Three way to Develop Competitive Advantage in New Age.

In nutshell, Strategy is all about gaining sustainable competitive advantage. This competitive advantage is what creates value for the organisation to maintain its sustainable profits year on year basis. Normally this competitive advantage is gained over the competitors who are offering similar product in same competitive market. But creating the Competitive advantage is not easy as all the players have similar assessment of external market/ environment which is based upon 3rd party independent market research . So when all the players have similar findings of " What Customer wants" then competitive advantage is more about the harnessing the "Internal Environment" and less about "External Environment". Aim is to maximize the fit of my internal Environment/ Capabilities to harness the External Environment ( Opportunity). Following are the three ways of developing Competitive Advantage or ways to maximize my "Internal Environment".

Think differentiation not in product but in business model - At times too much focus on adding additional feature for creating differentiation is lost battle. Often, we stuck into small items and misses out at the unexplored options in the Business Model itself such as Revenue Generation Mechanism, Product/ Service Offering, Peace of Mind of customer, and added advantage of owning the brand. For this Innovation workshop to be crafted to identify opportunities to create differentiation for which buyer would be ready to pay. This innovation can be in product, Customer service, user interface, convenience , Supply Chain, Manufacturing or out of the box design. All areas are to be explored.  Google's competitive advantage over Microsoft is of business model not of product/ Service.

  

Focus on Strategic Human Resource: This is the most trickiest part of creating competitive advantage. Competitive advantage is created first in mind of employee before it comes on paper and finally in the learning systems of organisation. Identify these critical resources, Nurturing them and providing them resources ( Environment) is one of the major function of Top Management. These Strategic Human resources are pillar of Innovative organisation, as they are from different fields such as researcher, Designer, Engineering, Business Strategy, Marketing, Sales and Service. Here decisive action is identifying the motivating factor of these employees, which is very unique to each individual. This unique addressal of aspirations of these Strategic Human Resources is quint essential for the innovative Organisation. Apple's competitive advantage is out of the sheer passion of few individuals.

Diversify the risk: Often focus on creating competitive advantage channelize organisation's energy/ resources on profit generating products/ services. This leads to unpreparedness for unnoticed changes happening in consumer preferences, regulation and other market forces. So Diversify the competitive advantage , distinct from the previous in unexplored territory and completely unique. This might be in exploratory/ research phase or less profitable generating phase. This diversification is very critical competitive advantage. End of KODAK is good example of inability to de-risk the business from digital photography.

These three items are very essential to develop true competitive advantage , in turn preparing successful strategy for the organisation. 

2 Reasons Why we could not see the Slow Down

Recent ongoing slow down in economy is because of  reasons, some are structural while others are cyclical.But following two reasons are distinct and profound and gives insight into why we could not gauge the Current Economic slow down.

1. Minimization is not always optimization: Increased length of Value chain: To reduce the cost, manufacturers are sourcing the sub components from far off places. Distributional channels are spread across geographies. The last nod of value chain is delivery , which is only focused about delivering the product at doorstep of the customers. This value chain has become so long that any feedback from the customer  to manufacturer, reaches very late. and by the time we know we have produced surplus, which feels like knee jerk reaction to the sales team. 

2. Face Less Business- Diminishing interactions with Customers Interaction between the supply side and demand side is becoming near to NIL. Thanks to AI/ Digital world/ Whatsapp/ Online purchase. Here technology is tracking everything about the transaction but it is not noticing anything about interaction. It went to what part but could not track why part. Technology was not meant for interactions so it just did what it was suppose to do- The tracking. This is the reason dealers/ retailers could read the mind of the customer as purchases were happening online and there was no mechanism to understand the customer's mind, his anxieties, his fear, and above all his sentiments of purchase.

Summary and way forward

These are two important reasons, which should not be ignored. We must reflect upon our business models to streamline the feedback mechanism in "Large Value Chains" and "Increase the personal interaction between the retailers and customers". Digitization and Technology must support the purchase but not replace the human interaction.  

3 Important Perspective before Defining your Business

Entrepreneurship is often result of sheer passion of an Individual  or group of Individuals. It starts with an idea which takes the form of business with Individual's immense energy, focus and true spirit of making difference in the world. The journey starts with problem finding and ends with finding the solution for that problem. Identifying the problem is easier part while solution in the form of Business Model is difficult part because this solution must be innovative, cost effective and sustainable.

Business Model has many aspects to it ,At the nascent stage of Business  Model Formulation, if following three perspectives ( 3P Framework) are taken it would definitely help in building right capabilities and Scaling up the business in the long run/ future.

Periphery: What business we are  ?

Often this is described narrowly in terms of Solution to some problem. Many firms which were very successful initially are not able to achieve the height of greatness mainly because of the non clarity of the purpose. It is very Important we focus on the bigger picture of the firms's existence. Car Business is too narrow as compare to MOBILITY Solutions. Similarly Mobile Business should be replaced with Communication Business and Movie making business should be replaced with Entertainment business. So this purpose define the focus point which has potential for the expansion in future.

Process: How you are doing ?

Business Model is mainly about this process of creating sustainable Value for the firm. How you are meeting the purpose should be clearly communicated in terms of Value creation, whether it will be done as Manufacturer, Trader, Product aggregator, Platform provider or combination of these. This process of value creation can be Soft ( Design/ Ideas/ Innovation/ Strategy/ Planning) or hard ( Manufacturer/ Trader/ SCM etc.) or even combination of the two. This understanding of the process or Value chain entities where firm is operating is critical because other planning and processes  are dependent Upon it. It also determines the vulnerability of the business as risk taking entity.

Performance :What is the Social impact/ Outcome ?

True Business outcome does not lies in balance Sheets. True outcomes gets imprint in the minds of the customers, which in its totality is reflected in terms of Social impact. For an exmaple- Invention of Bulb, its Social Impact is far beyond the narrow measure of Quarterly financial results of the Bulb making firm. Focus should be on how Humans are getting impacted by it.  The foremost measure the Business Outcome is judged by Which of customer's need / latent desire is getting fulfilled ?

Summary

Even before starting the business, this 3P Framework can truly form the foundation of "Concept of the Business". This framework is about the Human connect of the Business, where it finds purpose in the Mind of Customer  as problem, and firm adopts an approach to address the problem , the result of which can be measured by Performance in terms of the Social impact firm is making in terms of Happiness Quotient of Customers.