Renewable Advantage by Jeffrey Williams

Author:Jeffrey Williams
Language: eng
Format: epub
Publisher: Free Press

Endowments

Endowments can be the basis for success but they are not based on systematic steps taken to renew advantage. Endowments are not created through an organization’s systematic actions. Instead, endowment-based capabilities are handed down by virtue of some market factor or consequence outside of managers’ control. Although managers are not capable of creating endowments they are responsible for recognizing and acting on them.

Mellon Bank had an advantage in back-room check processing through access to a stable Pittsburgh labor force. This endowment helped when competing against Citibank in New York, where the labor force is more expensive and less stable. This advantage influenced an attempted merger between Mellon Bank and the Bank of New York that could have moved check processing from New York to Pittsburgh. So we see that endowments are not assets that managers can cause to come into existence, nor can they take credit for them. But endowments can be exploited to the extent that managers recognize them and competitors cannot gain access to them.

The distinction between skills and endowments matters importantly for renewal opportunities. Advantage based on endowments, because it is outside the control of the organization, is generally difficult to replicate. Thus, endowments are harder to extend forward, beyond the region of past success. The reason, again, is that endowments cannot be replaced at the will of managers. Thus, insofar as this is true in a particular case, managers should be alert to the extent to which renewal plans are based on endowment-based strategies that may have hidden growth barriers associated with them.

To what extent is your success based on endowments? Are you relying on advantages that can or can not be extended forward? Can they be built upon to sustain growth or will success be limited to your current customers?

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