Go out and find a copy of the June Harvard Business Review Magazine (sorry, I know it’s old news now, but there must be some out there!). The cover spotlight is on “Strategy for Turbulent Times” and the first article in that section is by Rita Gunther McGrath on “Transient Advantage.” She argues that the days of long-term competitive advantage are for the most part over. Some companies may still achieve it, but they will be the exception rather than the rule. The rest of us are going to jump from one transient advantage to the next, because the markets are changing that quickly. The organizations that figure out how to move through these transient advantages more adeptly are going to be the successful ones.
I love this idea, but I think it will be hard for associations to swallow, simply because most of them have been enjoying a sustained competitive advantage for a long time. Like decades. McGrath points out that companies (particularly ones that have had an advantage for some time) are going to resist the truth that times are changing. So she provides a simple assessment. If you answer yes to four or more of these questions, you may be in trouble:
- I don’t buy my own company’s products or services.
- We’re investing at the same or higher levels an don’t getting better margins or growth in return
- Customers are finding cheaper or simpler solutions to be “good enough”
- Competition is emerging from places we didn’t expect.
- Customers are no longer excited about what we have to offer.
- We’re not considered a top place to work by the people we’d like to hire.
- Some of our very best people are leaving.
- Our stock is perpetually undervalued.
Okay associations, let’s be honest. The first one and last one don’t even apply to you, but I bet you said yes to four of those anyway. McGrath says this is a warning sign that “you may be facing imminent erosion.” I think that’s what’s going on here. It’s not about whether the membership model is dead, or if you are relevant, or if you follow strategic planning best practices. It’s simply a matter of you having lived for a long time with a sustainable competitive advantage, and it’s now eroding. McGrath points out that there are actually clearly defined stages in managing advantage. When you’re on top, you’re in the “exploit” phase. You gain market share and force competitors to react. You need people who are good at analytical decision making and efficiency.
And associations have been there for decades. That’s why your strategic plans simply describe what you do or set growth targets for established activities. Just keep implementing. Get better satisfaction scores at your conference. Increase member retention by 1%. Exploit that advantage. This has clearly been working, so I get why this has been your focus.
But if you answered yes to four or more of those statements above, then your advantage is probably slipping. Given the transformation brought on by the social internet (and the fact that your business model has been based in education/information and networking–the heart of the social media transformation), I’m not surprised. So now you’re in a new phase regarding your competitive advantage, that McGrath calls “reconfigure.” You have to reconfigure what you’re doing to keep your advantage fresh. To do this, you need people who “aren’t afraid to radically rethink business models or resources.”
Hmmm. Turns out that if you’ve been set up for exploiting for a long time, this reconfigure work might throw your people for a loop. To some extent this new new work just won’t make sense. It may not fit with your structure or your current processes, or your traditional metrics. So you’re good at strategic planning for an organization with a sustained competitive advantage, and that is precisely why you are very bad at strategy in a transient-advantage economy. You’re not so good at rethinking business models or shifting resources to new experiments. And the deeper you dig, the more you’ll realize that it goes beyond your strategy process and into your culture, structure, and skill-sets of your people. McGrath talks about this, but I’ll save it for another post.
Folks have talked for years about how association execs are risk averse and associations are complacent. I wonder if “transient advantage” is one of the roots of those symptoms. Inertia is a powerful force in organizations.The trouble is that the competitive advantages erode slowly, and so it is hard to make the case for change. How can organizations find the will to break out of the inertia and “reconfigure” the organization without some sort of disruption? Governance in associations and other nonprofits often is highly political and slow to move. How can a leader stimulate the kind of conversation it will take to develop the political will to “reconfigure” without sounding like Chicken Little? It’s hard work! And it requires foresight. I am reminded of Charles Handy’s Sigmoid Curve, which shows how organizations and their products and services need to change before they reach their apex. The trick is know when to make the change before the disruption occurs. Here’s a very good explanation of what I’m talking about. http://www.youtube.com/watch?v=iJmvTJ4VSxo‎
This is the conversations that associations need to be having.
Well said, Bob. That’s one reason why I like McGrath’s model, though–it acknowledges that the way they’ve been doing it historically makes sense. It’s not some kind of old, dead model. It was just the way you did the “exploit” phase, and we don’t need to do that work as much in today’s market. That still may be a tough sell, but it might not generate as much resistance if explained that way (he said, optimistically…). Do you think Boards might more easily engage in a conversation about the need to shift some resources from the exploit engine to the reconfigure engine? (As opposed to giving up our dinosaur ways and embracing the future?)
It will likely turn out to be one of those “the future is here; it’s just not evenly distributed” situations, don’t you think? Some associations can’t be as complacent as others. This shift will catch them when they have particularly burdened and burdensome governance, or when their reserves are tapped out. Some will not make the pivot to embrace the new realities and will fail or be swallowed up. But some will see change coming faster than others, and they will be the success stories – the associations who speak on panels at conference, who get written up as case studies, who show others the way forward.
Thanks for weighing in, Meredith. For sure there will be those who make the shift and thrive (and some who don’t). Same is true for any industry or segment, I think. But I do have a deeper concern that our percentages will be off. That is, the percentage that shift will be much smaller than it could be. Maybe even so small that the industry becomes super marginalized, or even disappears. I don’t mean that in an alarmist way. But I don’t take our existence for granted. And the speed with which we’re catching on to this trend (or lack of speed, more accurately) does concern me.