The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model

Authors Donald Mitchell and Carol Coles conducted a ten-year study of companies that had grown the fastest over a three-year period. Their research reveals that while unsuccessful companies doggedly apply outdated business models, the successful ones improve their models every two to four years.

The Ultimate Competitive Advantage provides a straightforward, systematic method any company can use to review and improve its business model and each of its key components: pricing, costs of doing business, and benefits added. Dozens of concrete examples from companies of all sizes and types are provided.

Centuries pass from the time an important idea is first expressed to its widespread implementation. For example, universal literacy and education were advocated after the printing press was invented. Their broadscale application did not begin until the latter half of the nineteenth century. Even today, these basics are not observed in all countries. Businesses didn't begin to study how to systematically improve until the twentieth century. Today, most ways to improve are ignored in more businesses than they are used. That's because a business can focus on only a few things. You need simpler, more effective ways to improve.

The most fundamental concept of progress is that of continual learning. Yet business has been slow to pick up on that concept, and applies it sporadically. Most organizations only look to learn how to do better what they did poorly yesterday that isn't very important tomorrow. For example, endless studies will go into fine-tuning a mass production line, when the company really needs to learn how to make better, customized products inexpensively. That's like stooping to pick up a penny while a hundred dollar bill rolls by unnoticed. Instead, you need to work on what will help you and your stakeholders the most -- continually improving their business models, finding ways to be better prepared for unexpected future events and enhancing their highest potential performance areas. Most companies totally ignore these three areas. It's no wonder that so many companies briefly prosper before withering.

Our purpose in writing this book, and others in this series, is to redirect the perception of what must be done to lead and operate a successful business or organization. We believe that you and your colleagues have the knowledge and skills to achieve vastly more. You have observed how to accomplish everything you need to do in some other area of your life, but have not yet applied those observations to the most important areas of your business. You, your organization and your stakeholders (including but limited to customers, end users, employees, partners, suppliers, distributors, lenders, shareholders, the communities in which you operate and the parts of society that you impact) simply need to apply your knowledge and those skills in new ways and more often. New questions raised in this book will help shift your focus into more productive directions.

The Ultimate Competitive Advantage is the third volume in Mitchell and Company's library of business books designed to improve organizational performance. Like the prior two books, The 2,000 Percent Solution (AMACOM, 1999) and The Irresistible Growth Enterprise (Stylus, 2000), this volume can be understood and employed independently. At the same time, the skills and perspectives developed in each volume are also designed to be complementary.

Beginning in 1992 and continuing through 2002, we sought to find the simplest, most effective management methods that the most successful companies used since 1992 to continually outperform competitors. We hoped to find these methods by tracking and studying top performing companies while they thought of and made the changes that created these competitive achievements. That kind of real-time measurement and study of creating competitive advantages across many different industries has never been done before.

Prior strategic studies have attempted to look backward at the causes of today's success in earlier periods and then tried to describe all of the elements of creating that best performance after the fact. In such backward looks, cause and effect can easily be confused in the process since many changes are only coincidentally associated with each other. Afterwards, memories fade and those who tell their stories may be more interested in enhancing their roles than in accurately describing what worked and what didn't.

Those prior approaches also unintentionally missed two critical points. First, management effectiveness in outperforming competitors reached a higher level in the 1990s than had been seen before through a new managment practice, continuing business model innovation. As a result, studying what people did prior to the 1990s is of limited usefulness in understanding the current gold standard in creating and improving lasting competitive advantages. Second, the management process behind improving performance across many aspects of a company was often kept secret during the 1990s and since then by those who practiced continuing business model innovation. Only if you looked in the right places while this innovation was going on could you find how this practice was flourishing.

As a result of these unintended limitations of prior published strategic studies, much of what you have learned about creating competitive advantages is of less value now compared to what you are about to read about the state-of-the-art and potential of continual business model innovation.

The message of The Ultimate Competitive Advantage is to develop and implement a superior strategy that continually improves an organization's business model -- its ways of serving customers and outperforming competitors, as well as fairly rewarding all stakeholders. This book is designed to help you plan, start and invest in new businesses; turn start-ups into seasoned operations; turnaround problem businesses; move from a weak position to industry leadership; and build from industry leadership into expanding the scope, growth and profitability of the industry. Most of the companies described in this book were start-ups under the current CEO within the past twenty-five years. Students and young people developing business careers can learn important leadership and management principles and responsibilities from the many examples we present between these covers. Readers will benefit by employing the strategic management process described in the book. Specific questions about your business at the end of each chapter and examples may stimulate useful thinking and help inspire progress.

Donald Mitchell and Carol Coles, Boston, 2003