Early warnings of a fading competitive advantage

Rita McGrath
7 min readDec 9, 2022

As the world begins to open up and I’m back on the speaking circuit, a question I get asked again and again is how one can tell when a once-robust competitive advantage is starting to show its age. Here’s how you can diagnose it.

Source: https://vivifychangecatalyst.wordpress.com/2014/07/26/transient-advantage-confirmation-bias-and-innovation/

The traditional strategy prescription

Find a competitive advantage, throw up entry barriers like crazy and defend that advantage with full throated energy. That’s been the strategy prescription for years, and sometimes it can provide a useful perspective on how to compete (for one of my favorite perspectives on this kind of competition, see George Stalk’s book Hardball and our Friday Fireside chat).

But a dramatic fall from grace isn’t the norm. More often, what happens is a slower, barely noticeable fading away of what was once a formidable franchise. It can take years before the alarm bells announcing impending doom start to ring.

Take Revlon, the glamourous company that Ronald Perelman bought in 1985. It ushered in an era on Wall Street of junk bonds, hostile takeovers and a sea change in how deals are done. Over the years, the company gradually seemed to lose its relevance (despite kudos for its CEO, Debbie Perelman). The firm went bankrupt in 2022, losing out to a whole host of factors — less interest in buying cosmetics in drugstores, the rise of celebrity brands, the growth of dedicated retailers like Ulta Beauty and a failure to center in many of the conversations of the moment. This is a far cry from the Revlon of the 1980’s which featured supermodels, photography by Richard Avedon and one of the best tag lines ever “the most unforgettable women in the world wear Revlon.”

The thing is, by the time bad news shows up in your numbers, it is usually way too late to avoid a turnaround at best, or a bankruptcy and restructuring at worst. And nobody in their right mind goes into these things thinking they are going to be easy (see this piece on the human factors that make transformation a long-odds story).

So, ask whether there is evidence of any of the following to structure an honest assessment of how things are really going.

I don’t buy my own company’s products or services

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Rita McGrath

Columbia Business School Professor. Thinkers50 top 10 & #1 in strategy. Bestselling author of The End of Competitive Advantage & Seeing Around Corners.