Defensibility doesn't last forever

I grew up on the school of thinking that says a company needs a defensible advantage to be successful. Something that makes it hard for others to copy it. This is part of what makes a natural (or unnatural) monopoly, which if you listen to Peter Thiel, is the only thing that matters. For more info on Peter Thiel's thinking, see this WSJ interview below or read his book, "Zero to One".

However, more recently, a more pragmatic examination of history reveals that even the best companies - ones with huge defensible advantages - have succumbed to the acceleration of change that compounding technological change has brought.

And so, defensible advantages TODAY might not be defensible tomorrow when the landscape shifts.

Think about Microsoft and Apple and Samsung in more recent industry and how they had to continually adjust. Apple embraced this in the 2000s by self-cannibalising the iPod with the iPhone. Microsoft's dominant Windows OS position was threatened when the advent of smartphones arrived but not using Windows. They have had to adjust to a world where they are the software that sits on the platform:

Hence, on reflection, what is needed is not just a business with a defensible advantage, but instead one that can continually transform itself, building defensible advantages every time the landscape shifts (which it will do, repeatedly).

In Edward Tse's book, "China's Disruptors: How Alibaba, Xiami, Tencent, and Other Companies are changing the Rules of Business", the CEO of Haier Group, Zhang Ruimin, said,

"Companies can no longer think about establishing a defensible position for themselves and their products; instead, they can only think of creating the means to transform themselves over and over again."

For info if you aren't aware of Haier group, they are the biggest White Goods brand in the world (think Washing Machines and Fridges) and $29.2B revenue (2016).

Re-invention and experimentation are critical parts of the DNA of a business that will be able to succeed in this accelerating world. In fact, the monopoly advantage of TODAY may hinder your tomorrow by making it harder to invest in things that will cannibalise your current advantage or open up the possibility that tomorrow might look different than today. But whether or not companies embrace the fact or not, change is coming. And very rarely are companies able to hold on to any defensive edges when the pace of interactivity, computing power and intelligence is reshaping our world decade after decade.