Don Kurz on why defensible strategy must adapt. Four pillars to screen for flexible moats and avoid the horse-and-buggy trap in your portfolio.
Most investors search for moats. Wide ones, deep ones, brand moats, cost moats. They want defenses that competitors cannot touch. That focus misses the bigger risk: a moat that never bends is a trap.
Don Kurz, former CEO of EMAK Worldwide and currently executive board chair at Omelet LLC, makes a sharp counterpoint in a recent article on defensible strategy. His central idea cuts directly into equity analysis. A strategy is only defensible if it can absorb change. The same test applies to the stocks on your watchlist.
"The ultimate hallmark of a defensible strategy is that it's adaptable to the inevitability of change."
Kurz uses a classic illustration. Horse-and-buggy manufacturers defined themselves by the buggy. When automobiles appeared, they did not shift. They got replaced.
"If there's a better way to provide that solution, you should be indifferent to how you provide it."
For a public company, that logic reveals the biggest single risk: defining the business by its product, not by the problem it solves. Blockbuster defined itself by video rental. Netflix defined itself by home entertainment. Same problem, different solution. One is dead. The other is a $200B business.
The mechanism repeats across every sector. A car company that thinks it is in the car business misses the mobility-as-a-service shift. A bank that thinks it is in the branch business misses the fintech wave. An ad agency that thinks it is in the TV spot business misses the programmatic and AI changes. Kurz's own firm, Omelet, operates in an advertising industry he calls "undergoing a lot of change and consolidation because of AI." His survival question: "Why does the world need our company?" That is the same question an analyst must ask about every portfolio holding.
Kurz lays out four keys to ensuring a company has a defensible strategy. Each translates directly into stock screening criteria.
"My biggest strength is recruiting good people, letting them have a real say, and then creating an environment to let the magic happen."
For a public company, talent depth shows up in retention rates, succession depth, and the quality of middle management. A CEO who holds all strategic IP in their head is a single-departure risk. A company with a deep bench can adapt faster because it does not need the founder to rewrite the playbook each time the market shifts.
What to look for: Search earnings call transcripts for references to talent density and internal promotion. Compare R&D headcount growth against revenue growth. Headcount flat while revenue grows 15% could signal leverage. It could also signal burnout and a thinning bench. Read the 10-K's executive succession section. If it is boilerplate, the board is not thinking hard about the next generation.
"The best thing about devising a defensible strategy for your business is that you don't have to do it all by yourself."
Kurz curates strategy from his management team's ideas. He blends diverse perspectives. That is a governance advantage. In public markets, a CEO who genuinely listens to internal dissent is rare. The ones who do – think Satya Nadella at Microsoft or Jamie Dimon at JPMorgan – tend to pivot early and avoid large strategic errors.
What to look for: Read the proxy statement for director tenure and background diversity. A board filled with retired CEOs from the same industry is not a diversity of perspective. Check the risk factors section of the 10-K. Generic copy-paste risk disclosures suggest the board is not actively thinking about change.
This pillar is the direct application of the horse-and-buggy rule. Kurz says "don't define your business by your product or process." For a stock, the test is simple: look at where the company invests its capital. If it still pours money into a legacy technology platform, it is defining itself by its product. If it builds for the new delivery method, even at the expense of current margins, that is adaptability.
What to look for: Examine the IRR on recent capital projects. Read the R&D footnote in the 10-K to see how much spending goes to new platforms versus maintenance of old ones. NVIDIA shifted from gaming GPUs to data center accelerators long before the AI boom. That is solution-definition at work.
"An advantage can be squandered if you don't have the grit to do the hard work of maximizing it."
Kurz is talking about execution. A great strategy that is not executed is just a document. For a stock, execution shows up in operational metrics: days sales outstanding, inventory turns, cost of goods sold relative to peers, and the ability to hit guidance ranges.
What to look for: A company that consistently beats its own guidance by a narrow margin is executing. One that beats by a mile once and then misses is gambling. Consistency in operations is a sign of a culture that does not coast on past success. Compare the company's operating margin stability against sector peers over a five-year period.
Kurz identifies several defensible advantage types. Each carries a different adaptability risk profile.
Check these signals before adding a position.
Kurz adds a counterbalance: "stay true to your brand identity." Adaptability does not mean random pivoting. The best players keep the core identity intact while changing the delivery mechanism.
Amazon has stayed consistent in its mission – "Earth's most customer-centric company." It moved from books to everything to cloud to logistics. The identity stayed; the products changed.
The risk check: When a company announces a big pivot, ask whether the move is consistent with its stated mission. A mining company suddenly calling itself a biotech firm is desperation, not adaptation. A software company shifting from on-premise to cloud is adaptation.
Next time you evaluate a stock, do not just ask "Is the moat wide enough?" Ask "Is the moat flexible enough?"
Start with the four pillars:
Then check the confirming signals. A company scoring low on adaptability but high on static moat is a candidate for a staged exit. One scoring high on both is a position to add to on weakness.
Kurz's final line wraps it up: "The key to winning in the long run is to curate a good strategy, execute it flawlessly, bend with the times, and stay true to your brand identity."
Winning in stocks follows the same path. Find companies with a defensible strategy that can bend before they break. Those are the names that survive the disruption cycle.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.