Rethinking Competitive Advantage: New Rules for the Digital Age
Ram Charan and Geri Willigan
Currency (April 2021)

“Insanity is doing the same thing again and again and expecting different results.” Albert Einstein

With substantial assistance from Geri Willigan, Ram Charan has written a book (the latest of 30+ bestsellers) in which he rethinks the conventional assumptions of a major business subject. In this instance, competitive advantage. “My research over the past five years made one fact crystal clear: Creating competitive advantage is significantly different in the digital age. Until recently, the greatest competitive advantage went to companies that controlled distribution channels, had hard assets on the largest scale, or had established brands or patents. Today, those advantages no longer ensure that a company will outcompete others.”

What will?

“In the digital age, competitive advantage is the ability to win the ultimate prize — the consumer’s preference — [begin italics] repeatedly [end italics] through continuous innovation on behalf of the consumer, and to create immense value for shareholders at the same time.”

Leaders of companies that include Alibaba, Amazon, Facebook, Netflix, and Google defied conventional assumptions about their competitive marketplace. What do these comanies have in common?

o “They imagine a 100x market space that doesn’t yet exist.
o “The have a digital platform at their core.”
o “They have an ecosystem that accelerates their growth.”
o “Their moneymaking is tied to cash and exponential growth.”
o “Decision-making is designed for innovation and speed.”
o “Their leaders drive learning, reinvention, and execution.”

With regard to the “New Rules of Competition,” Charan cites six:

1. A personalized consumer experience is key to exponential growth.
2. Algorithms and data are essential weapons.
3. A company does compete. Its ecosystem does.
4. Money making is geared for huge cash generation, not earnings per share., and the new law of [begin italics] increasing [end italics] returns. Funders understand the difference.
5. People, culture, and work designs form a “social engine” that drives innovation and execution personalized for each customer.
6. Leaders continuously learn, imagine, and break through obstacles to create the change that other companies must contend with.

He thoroughly explains them in a separate chapter devoted to each. These are the pillars of the mindset needed to rethink competitive advantage.

I am again reminded that, years ago, John Kotter told me that the greatest challenge change agents face is to change the way people think about change. One of Charan’s primary objectives for his latest book is to help those who read it to rethink the way they think about competitive advantage.

In his first annual report in 1997, Amazon’s Jeff Bezos asserts that every day at Amazon must be “Day 1,” ZERO COMPLACENCY. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it will always be Day 1 at Amazon.”

I wholly agree with Charan: “By far the biggest difference in creating competitive advantage before and after the arrival of the digital age is the speed of competitive action and reaction. All companies now operate in an extremely fast lane that presents twists and turns without notice.”

In this context, I am again reminded of Richard Dawkins’ observation: “Yesterday’s dangerous idea is today’s orthodoxy and tomorrow’s cliché.”

Ram Charan nails it when suggesting that companies must constantly and rapidly outperform themselves as well as others or will be choking on the dust of those that do.  Rethinking how to rethink is a never-ending process.