advantage thinking

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Advantage thinking is thinking and activities that build the strategic thinking competency to find and define a competitive advantage. Competitive advantage is both adaptive and evolutionary advantage - more than adapting to the environment by shaping the environment to your advantage while ethically doing good. The following segments present views of how this is achieved.

Stretching strategic thinking (Abraham, 2005) --
Strategy implies competing and outwitting competitors. This requires management to think about different and better ways of competing, delivering customer value, and growing. Strategic thinking is about coming up with alternative viable strategies or business models that deliver customer value.

Five approaches to conceiving of and producing advantage are described --

  1. being successfully different -- Either find a way to play a different game than anyone else is playing OR play the same game others are playing but play it differently. Differently means some form of differentiation by being better or different in respects valued by customers - quality, features, performance, reliability, ease of use, stronger, simpler, faster, smaller, or better looking.
  2. emulating entrepreneurs --
    • see opportunity everywhere
    • look beyond the conventional
    • view dissatisfaction from the customer's point of view
    • come up with opportunities before you need to
    • have a robust repeatable process for creating and nurturing new growth business

  3. finding new opportunities --
    • develop continuous opportunity finding mechanisms
    • perform continual idea generation
    • perform continual proposal generation and screening
    • ask opportunity seeking questions --
      • What other type of customer could benefit from our product, even if used in a different way?
      • What other products or ancillary services could we produce for the same customers?
      • What other products could we produce, for any customers, that use the skills, techniques, technologies, and know-how that we have?
      • Is there a way of reinventing our business model that would give us a competitive edge?
      • What unmet needs do people or companies have that we could meet, even if it means acquiring the necessary know-how and expertise?
      • What are the highest-growth industries now and in the foreseeable future that we might enter?

  4. being future oriented -- One useful method is scenario planning. It is a rigorous externally facilitated process that requires significant commitment, but is highly education and helps management to hone, direct, or change their thinking. Scenario learning principles are as follows (Fahey, 2003) --
    • Scenarios are only a means to an end. They have value only to the extent that they inform decision-makers and influence decision-making. Scenarios cannot be allowed to become irrelevant to the key issues facing the company and the decisions corporate leaders must contemplate and make.
    • Scenarios only add value to decision making when managers and others use them to systematically shape questions about the present and the future, and to guide how they go about answering them.
    • In each step of developing scenarios, the emphasis must be on identifying, challenging, and refining the substance of managers' mindsets and knowledge-what lies between their ears-and not on refining and perfecting scenario content.
    • Alternative projections about some future must challenge managers' current mental models by creating tension about ideas, hypotheses, perspectives, and assumptions.
    • The dialog and discussion spawned by considering alternative futures directly affects man-agers' tacit knowledge.
    • Scenarios are not a one-time event. They generate indicators that allow managers to track how the future is evolving. Thus, learning induced by scenarios never ends.

    See scenario planning, scenario learning, and scenario thinking.

  5. being collaborative -- The bottom line in assessing collaboration is ""do any of these methods of collaboration provide strategic benefits, making the company a stronger competitor?"" Collaboration areas include outsourcing, licensing (nonequity), shared resources or competencies (nonequity), partial non-controlling acquisition, joint ventures, and acquisitions. The key questions to ask when considering any of these moves are --
    • Will we become a stronger competitor?
    • Does it fit with our existing strategy?
    • Will it improve our situation?
    • Will it give us a competitive edge or distinctive competence we lack?
    • What is the risk, and is it worth taking?
    • Is it a means of acquiring ""disruptive"" innovation that might sustain the firm in the long term and that we couldn't develop in house?
    Customer collaboration can occur in the R&D area, operations, creating experiences, and in adding value to the experience of using the product.

Further questions to ask to stimulate strategic thinking --

  • Are there ways the company can differentiate it-self or its products and achieve a competitive advantage? Can it create its own game and rules, and win?
  • By ""walking in the customers' shoes""-as entrepreneurs do-are there products or services currently offered that one could improve upon? What are customers' dissatisfactions, and could the company provide the solution?
  • Is the company's search for opportunities wide-ranging enough? Has it examined every combination of customer needs, current capabilities, and technological advances? Are there opportunities in other growth industries? Can it rein-vent its business model? Is the company investing in R&D and experiments now that will, in time, become one of its core businesses?
  • What steps is the company taking to address uncertainty in the future? Has it mapped out a number of likely futures? Does it assume a certain future will happen, but has contingencies in case things turn out differently? Is the company dependent on ""whatever"" the future will bring, or is it trying to ""define and design its own future?"" Is there a preferred future it would like to bring about?
  • Has the company explored taking advantage of opportunities that become feasible only through forming a strategic alliance or merging with-or acquiring-another company? Are there ways in which it could co-create value with its customers?

Thinking differently for adaptive advantage (Kelly, 2006) --
Adaptive advantage requires the ability to anticipate and sense change and the capacity to respond quickly and coherently. Following are developmental priorities for adaptive advantage --

  • Thinking differently -- more complex environments require increasingly complex thought
    • outside-in - in contrast to inside-out. See ways of thinking.
    • connective - make creative connection between disparate ideas and trends. This is analogous to systems thinking but focuses on new patterns of possibility.
    • scenario -- anticipate the future without trying to predict it or ignoring it. Scenarios are stories -- stories help to overcome the inertia and denial of the future as a scary place. See scenario planning and scenario thinking.
  • Learning differently --
    • literacies for the future - focus on a few external developments that are low impact today but may be greater in the future. Establish core areas for focused learning.
    • learning networks - for continual exposure to a broader range of ideas and developments. Link members with a wide variety of expertise and experience. Include internal and external people.
    • learning journeys - learning journeys are truly exploratory - pushing the envelope of what is known and redefining the boundaries of what is possible by exposing the participants t striking new experiences, places, people, and ideas. This is in contrast to fact-finding or benchmarking expeditions that tend to be confined to current paradigms, perceptions, and hypotheses.
  • Acting differently --
    • act experientially - imagine, design, and execute small scale experiments in new opportunity spaces - do hypotheses formation and testing. Systematically expect learning form both success and failure. Swiftly move on to the next iteration.
    • act inclusively - include others in relation to the purpose of your business (beyond making money). Dialog and collaborate with broadly defined stakeholders. Include previously untapped markets, such as the 4 billion that are poor in this world.
    • at ethically - a deep ethical consciousness throughout the organization as a core principle to serve as a shared ethical compass while navigating quickly through complex environments.

These ways of being different, fit into an overall model with three pillars of adaptive advantage - thing->learn->act - in order to develop competitive advantage.

Beyond adaptive advantage to novel advantage --
The invention or discovery of the truly novel produces unique advantages that go beyond adaptation to environment shaping. Developing or unleashing the creative potential of the organization to generate novel possibilities can be fostered by organizational actions.

  • iterative inquiry - rigorous execution of iterative inquiry extends thinking well beyond existing preconceived notions.
  • dynamic interaction - the variations arising from engaging in diverse dynamic interactions are the seeds for organization evolution. See responsive processes, evolutionary organization theory, and organization evolution.
  • learning of uncertainty - breaking the mold of traditional thinking biases to seriously understand and consider uncertainty
  • learning serendipitously - keeping in motion, encountering new stimuli, shifting contexts, etc. contribute to serendipitous learning.
  • act throughout the organization - develop a culture where all are listened to and all are encouraged and rewarded for innovation.

Evolving from experimentation to pattern recognition in pursuing innovation and competitive advantage (Christensen, 2006) --
There are three general steps that occur with innovative offerings -

  1. In almost every industry, the initial methods of development involve experimental, unstructured problem-solving and prototyping.
  2. In the second stage, patterns of cause and effect begin to emerge, enabling people whose training is less sophisticated to design and manufacture the products.
  3. Ultimately in the third stage scientific progress transforms industries into a rules-based mode, where well-researched and tested guidelines enable people with even less training, experience, and intuition to create even higher performing products and services than the world's experts could a generation earlier.
  4. Appling this line of thought to innovation - historically the ability to conceive and launch successful new growth businesses resided in the intuition, experience, and skill of the best venture capitalists and entrepreneurs in the world. When they succeeded, they really succeeded - but 80% of their attempts failed. Now however, an emerging body of well-researched theories is shifting the ability to create new growth product and businesses out of the unstructured realm of trial-and-error experimentation into the pattern recognition realm. Identified are the patterns in which plans and actions will lead a company towards success, and which will cause it to fail, in different contexts. Though the rules-based realm has not been discovered, the patterns are clear. Some of those patterns --

    • You beat competitors by disrupting them, not by bringing better products to market.
    • You can define a product that customers will be sure to buy if you've segmented your market by the jobs that customers are trying to get done, rather than by product categories or customer characteristics.
    • For new technologies, the best customers are non-consumers of the traditional product, and the best consuming occasions are those where consumption was not historically possible.
    • Proprietary architectures are important to success when the functionality and reliability of a product are not yet adequate for what customers need. When these have improved beyond the ability of the customer to utilize further improvement, then modular, open architectures will dominate.
    • What should you outsource, and what should you do in- house? Above-average profitability will always be earned by integrating across the interfaces in the value-added chain where you can better solve a problem that is not yet being solved well enough. The stage in that chain where attractive money can be made today is unlikely to be where the money can be made tomorrow.
    • How should you structure your organization to innovate effectively? Functional or lightweight teams work well when you're innovating within an existing architecture. A heavyweight team is the tool needed to create new architectures efficiently. An autonomous unit is required when the business model required to succeed is disruptive relative to the model of the core business.
    • New ventures that employ a deliberate strategy process will fail. They need to follow an emergent, discovery- driven process.
    • Capital whose owners are willing to incur significant losses in order to grow the business to be very big very fast is bad money-it will cause the venture to fail. Good money is impatient for profit, and patient for growth.

For further thought stimulating questions see competitive advantage factors and for the basis for advantage see competitive advantage.