Summary | Rethinking Competitive Advantage: New Rules for the Digital Age — Ram Charan
Many of us have experienced greater convenience using digital platforms. These digital platforms have enabled us for lower price, greater convenience, and instant access to relevant information. Digitalization have changed our experience as consumers and employees.
Creating competitive advantage is different in the digital age. In the digital age. Competitive advantage is the ability to win the ultimate price the consumer prefers, repeatedly through continuous innovation on behalf of the consumer to create immense value for shareholders. Core competencies have a self-life. They become obsolete and new ones have to be built. Today due to information availability in abundance, the consumer takes the call.
Roadblocks to moving into Digital
1. An overreliance to outdated theories
2. A dominant psychology of incrementalism and short term thinking
3. A blind spot when it comes to customers
4. Acceptance of existing boundaries
5. Belief in mass markets and segmentations
New Rules of Competition
# 1. A personalized consumer experience is key for exponentiation growth.
The digital companies imagine a 100X market space that does not yet exist. Digital giant’s relentlessly focus on consumer’s total experience end and work backwardly. They operate with the mind-set of Market of One — M=1, is the ultimate personalization. Technology is important, but the ultimate focus is on the consumer. Mapping the customer journey is emerging as distinct expertise. It involves breaking apart all of the interactions and decisions steps a consumer goes through from first exposure to an idea or recognition of a need through to what happens after the person makes a purchase. Leaders in the digital age takes on a stiffer but more exhilarating challenge.
# 2. Algorithms and Data are essential weapons
The digital platforms are built using algorithms and data that collects and analyses various customer experiences and behaviors. Each algorithm is a simpler sequence of steps for solving a problem. The ability to personalize an end-to-end consumer experience creates market space of 100x. A digital platform is also key to exponential growth. Standardization of data will eliminate lot fo the waste in record keeping and combined with algorithms can detect fraudulent billings Technology, logistics/ distribution and customer experience are the key pillars for digital growth.
#3. A company does not compete, its ecosystem does.
The ecosystem accelerates the growth. In digital age, competitive advantage goes to those who build ecosystem or network that leverages digital technology for the benefits of the consumers and paves the way to multiple streams of revenue. Ecosystem are never permanent, because the work is moving at such a ferocious speed, technology changes continue to accelerate and consumer expectations, continuously evolve finding new partnerships.
# 4. Moneymaking is geared for huge cash generation, not earnings per share, and the new law of increasing returns.
# 5. People culture and work design form a social engine that drive innovation and execution personalized for each customer.
Most digital companies operate with as few as three or four organizational layers. The digital companies recognize that structure goes lonely so far and that success ultimately depends upon the quality of its people. Technology plays a key role in giving people greater freedom to do their work. Technology makes real time data transparent, but still the organization depends upon people to knit the pieces together on a daily basis. Decision-making is designed for innovation & speed.
# 6. Their leaders drive learning, reinvention and execution.
Leaders continuously learn, imagine and breakthrough obstacles to create the change that other companies must contend with.