Businesses built on capital and equipment are easy to imitate. Adding advanced technology to the mix does not widen the gap by much.
At least when a platform business — one where the first mover's lock-in effect takes hold — forms a full ecosystem, it can create a decisive edge and sustain it for a considerable time. Even then, companies often grow complacent within that advantage and find themselves displaced by a new platform ecosystem before long. Others fall behind simply because their capacity for innovation cannot keep pace with the speed of obsolescence.
The trait experts most consistently rank as the primary condition for a decisive competitive edge is "rapid adaptability to a changing environment" — in other words, the ability to make decisions quickly and to mobilize and deploy resources at speed. This is the product of flexibility and dynamism built up over time through experience. Creativity and innovation, experts say, serve as powerful supporting forces behind it.
When that adaptability is systematized into accumulated knowledge, experience and capability — that is, into know-how — a genuine competitive advantage emerges. The edge gained this way widens the gap with rivals progressively, and it applies across industries without exception.
Particularly when an economic crisis strikes, that difference grows sharply. It makes overtaking, substitution and even imitation difficult for competitors. As long as a company stays alert to strategies of circumvention and leapfrogging, it can hold its dominant position for a long time. The mechanism, experts note, mirrors the logic of natural selection — the survival of the fittest through the mutation and inheritance of traits adapted to the environment.
Nearly all of this comes down to human resources. The problem, however, is that truly top creative talent is in short supply.
The practical answer, then, is to secure a large pool of capable people who bring the right attitudes and character. If learned and developed skills and competencies are added on top of that, so much the better. Only the growth of people, the thinking goes, can grow an organization and expand its lead over competitors.
These elements must be steadily executed under a clear mission, vision and strategy, with active feedback loops in place. Strong leadership and vigorous communication must also underpin the whole effort.
Beyond these, a culture of mutual consideration, encouragement of action and tolerance of failure, and well-designed incentive mechanisms are also cited as necessary conditions for building and sustaining a decisive edge. Embedding these qualities in an organization, it is said, requires insight drawn from social psychology. Ultimately, conflict management is the core of it all.
Meanwhile, there is a counterargument that an overwhelming competitive edge can itself be dangerous. Entry barriers that are too high — in organizational culture, technology and know-how — can end up trapping the leader as well.
The concern is that a company can lose sight of the strategies its rivals are pursuing. A distance at which tension is maintained and the competition remains observable — close enough to keep watch — may actually be the less dangerous position.
freiheit@heraldcorp.com
