One of the most profoundly important concepts in business (and in managing your career) is the idea of the Decisive Advantage.
The concept applies to any endeavor that involves competition — and more importantly deciding whether or not to even bother competing. It is this latter decision that most people rarely consciously consider. This is as true for aspiring management consultants as it is for your future clients.
When placed in the middle of a competition, most people’s overwhelming initial instinct is to compete to win. This is especially true for very successful people.
This phenomenon is reinforced by the education system. If only 10 people can get an A grade in a class, most competitive and successful people strive to be one of the 10.
However, as you transition out of the academic world to the”free” world, you increasingly have the option to choose not to compete. It’s a profoundly critical decision to make, in both your career and for your future clients.
The essence of strategy consulting (as opposed to IT, human capital or operations consulting) is to consider the “big picture” questions that rarely get considered.
It is for this reason I find it quite ironic that some strategy consultants who ask their clients tough questions sometimes forget to ask themselves the same questions. Sadly, I include myself in this category – especially earlier in my career.
With this introduction to the Decisive Advantage, let me cut to the chase and give you the 80/20 of today’s lesson.
If you do not have a Decisive Advantage, do not compete – especially over the long-term.
This is especially the case when opportunity costs are high. If your client enters market A, they don’t have the resources to enter market B. If you pursue career path A, you don’t have the time or energy to pursue career path B.
This principle is truer for businesses than for careers –but hopefully you get the point.
Now this principle of the decisive advantage is taught in all business schools and seems like common sense. Yet what I’ve come to realize over the years is that common knowledge is often not common practice.
In my business, I work a lot with smaller businesses, with the largest being Inc. 500 sized companies. As such, when I walk around town, I can’t help but analyze the businesses I see as I walk down the street. What I often find is that the majority of businesses have no real decisive advantage to speak of.
This results in many such companies either going out of business or squeaking by on “average” industry profits.
This pattern is certainly not limited to small businesses. The same issue exists with Fortune and Global 500 companies. For example, in the United States we have a retail store chain that used to be popular. It’s a chain called K-Mart.
K-mart has absolutely no decisive competitive advantage whatsoever anymore. I remember reading an article about K-Mart five years ago, and their new CEO read a research report that said 86% of Wal-Mart’s customers (their #1 competitor) drive past a K-Mart on their way to Wal-Mart.
It is absolutely brutal to be running a business (or to advise a client who is running a business) that has no decisive advantage.
Similarly, it is equally brutal to pursue or persist in a career path where you have no decisive advantage either.
That being said, it can make sense to pursue a particular job (like consulting) to acquire certain skills, experience or contacts to be used to achieve a longer-term objective.
This is the difference between a tactical decision vs. a strategic one. A tactical decision is a decision you make that enables you to pursue your strategic objective (where you have a decisive advantage).
An example of this is someone taking a job working at McDonald’s in order to pay for night school. Working at McDonald’s isn’t the goal; it’s just a means to the goal. This subtle distinction is an important one to keep in mind.
As you progress in your career, especially if you’re successful, you will constantly come across opportunities you could pursue.
Similarly, if you have a client with a successful business, there will be so many opportunities they uncover that they could pursue – a new partnership, a new product, or a new market segment.
It is not easy to constantly say “no” to these opportunities to stay “on strategy.” At every level of business, disciplined focus is extremely hard to achieve.
For example, in 1991, AT&T made a strategic acquisition of NCR – the National Cash Register company. Yes, the telephone (and now mobile) company bought a cash register company for $7+ billion.
For the life of me, I could not figure out why they would do such a thing. Maybe the price was right. Maybe the existing management team at NCR was incompetent and AT&T thought they could do a better job. All of these reasons are merely tactical reasons.
The fundamental strategic question is this:
What was AT&T’s Decisive Advantage in owning NCR? Why would NCR be infinitely more valuable in AT&T’s hands than as an independent company?
As it turns out, AT&T had no decisive advantage in this market. AT&T paid $7 billion for the privilege of losing even more money, until years later AT&T spun off NCR as a standalone company.
As I said, common sense isn’t always common practice. Just remember this rule of thumb: Always have a decisive advantage in any market, business, or career path you enter– especially one for the long haul.