Sustainable competitive advantage : towards a dynamic resource-based strategy

This paper introduces the concept of strategic advantage and distinguishes it from competitive advantage. This concept helps to explain the full nature of sustainable competitive advantage through uncovering the dynamics of resource-based strategy. A new classification of resources emerges, demonstrating that rents are more relevant than profits in the analysis of sustainable competitive advantage. Introduction The search for sustainable competitive advantage has been the dominant theme in the study of strategy for many years (Bain, 1956; Kay, 1994; Porter, 1980). The “resourcebased view” has recently found favour as making a key contribution to developing and delivering competitive advantage. Within this context, the concept of “core competence” is being presented as a ready-made solution to many, if not all, competitive shortcomings permeating organisations (Collis and Montgomery, 1995; Prahalad and Hamel, 1990). Both the concept of sustainable competitive advantage and the resource-based view, however, limit organisations in understanding the full nature and dynamics of strategy for the following reasons: • Sustainable competitive advantage is a journey and not a destination – it is like tomorrow which is inescapable but never arrives. Sustainable competitive advantage only becomes meaningful when this journey is experienced. For most organisations, however, the problem is how to identify where the journey lies. In fast-moving competitive environments, the nature of the journey itself keeps changing in an unpredictable fashion. As a result, the process of identifying the journey presents the main challenge. • The resource-based view strives to identify and nurture those resources that enable organisations to develop competitive advantage. The primary focus of such an analysis, however, is on the existing resources which are treated as being largely static and unchanging. The problem is that dynamic environments ceaselessly call for a new generation of resources as the context constantly shifts. Given the above considerations, organisations often fail to exploit fully the potential of both the concept of sustainable competitive advantage and the resource-based view. To reverse this situation, it is necessary to develop the competitive advantage and the resources of an organisation as a dynamic concept. This calls for rediscovering sustainable competitive advantage through exploring its origins, together with the processes that make it happen. For this purpose it is first necessary to make explicit what is meant by the terms “sustainability” and “competitive advantage” and then raise the following philosophical and practical questions: • Can the terms “sustainability” and “competitive advantage”, which can be argued to serve different purposes, be brought together in the name of unity of interest? • Is such a unity real or a discursive, aimless marriage? • Can sustainable competitive advantage assume a shared meaning for those who want to make it happen? These questions sound simple but the answers are quite difficult because the purpose of an organisation can potentially be twofold. First, the organisation has to focus on its existing resources in exploiting existing business opportunities. Second, the organisation has to develop, at the same time, a new generation of resources in order to sustain its competitiveness. There is therefore a need to balance living and unborn resources. This balance, which determines the effectiveness of strategy, is achieved when organisations succeed in marrying sustainability and competitive advantage in a way that it does not become a marriage of convenience. Competitive advantage and sustainability: the missing link The term “competitive advantage” has traditionally been described in terms of the attributes and resources of an organisation that allow it to outperform others in the same industry or product market (Christensen and Fahey, 1984; Kay, 1994; Porter, 1980). In contrast, the term “sustainable” considers the protection such attributes and resources have to offer over some usually undefined period of time into the future for the organisation to maintain its competitiveness. Within this context, “sustainable” can assume a number of meanings depending on the frame of reference through which it is viewed. It can be interpreted to mean endurable, defensible,