Competitive dynamics are shifting and the rules for success and failure are being rewritten across almost every industry and every business function. Exciting new innovative business models are emerging every day and you don’t have to be a fresh upstart to be a leading innovator. A recent study by Fast Company on the most innovative companies for 2013 shows that established companies Nike, Amazon, Safaricom and Target (the latter was founded over 110 years ago!), make up part of the Top 10 most innovative companies. However, the study also reveals that being legacy free helps as six relative newbies: Square; Splunk, Fab, Uber, Sproxil and Pinterest; capture the other top ten places and in doing so lay claim to the accolades that go with being a leading and successfully disruptive company.
These top ten innovative companies have two things in common; an overwhelming desire to disrupt their competitors by re-imagining the ways things are done and, they are also guided and driven by leaders who come from what we at TomorrowToday call the Connection Generation.
The Connection Generation is a cohort of innovation vanguards and change agents. As a rule of thumb, they were born sometime from the mid to late 1980’s until the early 2000’s and subsequently lived their adolescent years after 1995 growing up just as personal computers started to become ubiquitous in everyday life. This generation has been connected, communicating, content-centric, computerised, community-oriented, and continually clicking since they can remember. However, being a member of the Connection Generation is attitudinal factor rather than entirely age related, as we shall see later.
Astute companies are recognising the importance of creating a workplace that attracts and inspires talented members of the Connection Generation. By 2020, across the United States, Europe and the BRIC countries, this generation will make up 40 percent of the population and by then, they will constitute the largest single cohort of consumers and employees worldwide.
Business leaders take note, this generation is already rewriting the rules for success and failure and will be one of the greatest forces for disruption and empowerment the world of work has ever known. They are unhindered by preconceived notions of how things should be done, and their digitised view of the world ensures that they can imagine entirely new ways of doing things. We predict that this generation will drive changes in the world of work that will have as far reaching an impact as the industrial revolution had 200 years ago.
To support this claim we share with you, in Part 1 of this two series article, how the rules for competitive advantage have changed and why. In Part 2 we show why these changes in competitive advantage play naturally into the hands of the Connection Generation and in doing so we also provide you with a framework and new business script for building a competitive advantage in an era of turbulent change.
The Future of Competitive Advantage
Competitive advantage is an evolutionary force, constantly adapting and morphing. What once was ahead of the curve becomes engulfed and overtaken as new better ways of doing things emerge. This does not mean that what led to an erstwhile competitive advantage becomes irrelevant. Rather past advantages become “hygiene factors” still important to the proper functioning but no longer a source of sustainable advantage. A way to understand today’s competitive advantage – and for many it will strategically be ‘tomorrow’s competitive advantage’, is to ‘go back to the future’. By tracing what constituted competitive advantage through a succession of economic eras, we are able to see the evolution of what remains central to business success.
What follows now is a charge through 100,000 years of human history viewed through a lens of economic eras and what constituted competitive advantage in each of the eras examined. Naturally this represents a very generalised overview; nonetheless there are valuable insights to be gained for future success through undertaking such a journey.
Competitive Advantage over the Ages: The Hunter-gather era
The hunter-gather era, a period constituting approximately 90% of the estimated 100,000 years of human history was dominated by nomadic or tribal lifestyles. Experience was essential to both survival and the transfer of knowledge through story-telling was critical. Elders were the leaders within the tribe as their stories stretched back the furthest. Remembering was revered, as it was essential to survival. Tribes that gained competitive advantage were those that were best adept at ‘focus’. Being focused on the finding and securing the best shelter and optimum places to hunt and gather food were the tribes and tribal leaders who were most successful.
The disruptive revolution that occurred and profoundly changed the rules of the game was the ability to domesticate animals and the invention of the plough. Out of this disruptive revolution emerged the Agrarian Society.
Competitive Advantage during the Agrarian Society
It was approximately 10 000 years ago that agriculture emerged leading to a change in the way life was lived. The plough, the advent of animal husbandry and the invention of the watermill, all led to an increase in available energy. In essence muscle power was replaced by this ability to harness animal-power and nature. The nomadic nature of tribal live gave way to permanent homesteads that combined both life and work.
Competitive advantage during the Agrarian Society was forged by those who had ownership and were able to extract more than others from their main asset – their land. Competitive advantage thus shifted to those who not only had focus but also owned and had access to the best land.
The next disruptive revolution occurred with the invention of the steam engine and the industrialised printing press heralding the start of the Industrial Revolution in Britain around 1750.
Competitive advantage during the Industrial Revolution
Innovations such as the steam engine revolutionised nearly every aspect of life and led to rapid urbanisation. Factories emerged and work became organised. Industrialists observed how entrepreneurs were making money and taking the business models that worked, industrialists polished these models and perfected them, drove down costs, built efficiencies, and managed risks to gain a march on the competition.
No where is this better demonstrated than by the production line assembly system. Most of us know the famous quote attributed to Henry Ford saying: Any customer can have a car painted any colour that he wants so long as it is black. But why black, why not green or red? The answer is found in the obsession of industrialists and their pursuit of extreme efficiency. Black absorbs light more readily than any other colour and therefore it dries the quickest. On a production line where shaving minutes off production time meant more vehicles off the production line, then having the most efficient paint ultimately created more profit. The endless and often ruthless pursuit of greater business efficiencies resulted in competitive advantage during the Industrial Revolution.
The evolutionary cycle of competitive advantage continued into the Industrial Revolution and during this era, the advantages of previous eras: focus and access to assets, became hygiene factors, still important, but no longer sufficient for achieving competitive advantage. Business efficiencies became the new normal for achieving competitive advantage.
The next disruptive and revolutionary force occurred in the 1960s with the arrival of technologies that elevated our ability to access and store information, heralding the start of the Information Era.
Competitive advantage during the Information Era
The Information economy has grown exponentially with the rapid and pervasive technological innovations that have occurred. Omnipresent telecommunications, 24/7 TV channels, personal computers and mobile phones being the obvious examples. In this economy, competitive advantage can no longer be found solely in ensuring greater business efficiencies. As with all the other economies, when the transition occurs, the old factor that secured a competitive advantage becomes a hygiene factor. It moves from being the distinguishing feature to merely a necessity in what constitutes competitive advantage. In the Information economy competitive advantage is found in the ability to extract relevant information and use that information to create a strategic advantage. We call it ‘business intelligence’.
Having the data though is not enough, to gain competitive advantage one has to show it and use it is ways that people both understand and find useful. The movement of information across the business become critically important and often hindered by the previously efficient organisational silo models created by industrialist model. As competitive dynamics shifted in the information era, the ability to rapidly share relevant and useful information across boundaries and globally, created a distinct advantage. Those companies that mastered the flow of information gained the advantage.
This now brings us to the present time and the disruptive revolution that is occurring all around us, is our increasing ability to use information real time, on the go, 24/7/365 and in a social context. The rapid advance of social, smart and mobile technologies, combined with increasing broadband speeds, infinite storage space in the Cloud and computer processing speeds: that now mean many of the things we once dreamt of doing are within reach or already happening (self-driving cars, 3D printers, Internet of Things for example) mean that the rules for success and failure have changed again.
The source of competitive advantage today and in the near future will be defined by how well businesses connect, collaborate and communicate. – In essence competitive advantage now stems from our ability to forge strong relationships and connections with the people important to our community, business and tribe.
The Information economy is giving way to the emergent ‘next economy’ that we in TomorrowToday have tagged the, ‘Connection Economy’.
Competitive Advantage in the Connection Economy
The new economic era has also commonly been referred to as the ‘relationship economy’, the ‘experience economy’ and even the ‘dream society’ (Rolf Jensen). It really does not matter what descriptive title you ascribe to it – the point is that once again the rules of the game are shifting and with that, what constitutes competitive advantage.
It is a shift that is an extension of the use of technology to not merely extract business data but to be used for personal connection. It is the emergence of social technologies (Facebook, LinkedIn, Twitter etc) that connects people and are used to initiate, develop and establish personal relationships.
The Connection Economy is being played out against the backdrop of a ‘changing of the guard’ within both the workforce and leadership domains within organisations. Essentially it is a clash between Boomers and older Gen X (who could at best be described as ‘digital immigrants’) and younger Gen X and Gen Y (‘digital natives’) and it is on the battleground of this generational ‘war’ where it is easiest to see the emergence of the Connection Economy.
In the Connection Economy, competitive advantage shifts to the ability to form meaningful, emotional connections and relationships. In the context of access to information, personal choice and competitive pricing, the question of ‘why buy your product or engage your service?’ becomes ever more narrow. The decisive criteria in that decision comes down to that of personal ‘connection’: I want to do business with you because I like you, trust you, I believe in your cause, your values – we have a relationship. It is that simple, it is that complicated.
Competitive advantage in the Connection Economy will pass to those who understand the fundamental shift taking place and what it means for their own business, leadership thinking and practice. The term ‘authentic leadership’ is making its appearance with ever increasing frequency. The currency for success in the Connection Economy is: Transparency, Authenticity, Generosity, Friendship, Creativity and Trust – currencies that cost driven, efficiency-focused industrialists would never get.
If you live work and play in an industry dominated by an industrialist management mindset, then here is the collective opportunity and the threat: The opportunity – your industry and business is ripe for disruption and the forces of empowerment and change are at your door. The threat – if you are not doing the disrupting you are in danger of being the one who is disrupted. One of the best questions your leadership team, in fact everyone in your business should be asking right now are: How can we make ourselves obsolete? It’s a question your competition wants to answer, perhaps even competitors you don’t even know you have.
There is an important final point to make in this section of Part 1: As business and society has transitioned between each economic era, the competitive advantages of the past era has become a “hygiene factor” still important to the proper functioning but no longer a source of sustainable advantage. For example: Focus, assets, business efficiency and data – the competitive advantages of previous economic eras – are still important for success in the Connection Economy, but today these are increasingly only minimum requirements for competitiveness. To succeed in the Connection Economy business leaders are required to up their game and create authentic relationships with the tribes who choose to engage with their business. The key words today are Choice, Permission and Relationships. The bar has once again been raised adding further complexity to business success. Those leaders that recognise this shift and act first will gain competitive advantage in the Connection Economy
Building Competitive Advantage in the Connection Economy
The ability to transition from one economic era to the next is fundamental to continued and sustained business success. Few manage to achieve this yet, in a world of increasing complexity and ubiquitous and unrelenting change, the need for such is beyond debate. Smart leaders get this and understand the need to build adaptability and nimbleness into the very DNA of their organization.
In part 2 of this two part series exploring how to build competitive advantage we explore how the “Connection Generation” is the key to creating competitive advantage in the Connection Economy. Using our in-depth Strategic Insights we’ve created a framework that explains the key elements of this new business script. It’s a script that enables leaders to rewrite their future, build a better business and attract and retain the very best talented people and most valuable customers from the Connection Generation. We look forward to sharing these insights in our next newsletter.
Part of this article covering competitive advantage over the ages has been adapted from a more comprehensive study undertaken by International Partner Keith Coats and his assistance and insights are greatly appreciated. If you are interesting in reading more about the evolution of competitive advantage please click here