Building Sustainable Competitive Advantage in a Networked Economy

Sustainable Competitive Advantage

One of the most fundamental pillars of any successful strategy is an organizations ability to create and sustain a competitive advantage, create a niche, business practice, product, service that only is a differentiator for the organization in the market.

Some organizations use patents, some use product design (Apple), some use their ability to innovate and come up with new market categories (Uber, 3M, Proctor & Gamble), some use their ability to manage cost (SouthWest Airlines), some use their scale of operation& Gamble, Colgate), some use their customer focus (Amazon, Zappos, Ritz Carlton), some use a combination of these (Coca Cola) to build & sustain their competitive advantage.

If you notice all of these traits upon which sustainable competitive advantage is built are internal to each of these organizations. So, if there is a challenger in each of these categories who want to go after these organizations, they can still go after them using these very strengths, without their baggage and they have a good chance to pose a serious threat to these organizations and many organizations are actually using this to grow big and challenge incumbents in their respective categories.

Add to this, the amount of venture capital available for start-ups who want to go after the incumbents is staggering, to say the least. The fast paced change in the business environment is not helping either.

Death of Sustainable Competitive Advantage as we know it?

All of this has led to a lot of people believing that the era of building a sustainable competitive advantages is gone by. Hence the plethora of blogs, books that herald the death of competitive advantage as we know it. These posts talk about sustainable competitive advantage becoming a transient competitive advantage due to the rapid changes in the business environment and the ability of competitors to mirror the advantage in a short span.

Creating Business Networks to Build Sustainable Competitive Advantage:

In my opinion, there is still a lot of different ways that organizations can build sustainable competitive advantage, that can last a long time. One such option is to compete as a network-of-organizations rather than as a single organization.

What do I mean by this? You do not compete with your competitor alone. You compete as a network. The entire network moves and competes as a single entity.

This calls for a very different kind of organization and leadership. Some key aspects that can lead to such a Business network are:

• A mindset shift among the network, where the entire network is focused on one thing only – Helping the end customer happy by fulfilling his need profitably.
• This necessitates the need for a single version of truth for the entire network, which means that the flow of information among the various organizations in the network needs to be, real-time and complete.
• In order to be able to achieve this, there needs to be alignment among all the participants around all the business processes.
• Once you have aligned the business processes and the information flow, the most critical thing that remains to be done is to nurture leaders within these organizations who continue to believe in the vision and at the same time are connected with the reality of the business environment and continuous dialogue among these budding leaders and the existing leadership.

Is this fantasy or Real?

I know that this seems to be the stuff of fantasy world rather than real world, as organizations still struggle with basic challenges like silos in their own organization, not enough engagement within the walls of the organization and many such challenges. To expect them to be able to pull off something like this seems to be a big ask.

You are right. This is not easy. However, this is exactly what makes this a good option to build sustainable competitive advantage for all the participants.

Factors that could make this a Reality

This is possible today as there are

• Technologies which can enable such networks already in place.
• The need to build a sustainable competitive advantage is strong
• the next generation workforce will find this idea of cross-organization collaboration native to their psyche as they would have grown up in an environment where you share everything with their network and hence this would come naturally to them.
• The socio-politic-economic environment today is also conducive for such a network to thrive.

Already there are examples where organizations have started exploring such cross-organization collaboration, albiet in a very small and in an experimental way.

• Google’s collaboration with Nestle to release their software under the brand Kit-Kat is one such example.
• Procter and Gamble’s Connect & Develop program is another such experiment.

These are small collaboration that tested waters.

I surely hope to see a much deeper level of cross-organization collaboration (fundamental building block for the Business Network as a Sustainable Competitive advantage strategy) sooner than later.

What do you think?

These are my opinions. What do you think? Is such a business network possible? Do you know of such a network already in place? Do share your thoughts and lets continue to take this discussion further. Its time we re-thought how businesses should compete with each other.

To learn more about the Networked Economy, you could join the conversation at http://futureofbusiness.sap.com/networked-economy.

This post first appeared on SAP Business Trends and is re-published here with permission.