Tonight I was lucky enough to attend a UNSW AGSM innovation night featuring Dan Levinthal from The Wharton School, an extremely highly cited world-class business thinker. Here are some of my raw and barely edited notes on his talk ‘The Short Shelf-Life of Competitive Advantage: The role of innovation and adaptation’:
Sustained Competitive Advantage vs Renewal
- Is sustained competitive advantage realistic?
- Between 1957 and 1997, only 74 firms from 1957 S&P 500 survived, and only 12 of them outperformed.
- Perhaps we should just accept that competitive advantage is temporary
- Rather focus on “renewal”: new opportunities, exiting existing positions
- “It’s not the strongest of the species that survive, but the one that is most responsive to change” - Darwin
- “The ability to learn faster than your competitors may be the only sustainable competitive advantage”
Exploration - Exploitation
- Evolving entities:
- Need to survive in present and adapt to enhance survival in future
- Always opportunities to improve an organisation, it is never perfect
- Competitors are also improving
Challenges of exploration and exploitation
- Exploration vs exploitation is disruptive vs sustaining
Myopia of learning
- Learning is feedback driven - fast feedback
- Exploitation/sustaining is immediate, exploration/disruptive is distant (and may fail)
- Early “stage-setting” investments may provide good options later
- Staged/structured experiments
- This only works if you can easily terminate an option
- But you don’t know if something is working or “in the money”
- Failure isn’t good for one’s career - so there is incentive for people to make it look like it worked
Select & variety
- Dan credits Clayton Christensen’s thinking here
- Selection criteria: existing customers may not want it
- So, challenge of finding viable applications
Dan throws the floor open to audience questions, with some thought starters on the screen:
- How do we go about managing less successful experiments?
- How do we acount for career consequences?
(At this point I was handed a microphone and embarrassingly asked an asinine question, Dan was very gracious about it though)
I was glad that I’ve recently read Clayton’s Christensen’s Innovator’s Dillema book, as it was so relevant to the presentation. It’s certainly an area that is super relevant to my current career path.
An interesting evening. I sat in the front row and typed notes, but in future I’d love to be bold enough to bring my Wacom tablet and sketchnote this sort of event. Will need to practice some more!