Scott Berkun’s open letter to new Microsoft CEO & the problem with competitive advantage

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Scott Berkun wrote an open letter to Microsoft’s new CEO about what needs to be done to turn Microsoft into an innovation machine again.

(Whatever you think about Microsoft, let’s assume for the purposes of this discussion that Microsoft has lost its innovation mojo and if you don’t accept that, just find and replace ‘Microsoft’ in Scott’s piece for say, ‘Nokia’, ‘Oracle’, ‘Blackberry’, ‘LinkedIn’ or whoever – pick a well established incumbent organisation with huge market share and a highly profitable business. OK, scratch Blackberry and Nokia).

Scott used to work at Microsoft in the 1990s before ploughing his own furrow as a writer, commentator and speaker. He spent a year working at WordPress.com for his latest book, The year without pants, where he learned how one of the top ten websites in the USA works with a couple of hundred completely distributed employees.

Given Scott’s background, it isn’t surprising at all that his CEO letter is so people focused:

“An approach you should borrow from WordPress.com is to hire leaders who are masters at running experiments and eliminate ones who fear them. For too long, Microsoft has promoted managers whose strength is optimization and maintenance. The fantastic revenues from the 1990s era product lines of Office and Windows continue but only lead the company deeper into an innovator’s dilemma. Too many of the most powerful people at Microsoft have both feet in the past, taking false pride in the machinations of extracting its sizable, but declining, value. In 1999, Microsoft’s leaders had the entire Web open to them but abandoned it all, preferring the certainty of its legacy businesses. Despite all its rhetoric, Microsoft has always been a smart but conservative company, awakening only as a last resort. Does it still know how to wake up?”

It struck me though that a lot of what he talks about stems from a much bigger issue around strategy and the way that big companies think about their place in the world and maybe Scott will get a chance to talk about that with someone else with some ideas about that very soon…

Professor Rita Gunther McGrath comes at what is essentially the same issue from a strategic perspective. She will be talking at Business of Software Conference (28-30th October 2013, Boston) about the end of competitive advantage, the notion underlying almost all corporate strategy today – build barriers around your business to protect it.

Competitive advantage lies in being able to acquire resources and attributes at a higher level than others in an industry so that you can keep competition out and own the profits in an industry. Competitors can’t compete because you have access to better resources, higher sales and profits. It is an idea that has dominated management thinking for 25 years or so.

Transient Advantage Rita argues that nothing is forever. That competitive advantage simply doesn’t exist anymore and that the concept of transient advantage is a more appropriate strategic framework to operate in today’s world. (I took some notes at a talk she did recently in Nottingham) and also had the pleasure of asking here a few question in this video interview. The Competitive Advantage and Transient Advantage playbooks are quite different.

I think Scott and Rita are talking about different aspects of the same thing – companies need to start recognising that in an increasingly fast moving world, they need to think differently about everything from their strategic thinking to the way they create a culture that lets their employees get things done.

Rita opens the Business of Software Conference in Boston in a couple of weeks time and Scott talks before lunch. Maybe we should get them to do a joint Q&A?

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