The Ultimate Competitive Advantage

Authors: Donald Mitchell and Carol Coles

Reviewed by Theresa Welsh

This book gives business advice that seems simple and obvious, but goes beyond the superficial in providing many examples of how it’s actually done. The simple secret Mitchell and Coles tell us is that if we want to succeed in business, we must constantly improve our business model. This appears to be just another way of saying “if you keep on doing the same old thing, you’ll soon be out of business.” Many consultants have warned us about the ever-changing landscape of doing business in the global economy, but Mitchell and Coles turn change into a virtue. You stay one step ahead by always having a new business model ready to trot out when your competitors catch up to your last innovation.

What I liked about their approach is that it stresses bringing benefit to all stakeholders: customers, employees, shareholders, and communities. Instead of just finding ways to lower costs, they show how some companies search out ways to lower costs while providing a better service or product to their customers. They say companies should look beyond their immediate customer to their customer’s customer and ask: How can everyone gain? Many companies look only at bottom-line savings when making a change. One example that comes to my mind is companies that decide to outsource their customer support call center. Most do this in order to achieve cost savings and free up company employees for other work so they can concentrate on new products. However, customers who call for support find themselves talking to low-paid contract workers whose responses are scripted. The support workers are isolated from the rest of the company and have none of the benefits of company employees. The best workers tend to quit because they have no opportunity to suggest ways to better serve customers, and the work offers no promotional path. In this case (and outsourcing is very popular these days), did the company truly gain any advantage? Such companies are not considering the interests of all stakeholders, as the authors suggest.

The authors make the case that companies should listen to employees and to customers for ideas. They point out how companies that seek only to look more profitable for shareholders can come to a bad end. The poster child company for greed over substance is Enron, which disguised its debt and misled employees when its once-innovative deals began to sink. The dishonest dealings of its officers caused great harm to employees, suppliers and the community that relied on Enron for jobs. When any business begins to falter because it no longer has an advantage over its competitors, the answer is to move on to the next business model and create a new advantage that leads to new, honestly-gained profits. 

Of course saying the company should move to a new business model and finding the right new business model are two different things. Sometimes companies find their entire business is based on a technology they pioneered, but which is headed for obsolescence. One such example is Polaroid, which made cameras based on the fabulous work of its founder, Dr. Edmund Land. The company kept for itself exclusive use of its photo technology, and had a virtual monopoly on instant pictures with its Polaroid cameras. But faster photo processing and finally digital cameras made its product less attractive. This is a company that needed to move beyond the instant-picture technology that was its trademark. The company made some efforts at change, producing some digital cameras and appealing to new customers (teens) with their small Izod cameras. But it remains to be seen whether Polaroid can move even faster out of yesterday’s products into something that could provide an advantage in the rapidly changing world of photography. In a company so rooted in one kind of product, making this leap would certainly be a bold and difficult thing to do. Or to use an old worn-out example, what should a company making buggy whips in 1900 have done?

Mitchell and Coles say a company should not wait until their position is eroding to search out new business models. Instead, continually work on business model improvement. Larger companies need to test new business models but small companies are more agile and can sometimes quickly get the information they need to move to a new way of doing business. Throughout the book, the authors use the example of a childrens’ lemonade stand. They suggest ways the children can offer a new service (chairs so customers don’t have to stand), alter their product (add iced tea or other beverage), or provide more for less (offer a family price, or weekly rate). I enjoyed their examples of very small businesses, like Ray Hughes, the golf caddy, and Michael Cagliandro, the barber. These people who worked at modest professions found ways to please customers while adding services and building successful and satisfying businesses.  The authors also profile Frank Lloyd Wright, whose bold architectural ideas took him from a one-man shop designing homes for ordinary people to running a firm that created important public buildings like the Guggenheim Museum in New York City. But it was his vision of making better living and working spaces for everyone that led him to constantly innovate new ways to serve the public.

If I have a problem with the advice in this book, it’s that identifying all the consequences of a business model change can be near impossible, especially for very large companies. How many manager can think beyond a change that merely cuts cost to one that cuts costs AND provides a benefit to all stakeholders? Most corporate managers are heavily focused on their immediate financial position or their own spot in the company hierarchy. Big companies have cadres of such managers who must buy into change, and who then must sell the change to thousands of employees. They may not even consider effects on their suppliers because they are used to having smaller companies eager to do business with them. Big companies are used to dictating terms to suppliers, and most corporate managers would have to make a big shift in their thinking to start caring about how their actions affect other companies that supply them with parts and services. These same managers often also fail to listen to their employees, and if they use contract workers, they treat them like commodities, and do not bother to tap insights and skills of these non-employees. 

Big multi-national companies wield enormous power in the world, and their executives can easily become arrogant and fail to see a need to listen to employees and suppliers, or to care about how their actions affect communities. Companies that gain a virtual  monopoly in one area (think Microsoft) may also take the position that customers will have to buy  whatever new product they create or pay whatever price they charge. Even Mitchell and Coles suggest finding the advantage your competitor can't duplicate. But then that particular strategy did not save Polaroid when totally new technology came along to reduce demand for their exclusive product. 

Like most good business advice, the ideas in this book require study and thought to see how they might apply to a specific business. I found that reading this book did put my thought processes into high gear and the many examples from real companies and real people were valuable. Doing what the authors suggest is not simple, but the concept of constantly working on your business model to find the next level of benefit for all stakeholders is very useful and can potentially be applied to every type of business from lemonade stand to multi-national corporation. Anyone who wants to be successful in business could learn something from reading The Ultimate Competitive Advantage.

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