Producing sustainable competitive advantage
Academy of Management Executive, 2005, Vol. 19, No. 4
Reprinted from 1995, Vol. 9, No. 1
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Producing sustainable competitive advantage through the effective management of people*
Jeffrey Pfeffer
Executive Overview
Achieving competitive success through people involves fundamentally altering how we think about the workforce and the employment relationship. It means achieving success by working with people, not by replacing them or limiting the scope of their activities. It entails seeing the workforce as a source of strategic advantage, not just as a cost to be minimized or avoided. Firms that take this different perspective are often able to successfully outmaneuver and outperform their rivals.
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Suppose that in 1972, someone asked you to pick the five companies that would provide the greatest return to stockholders over the next 20 years. And suppose that you had access to books on competitive success that were not even written. How would you approach your assignment? In order to earn tremendous economic returns, the companies you picked should have some sustainable competitive advantage, something that 1) distinguishes them from their competitors, 2) provides positive economic benefits, and 3) is not readily duplicated.
Conventional wisdom then (and even now) would have you begin by selecting the right industries. After all, “not all industries offer equal opportunity for sustained profitability, and the inherent profitability of its industry is one essential ingredient in determining the profitability of a firm.”1 According to Michael Porter’s now famous framework, the five fundamental
Reprinted from 1995, Vol. 9, No. 1
........................................................................................................................................................................
Producing sustainable competitive advantage through the effective management of people*
Jeffrey Pfeffer
Executive Overview
Achieving competitive success through people involves fundamentally altering how we think about the workforce and the employment relationship. It means achieving success by working with people, not by replacing them or limiting the scope of their activities. It entails seeing the workforce as a source of strategic advantage, not just as a cost to be minimized or avoided. Firms that take this different perspective are often able to successfully outmaneuver and outperform their rivals.
........................................................................................................................................................................
Suppose that in 1972, someone asked you to pick the five companies that would provide the greatest return to stockholders over the next 20 years. And suppose that you had access to books on competitive success that were not even written. How would you approach your assignment? In order to earn tremendous economic returns, the companies you picked should have some sustainable competitive advantage, something that 1) distinguishes them from their competitors, 2) provides positive economic benefits, and 3) is not readily duplicated.
Conventional wisdom then (and even now) would have you begin by selecting the right industries. After all, “not all industries offer equal opportunity for sustained profitability, and the inherent profitability of its industry is one essential ingredient in determining the profitability of a firm.”1 According to Michael Porter’s now famous framework, the five fundamental