In today’s world the competition amongst companies within the same industry or sometimes even across industry boundaries is rough. New businesses are constantly born and they want to get their share of the wallet. There are many books and articles that will provide guidelines, how to improve your business concept and gain advantage from the competitors. Being innovative is a common factor in all of the books and it is the basis of any development process. However, there are also other similarities and certain concepts seem to appear whenever the change strategies are concerned. Are the following paths keys to your company’s success?
Change is constant, create your own future!
Nowadays the business world changes rapidly. Not a step by step, but leaping ahead by breaking the rules. Gary Hamel tells in his book “Leading the Revolution” about finding the passion to be an activist in your own organisation. By this he means finding (and constantly evolving) one’s own enthusiasm to not just forecast the future, but to imagine and actually find means to create it. To survive this change, companies must re-create their business models continuously. This means adapting new development methods throughout the organisation and involving its stake holders.
In history, revolutions don’t start from the top; they start from the lower ranks. To succeed on the market, an organisation must be innovating and sharing ideas from the operating level to the top management and its customers. Hamel tells in his book how new business models don’t just replace the old ones, but open completely new opportunities. So many successful companies don’t focus on their competition but their own vision, causes and competence.
Why to be open to innovation?
Open innovation together with a services approach to business is an effective way to compete in today’s business environment. The father of “Open Innovation” Henry Chesbrough defines open innovation as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation” (Chesbrough 2006, 1). In other words, companies should open up their innovation process to get the best ideas and technologies from others for their own business model, and let others use their innovations. They should be more open in order to be more innovative.
It’s hard for competitors to copy the innovation, because it is based on tacit knowledge. If the customers are included into the innovation process, they will be more loyal to the company. It will bring greater value for them and competitive advantage for the company. The best solution could be to create a business platform, on top of which others can build their services, attracting more and more customers and making it more and more profitable for you. Good example of such a platform is Apple. Apple is very good at hardware design and knows the crucial role of services they provide, but the biggest and most sustainable competitive advantage that Apple has over others is the iOS services ecosystem.
Is co-creation your business advantage?
One of the emerging trends in modern successful businesses is being closely tied with its customers, letting them teach you what they want. A contemporary term for such close cooperation is co-creation. The essence of co-creation according to C.K. Prahalad and V. Ramaswamy in their book “The Future of Competition…” is arranged into four main ideas of dialogue, access, risk assessment and transparency. In order to have a dialogue there needs to be a common interest (like a need for some product or service and the possibility to provide such), a forum for the discussion (like a blog) and the rules of conduct to make the dialogue constructive, say the authors. Nowadays, the customers are demanding the access to experiences, not ownership of some physical products. Challenging the old way of thinking that one should own something to be able to use it. Risks also need to be addressed beforehand, because costs of damage to the consumer can be very high. Transparency as a part of the customer experience may mean the difference between winning and losing a customer, if a business fails to create trust in its communication. Thus, co-creation provides a setting for success-oriented innovative entrepreneurs for developing a loyal, active and evolving customer base.
How do you facilitate change?
Every company struggles with their vision and strategy in some point of their lifecycle. Traditional strategy making is based on chess master-like foresight to see moves ahead, as well as detailed understanding and some control of the corporation’s environment. Steven Steinhilber, Corporate Vice President Strategic Alliances at Cisco compares change in strategic thinking to competing in Olympic Games. In the past you trained and picked to compete in a race that fit you, but…
“Today you enter a race which you believe fits you, but after the first lap you are told this is not 400 meters but 5000 meters, and you go out of the stadium… and you ﬁnd someone new racing alongside, who just tells you: “It looked like an interesting race going by, so I just joined”. Everything is unpredictable.”
Fast Strategy by Yves Doz & Mikko Kosonen
There are, however, a lot of examples of successful strategy and business model changes. Ford Company revolutionized the industry with Model T product line, changing their concept regarding core strategy, recourses and networking. Even it was 100 years ago those principles did not change till today. HP created a business concept for individuals. They realized that solution for companies, which their competitor Xerox provided, did not reflect private customers’ needs. Nowadays no one is imagining having at home computer without printer.C. K. Prahalad and Venkat Ramaswamy in The Future of Competition tell that knowledge must be organized around communities of practice, not in administrative or organization silos. This is in line with IBM “Integrated Operating Teams” concept introduced by the old CEO, Sam Palmisano, who gathers high potentials in the organization to solve the most important issues bothering the company.
Before mentioned Apple went even further by co-strategizing; their key to success was sharing ideas and scenarios by networking with stakeholders and partners. Henry Chesbrough thinks “these concepts together provide the path away from commodity trap”. Surviving the change in business world could happen by innovative co-creation and on-going transformation of business models.
Post by Ekaterina Zhiteneva, Lauri Kuljus, Jenni Aranko, Teija Hakaoja & Daniel Augustyn
Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant by W. Chan Kim & Renée Mauborgne
Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life by Gary Hamel
Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era by Henry Chesbrough
The Future of Competition: Co-Creating Unique Value With Customers by C.K. Prahalad and Venkat Ramaswamy
Fast Strategy: How Strategic Agility Will Help You Stay Ahead of the Game by Prof Yves Doz and Mikko Kosonen