Beyond Competitive Advantage: How to Solve the Puzzle of Sustaining Growth While Creating Value

by Todd Zenger

A competitive advantage just isn't enough.

Your company is turning in regular profits every year, and its market share is only getting bigger. Competitors can’t touch you. So why is your stock price so sluggish? The answer is as simple as it is investors aren’t interested in history, and they already know you’re profitable and competitive-that knowledge is baked into your stock price.The hard reality is that a competitive advantage just isn’t enough. Investors want companies to surprise them with unexpected value, which means that you can outperform market expectations only if you as a leader know how to find, create, and deliver a series of multiple competitive advantages.This is why a corporate theory is so important. A good corporate theory provides a compass for those at the strategic helm, guiding their decisions about what assets and activities to pursue, what investments to make, and what strategies to adopt. Behind every long-term corporate success story lies a basic theory about how that company creates value.In Beyond Competitive Advantage, strategy professor Todd Zenger describes what makes a great corporate theory and helps readers understand the many tensions and trade-offs they’ll face as they apply the theory to meet the challenge of market expectations.Based on years of research and analysis, Beyond Competitive Advantage provides managers and executives with a framework for both sustaining value and creating growth.

Genres: Business, Nonfiction, Management, Entrepreneurship

224 pages, Kindle Edition

First published June 14, 2016

Reviews

[InvestingByTheBooks.com · Rating 3 out of 5]

In his corporate strategy book Beyond Competitive Advantage the University of Utah business professor Todd Zenger, specialized in so called organizational design, presents a framework for companies on how to create shareholder value. The thesis is that companies too often use faulty or outdated structures to guide them in this pursuit and they should instead formulate and follow something the author calls a Corporate Theory of Value Creation. Although I don’t fully agree with all the preconditions that Zenger sets up the solutions he proposes are still largely correct.

The book is structured in three parts and seven chapters. Part one spanning the first 100 pages introduces and describes the author’s Corporate Theory and why it is needed. The other parts and the remaining 80 pages are mainly concerned with how companies – with their Corporate Theory at hand – should through organizational design, strategic focus, asset allocation, investment choices, acquisitions and divestments etc. link together the assets of a company, in a broad sense, to create value. “The leader’s task in a dynamic design is to identify and select the proper sequence of programs, initiatives or structures.”

However, to take one step back, Zenger starts by claiming that companies are too stuck in an antiquated view of strategy as formulated by Michael Porter in his classic Competitive Advantage - hence, the name of this book. What we are moving beyond is not the need to have competitive advantages as such but an old formulation of what corporate strategy to use. Porter’s approach to strategy is that a company should position itself in a valuable market niche where it through some means can have a competitive advantage and then work to fortify its moats in this market segment.

Now, the purpose of a corporation is to create shareholder value and in Zenger’s view this positioning type of strategy framework is too static to be able to create the continuous growth in value that shareholders demand. Instead the company should take a more adaptive and fluid trial-and-error approach. But without a beacon to guide these trials they risk becoming a value destroying random walk. Enter the author’s Corporate Theory of Value Creation defined as “a logic that managers repeatedly use to identify from among a vast array of possible asset, activity, and resource combinations those complementary bundles that are likely to be value crating for the firm.”

The theory that must be unique for the specific company can for example relate to an advantage in solving a set of customer problems, in exploiting a set of assets, a privileged position in gaining synergies from M&A etc. The observant reader could object that this doesn’t sound much different from the means that Porter would list in gaining a competitive advantage and they would be correct in this. However, Zenger’s Corporate Theory must also give a view on future development, on synergies between corporate activities and an insight on which assets that fit the company and by all this function as a tool to take the company forward into the future. It is a type of fact-based belief on how the company can create value that over time will help the management prioritize.

I agree on the need of a beacon and the book is not bad but it is quite lightweight, a tad ivory tower academic and there is a lot I don’t agree with. First, I don’t think companies are at all as trapped in Porter’s models that Zenger portrays. Secondly, while I agree on the corporate purpose of creating shareholder value it is a fundamental mistake to equalize this with the current share price. Further, the author advocates a corporate design oscillating between centralization and decentralization to over time optimize the combination of efficiency and innovation. I think there is an obvious risk that a firm by this never gets the compounding momentum that is needed for large-scale success.

The author in my view gives the right prescription but I don’t fully agree with all of the analysis done beforehand.

Mats Larsson, November 4 2018

[Matthew Wilcox · Rating 5 out of 5]

Excellent book that is concise in addressing how companies can grow with value! Quick read that covers the topic well. Should be on every bookshelf for those in business!

[Jason Smith · Rating 3 out of 5]

I read this as part of Dr. Zenger's course on corporate strategy. His course lectures were very much like the book; a conversational, yet academic, approach to corporate strategy. There are a lot of case references to support his theories.

[Amith Guthi · Rating 4 out of 5]

It goes beyond business strategy theory with fresh insights to modern day challenges.

[Jennae · Rating 3 out of 5]

I read this for my MBA and for a school book it was pretty good.

[Coleman Klein · Rating 4 out of 5]

Covers several interesting topics but more examples would have helped here and there.

[Jeremy Cox · Rating 5 out of 5]

This was my second time through this book, and Dr. Zenger's ideas stood out more clearly this time around. Think about an ideology by which a business operates can generate more long-term value than constructing a specific business plan that generates profit in excess of competitors in the current.

[Scott Hazleton · Rating 4 out of 5]

Great read for current and aspiring leaders. A few of my takeaways:
- Start with a theory
- Foresight, Cross-sight, Insight
- “Strategy cannot be reduced to reaction” - it inherently provides direction.
- Uniqueness is key
- Four types of theories
- Three questions in choosing a relationship strategy (knowledge, uniqueness, measurement)
- Strategic leader perform three key roles

[David McAllister · Rating 5 out of 5]

Great, insightful book. Very good use of business cases.

[Dhanush V · Rating 4 out of 5]

Simple and Enlightening