Cumulative Advantage

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Cumulative Advantage

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Publication Date:
January 01, 2017

Why do companies routinely succumb to the lure of rebranding? Because, say A.G. Lafley and Roger L. Martin, the authors of “Customer Loyalty Is Overrated,” they believe they must continually update their business models, strategies, and communications to respond to the explosion of consumer options. Research suggests that what makes competitive advantage truly sustainable is helping consumers avoid having to make a choice. They pick the lead-ing product in the market primarily because that’s the easiest thing. And each time they do so, its advantage increases over that of the products they didn’t choose, creating what the authors call “cumulative advantage.” They offer guidance for building it. A Counterpoint: In “Old Habits Die Hard, but They Do Die,” Rita Gunther McGrath argues that although the theory of cumulative advantage makes sense in predictable industries, habits can shift. Consider how Dollar Shave Club’s subscription model snatched market share from Gillette. Executives, McGrath says, must balance the power of cumulative advantage with the need to refresh their approach. One tactic is to leverage a company’s core capabilities, but in a new format. The better executives become at understanding the motivations behind unconscious choices, the more likely they are to build habitual behavior in their customers–and the more likely they are to see how habits might change. Two Company Strategies: Jorgen Vig Knudstorp, cochairman of the LEGO Brand Group, built his company’s cumulative advantage by mining the emotional connection that so many people have with the colorful blocks. “If you can make your brand a value–a part of someone’s identity–you have a really powerful competitive advantage,” he says. Intuit chairman Scott Cook attributes much of his company’s success to the decision to design Quicken, Intuit’s personal-finance software, to work like a checkbook. As he puts it, Quicken “lets people hold on to their habits.”

Copyright © 2020 Harvard Business School Publishing. All rights reserved. Harvard Business Publishing is an affiliate of Harvard Business School.

Cumulative Advantage

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