantage no longer enough: Survey
Competitive advantage no longer enough: Survey
The Jakarta Post, Jakarta
Competitive advantage is no longer enough to achieve high
growth in revenue and profit.
That was the strongest message reiterated by France's INSEAD
business school at a management seminar organized for senior
executives of publicly-listed PT Astra International here last
week.
INSEAD professor Ben. M. Bensaou noted that staying ahead of
competition was not enough anymore, pointing out that high-growth
companies do not bother much about their rivals. Instead, they
focus their resources on making their competitors irrelevant
through a strategic logic called value innovation.
Speaking at the Astra Management Development Institute,
Bensaou defined value creation as the simultaneous pursuit of
radically superior value for buyers and lower costs for
companies.
At another seminar organized for chief executive officers at
the Marriott Hotel, Ken Gibson of McKinsey & Company said top-
performing companies, which his consulting firm had studied over
the last four years, showed a common characteristic; that their
management consistently carried out five distinctive "must do"
leadership elements.
The five elements are: Communicate clear and compelling
missions; create aggressive targets and goals; build atomized
organizations with clear accountability; provide transparent and
timely performance feedback and enforce visible consequence
management.
The McKinsey survey also found that top-performing companies
create an environment where underperformers feel under strong
pressure to select themselves out. This is quite different from
many companies in Asia where regulations make management
reluctant to act against low-performers.
INSEAD, which has been playing a significant role in enhancing
the capabilities of most Astra senior executives, presented at
the seminar the findings of five years of research by W. Chan Kim
and Rene Mauborgne on more than 30 different industrial companies
around the world with in-depth interviews of hundreds of
managers, analysts and researchers.
Another INSEAD professor, H.C. de Bettignies, enlightened
Astra executives with the role of values, ethics and performance
management and of how the values of business leaders shape
managerial behavior and influence corporate culture.
The research compared high-growth companies to those with less
successful performance records and found that the managers of the
less successful firms tended to think only along the five
conventional textbook dimensions of strategy: Industry
assumptions, strategic focus, customers, assets and capabilities
and product and service offerings.
How is value innovation brought into the market place?
The study cited several high-growth companies that had
succeeded not only in beating their rivals but in making their
competitors irrelevant.
Success Case 1: For decades major U.S.television networks used
the same format for their news programming, aired shows in the
same slot and competed on their analysis of events, the
professionalism with which they delivered the news and the
popularity of their anchors.
But in 1980, CNN changed the rule of the market game, entering
the scene with a focus on creating a quantum leap in value, not
on competing with the networks. CNN replaced the networks, format
with real-time news from around the world and emerged as the
leader in global news broadcasting and created a new demand
around the world. But it was also able to produce 24 hours of
real-time news for one-fifth the cost of network news.
The message conveyed by the CNN success: Conventional logic
leads companies to compete at the margin for an incremental share
and use competitors as benchmarks. Value innovators offer a
tremendous leap in value and build on the powerful commonalities
in the features that customers value.
Success Case 2: Many cinema operators in Belgium shut down in
the 1980s after the success of videocassette recorders and
satellite and cable television. Instead of continuing to compete
for a shrinking market, cinema operator Bert Claeys created
Kinepolis, a megaplex with 25 screens and 7,600 seats, thereby
offering moviegoers a radically superior experience. Screens
measure up to 29 meters by 10 meters and viewing rooms have 70-
millimeter projection equipment and state-of-the art sound
equipment.
Kinepolis offers oversized seats with individual armrests and
lots of legroom with a steeply sloped floor to ensure everyone an
unobstructed view. Today, Belgians refer to it as much more than
simply a night at the movies. It has solved the problem of
parking scarcity and cost and has resulted in one of the lowest-
cost structures in the industry. In its first year, Kinepolis won
50 percent of the market in Brussels and expanded the market by
about 40 percent.
The message: Instead of battling competitors over targeted
segments of the market, Bert Claeys made the competition
irrelevant by putting aside conventional thinking about what a
theater is supposed to look like. And the company did all that
while reducing its costs.
Success Case 3: In the mid-1980s, the budget hotel industry in
France suffered from stagnation and overcapacity. In 1985, Accor
launched Formule 1, a line of budget hotels without costly
restaurants and appealing lounges, offering small rooms with a
bed and bare necessities. The Formule 1 concept gave Accor such a
big cost advantage that it allowed the company to improve the
features customers valued most -- a good night's sleep for a low
price.
Accor has not only captured the mass of French budget-hotel
customers but also expanded the market as truck divers, who
previously slept in their vehicles and businesspeople needing a
few hours of rest, have been drawn to Formule 1 hotels.
The study singled out several other companies that made
competitors irrelevant through their value innovation.
But, the research found that companies, which were most
successful at repeating value innovation were those that took
advantage of all three platforms on which value innovation could
take place: Product, service and delivery.