Nearly all the people with a business background (which is pretty much everyone: from professionals to craftsmen) talk about business strategy. Some define strategy from Michael Porter’s perspective and some have a hybrid theory coming from the many academics that started writing about it after Porter wrote his famous books in the 1980s. Strategy was based in a competitive advantage a firm will get from a unique combination of resources that corresponded to the environment in which it was located. Then there was an information revolution and suddenly tons of data about our environment was available to us, this made firms evolve in strategy and structure. Then the information revolution democratized (to use the term loosely) the access to information, not only making it available to big firms, but to small ones and individuals. Information everywhere lead to people making more strategic decisions and being aware of how weak some competitive advantages were. Some businesses competitive advantage was based solely on their advertising budget.
Times changed and one would expect that business would change with it. Indeed business started to adopt changes slowly, first introducing an IT department and then letting the structure shift in order to be ready for the huge changes on information management that were coming. Many organizational theories emerged and the organization gained “support” groups such as IT and legal advice, outsourced many things and became leaner. All changed, later some businesses introduced departments with fancy names such as “Strategic Management of Information Department” with sole purpose of concentrating the data analysis and administration in order to keep the firm up to date and running smoothly.
Other things didn’t change. The most important of those things was the idea that competitive advantage was going to be sustainable in the long run using the old rules of business. Some of the laws protecting competitive advantages come form the 18th century, some of these ones won’t work any more. But, lawmakers and lobbyists started to harden the security to the house instead of building a new one. As information became more open the competitive advantage based on information asymmetry started to disappear. The internet as a democratizer of access to information made many old business models die and firms had to shift to survive. The problem with this is that they sift to survive, not to win again the “business game”. New businesses still depend on old models as the change is taking place. They’re are slowly changing, but yet maintaining their generic strategies for the new “models” they find. Many of them still support their gross revenues in the old business model and are failing to apply a bit of futurology in order to be one step ahead of change.
Information access has also changed many personal habits. It it’s less likely that employees will accept the conditions they were offered 20 years ago. Now employees want the ability to work from home, tailor their own schedules and get different kinds of benefits. Seeing this science conducted many studies and made many programs by which employees could gain more control over their work. Daniel Pink showed us a bit of that on his TED talk.
All those things changed and we still think we can find a sustainable competitive advantage as we did in the 1980s. Many historians agree that the change in this last 30 years has been faster than any process of change made previously. That’s obvious if we believe that as humans we are accelerating constantly. Organizations can’t find a competitive advantage in access to relevant information, they now must base it on better interpretation of the data and since users are becoming capable of doing that the sustainability of that model is in question as well.
The new businesses should be based on constant change and adding value in specific ways to the customer, even when that requires developing something that seems inconsistent with the “strategy” you are following. Instead of focusing on organizational goals it’s time to focus on the goals of our customers and start to develop our strategy to fit their needs. New businesses need to personalize themselves, that means gain a personality. It’s simple we’ve been defining competitive advantage as what we can do better than the competition. The truth is that we’re heading towards a world where we can do just the same thing the competition does. Therefore, competitive advantage will stop being based in what we do better (because we don’t know for how long it’ll last) and will be based on how we adapt to what consumers want, give them excellent service and provide them with more control.
The 20th Century and the first decade of the 21st were ruled by companies feeling their customers where lazy people wanting everything done for them. I have a personal theory that has that as the main cause of obesity in many countries. The end of the first last decade and this decade will bring a revolution in the consumer side. And it will require businesses that no longer base their strategy on competitive advantage, but on competitive caring. Take for example Telcos, they provide the same service with the same quality and are competing in who offers one Mb/s more of internet connection or more gifts to the user. Traditional Telcos are becoming a commodity and they are not switching to think on their customers experience as the key to their sustainability. If you’ve watched enough ads you’ll see that telcos tell you: “we have more coverage”, “we give you a free backpack”….no one tells you “we don’t suck at costumer service”. The latter is where the new strategy lays on. The competitive advantage is not in the technical features of the product or the cost effectiveness, because every improvement that could be made it has already been made by everybody. Whether it’s six sigma, JIT or whatever acronym we can come out with, it’s already done and if it’s new it’ll be implemented by everybody in less than a year.
So the competitive advantage will be in the ability to change quickly and adapt to consumer needs. Consumer expectations drive markets today, everything else is plain vanilla in the business environment. Given that, organizational structure gets a special place in making firms able to compete. Many CEO and boards of directors are lazy as we see organizational charts stay static when the environment requires a more flexible organization that is able to mold to what customers expect from them. I haven’t seen many models out there that incorporate the new social technologies and environmental concerns to the competitive advantage definition and organizational structure creation.
In a fast changing world, we need to re-define all of that. Many companies have already done this, some are flexible from their inception, while others are slow movers. How do you see the competitive advantage form in the next decade?