Successfully Ride Waves of Transient Competitive Advantages

Abstract

This chapter, mainly based on Forrest and Nightingale (2017), establishes a specific set of procedural steps for any firm to transit smoothly and successfully into the era of fast strategic changes while the firm’s once sustainable competitive advantages have become transient. To accomplish this goal, this chapter bases its reasoning on the established result of when new competitions will naturally appear within an established market and why competitions within any business organization always exist inevitably. By combining with published conclusions derived on anecdotal analyses and inductive reasoning, this chapter advances the systemic reasons for why a list of time-honored steps will practically work so that firms can successfully surf through waves of transient competitive advantages with improving performance.

Appendix: Technical Details

The proof of Proposition 6.1

By contradiction, consider a fully efficient organization that satisfies given condition, where the organization’s mission is not in total agreement with the personal value of employee k. Let Y be a variable measuring one aspect of employee k’s personal value such that

$$ {U}_k={U}_k\left({X}_k,Y\right), $$

(6.1)

satisfying

$$ \frac{\partial {U}_k}{\partial {X}_k}>0\kern0.5em \mathrm{and}\kern0.5em \frac{\partial {U}_k}{\partial Y}>0 $$

where U_k is the utility of k, X_k the total consumption of k, and the production function of the organization is

$$ P=P\left({X}_c,{U}_k,\dots \right), $$

(6.2)

satisfying

$$ \frac{\partial P}{\partial {X}_c}>0,\kern0.5em \frac{\partial P}{\partial {U}_k}>0,\kern0.5em \dots $$

where X_c represents the expenditure of the organization except that spent on k and the dots all the utilities of all other employees. The monetary bonus that measures the work efficiency of k is expressed by

$$ {h}_k={h}_k(Y), $$

(6.3)

satisfying

$$ \frac{dh_k}{dY}<0. $$

In real life, although this variable Y might only exist implicitly and cannot be measured readily, its negative effect on the quality and efficiency generally can be clearly seen. So, we simply assume without loss of generality that Y can be measured in determining the monetary bonus. The organization’s resources are distributed to its employees to maximize its production function P in Eq. (6.2) subject to the following constraint:

$$ {X}_c+{X}_k={X}_c+\left({I}_k+{h}_k\right), $$

(6.4)

where I_k is k’s income from his work at the organization. Maximizing the production function in Eq. (6.2) subject to the constraint in Eq. (6.4) leads to the contradiction:

$$ \partial {X}_k/\partial Y>0\kern0.5em \mathrm{and}\kern0.5em \partial {X}_k/\partial Y={dh}_k/ dY<0. $$

That implies that the assumption that the organization that satisfies the conditions of the proposition is fully efficient is incorrect. QED