There are many sources of competitive advantage. Size is one - large companies can do things that smaller ones cannot, whether you're Wal-mart, Home Depot, or General Motors.
Installed base is another - just ask Microsoft. In retail, location is the killer competitive advantage. And access to capital, distribution networks, supply chains, R&D, and timing have all have been proven effective at creating advantage at one time or another.
But in each and every case, a one-time competitive advantage is not sustainable. It does not endure beyond the cycle of one market structure. When the market structure shifts, the advantage is often lost. Numerous companies have failed to recognize this simple fact, and have failed to adapt to changing conditions, and have consequently driven themselves into the ground.
The only way a competitive advantage of any kind can be made to sustain is through innovation.
This might logically lead you to ask how we define innovation. In our view, innovation is improvement in the value that a company offers to its customers, or reduction in the cost of delivering value to customers.
Some innovations
are small, or incremental. We call these "continuous innovations." Others
are major breakthroughs that create ruptures of one kind or another. These
we call "discontinuous innovations," "breakthrough innovations," or "game
changing innovations." Both continuous and discontinuous innovation are
important and necessary to the long term survival of any firm and to the
preservation of competitive advantage no matter what form it originally
developed. 
We recently published a book about discontinuous innovation entitled "4th Generation R&D: Managing Knowledge, Technology, and Innovation" and we're continue to research this issue in conjunction with the Ackoff Centerof the University of Pennsylvania.
Now you know why we say that innovation alone creates sustainable competitive advantage. We welcome your feedback on this, and on anything else we've said on our web site. Please contact us at: info@innovationlabs.com
