So we've been discussing how to analyze capabilities, and in particular, we've been focusing on how to think about the sustainability of any competitive advantage you might have. We've discussed imitability in our last session. Now we're gonna discuss durability. So, what do we mean by a durability? Simply, we mean can you maintain the capabilities over time? Will they, in essence, degrade or become obsolete? Now, why would a capability degrade or it become not durable? Well, we can think of a number of challenges to durability. First of all, think about human capital. For example, consider Michael Jordan, arguably the greatest basketball player of all time. Michael Jordan played for the Chicago Bulls in the 1990s and brought them to six championships in the NBA. Arguably, Michael Jordan was a valuable asset to the Chicago Bulls that provided them a competitive advantage. Well, what happened? Well, as it happens to all of us, eventually his skills started to degrade. And, as you can imagine, today he is probably not as valuable an asset to a professional basketball team than he was in 1995. That asset degraded over time. You can think of other human assets, Herb Kelleher, the CEO of Southwest Airlines who was there for many, many decades. Eventually, he stepped down and retired. There was great concerns whether the organization would be able to continue without him at their leadership. More recently, the tragic loss of Steve Jobs. Many questioning whether Apple would be able to continue on without him at the helm as CEO. Not only human assets, but physical assets can degrade as well. When we think about manufacturing equipment, any type of physical machinery, all of that tends to degrade over time. And a question would be, can you maintain it or upgrade it as you go forward? A second thing to consider here, sometimes those things that are most core to us, that provide us competitive advantage, might actually become what we call a core rigidity over time. The idea here is that that success that you had actually breeds complacency. You might become more risk adverse, you might become more myopic, and as a result, what made you successful ends up being your cause of your defeat later on. General Motors, for years the leader in US car manufacturing, was very hesitant for decades to believe that Japanese manufacturers, such as Toyota and Honda, were actually a competitive threat to them. And one could argue that bred some complacency that then lead them to some financial troubles in more recent years. A third thing to consider is that the valuable capabilities you have today may simply be obsolete tomorrow. We've discussed Kodak before. Manufactures, leading manufactures of film then find themselves in a digital world, and those capabilities are no longer valued as they were. We can go back to the Swiss watch industry in the 1960s. Swiss watch makers, the best in the world at making mechanized watches here, the old wind up type of watches. What happened? The advent of Quartz technology caused a major disruption in the industry. You had entry by Japanese manufacturers, such as Casio, and suddenly, the Swiss manufacturers found themselves on the ropes in terms of global market demand and market share. Now, as you can imagine, they've made a big comeback in terms of styling and the like, but for a while there, their core capability of mechanization wasn't relevant in a digital world. Fourth, some assets may be more valuable to others and thus are worth selling. Now, this is somewhat counter-intuitive to a lot of people here. If I have a valuable asset, shouldn't I just hold on to that? Maybe yes. Maybe no. Look at professional soccer. Futball, as we call it. There are those players who are, in essence, traded or rented out for a while to another team. The argument here is that those players might be worth more to that other team, at least in the short run, than they are to the team that owns them. Perhaps it’s because the rest of the players on the team aren’t very good and that team isn’t going anywhere, so they'll rent that player out to a team who has a better shot of winning the playoffs and winning a championship. So this idea that an asset, even if it provides competitive advantage, might not be durable because you would actually be willing to sell it to another player here. So again, durability is a critical factor when thinking about the sustainability of competitive advantage, and you have to ask yourself whether these capabilities we've identified can persist moving in to the future.
