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TECH TALK: Good Books: The Only Sustainable Edge

November 23rd, 2005 · No Comments

From Jared Diamonds treatise on how civilizations collapse, we come to something more directly relevant to each on us: how can we make our companies more successful. John Hagel and John Seely Browns book The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization provides some answers. The book has the following introduction:

Many firms have used outsourcing and offshoring to shave costs and reduce operating expenses. But as opportunities for innovation and growth migrate to the peripheries of companies, industries, and the global economy, efficiency will no longer be enough to sustain competitive advantage.

In Your Next Business Strategy, renowned business thinkers John Hagel and John Seely Brown argue that the only sustainable advantage in the future will come from an institutional capacity to work closely with other highly specialized firms to get better faster. Enabled by the emergence of global process networks, firms will undergo a three-stage transformation: deepening specialization within firms; mobilizing best-in-class capabilities across enterprises; and, ultimately, accelerating learning across broad networks of enterprises.

Hagel and Seely Brown discuss the strategic levers that will accelerate this migration, and they outline a new approach to strategy development that will help companies capture this shifting source of strategic advantage.

Calling for a forceful reinvention of business strategy and the very nature of the firm itself, this bold and forward-looking book reveals what every company must do today to become tomorrows market leader.

Here is an excerpt from the book: When customers demand more and control more, a company cannot rely solely on its own capabilities, no matter how distinct. Similarly, a company will struggle to mobilize outside resources unless it can offer exceptional capabilities in return. After all, the best enterprises receive so many proposals to collaborate that they will likely form partnerships only with whoever provides truly compelling, unique value. And so the real strategic power comes when a company integrates and extends these two schools of thought, amplifying the value of its distinctive internal capabilities by creatively and aggressively harnessing complementary capabilities from other companies.

Hagel and Brown add in an interview with HBS Working Knowledge:

Q: Can you tell us what that sustainable edge is?

A: We make the case that getting better faster by working with others is the only sustainable edge. Structural advantages are eroding rapidly. Distinctive capabilities provide temporary advantage, but unless they are aggressively refreshed through rapid incremental innovation, they will be rapidly overtaken by other, more aggressive competitors. Relative capability is no longer the key strategic metric; it is the relative pace of capability building.

We also take to heart [Sun Microsystems co-founder] Bill Joy’s observation that “there are always more smart people outside your company than within it.” So, if you are serious about accelerating capability building, you will need to focus on the edge of your enterprise and learn how to work more effectively with business partners in ways that help you to get better faster.

Q: Li & Fung, headquartered in Hong Kong and with a network of 7,500 business partners, is clearly an example of a company you admire. What about its strategic focus do you see as cutting edge?

A: Li & Fung is one of the most innovative companies in leveraging the capabilities of specialized business partners on a global scale to add more value to its customers. It has organized a highly flexible global process network that orchestrates activities on a truly end-to-end basis, from the sourcing of fibers to the delivery of finished apparel to retail distribution centers around the world, to create customized supply chains for each item of apparel. These relationships are loosely coupled, so that partners can be quickly brought in and out of specific apparel manufacturing assignments.

At the same time, Li & Fung has invested considerable effort to build shared meaning and trust among its partners, based in part on the potential for rapid capability building, so that it can more effectively collaborate with its partners.

John Hagel also has a blog that is a great read.

Tomorrow: Big Bang


TECH TALK Good Books+T

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