The biggest disruption enterprises face today is not technology or political uncertainty but the demolition of two fundamental assumptions of strategy, which are gospel to practitioners of strategy. According to Rita McGrath, one of the leading minds in the field of strategy and innovation, the first assumption is that industry matters most.
In B-Schools and elsewhere, we were taught that industries comprise of relatively stable competitive forces. If you take the time and effort to analyze the forces, you will be able to create a roadmap for your business, which may last for some time. Since industries were considered to be mostly stable, one might believe in getting a reasonable return on investment by analyzing industry trends and planning the strategy accordingly. Five-year plans were very normal decades ago but today, we find the time span is getting much shorter, and in many companies, annual updates on strategy is the norm.
That brings us to the second assumption that is getting derailed. This is the holy grail of strategy: sustainable competitive advantage. Having derived a competitive position within an industry, organizations tended to promote employees who were good at running big businesses, driving operational excellence, improving supply chains and so on, keeping the advantage intact. Management structures that directed resources and talent to strategic business units were associated with high performance. The core assumption here was that you could optimize your systems and processes around a set of sustainable advantages.
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