This edition of the πΌπππ‘πππ£π£π€π«ππ©ππ£π β’Newsletter is for Innovators and Business Leaders who want to create and sustain competitive advantage for long term viability.
Competitive advantage is a property of a business capability that is distinct to your business and difficult for other businesses to replicate. A competitively advantaged capability needs to be nurtured, thoroughly leveraged, and continuously enhanced. These kinds of capabilities become the foundation on which you build a business, both for short term stability and for long term success.
In this edition of the A-I Newsletter, we identify and explore the surprisingly few sources of sustainable competitive advantage.
There are only two sources of sustainable competitive advantage, the business capabilities that make your business different and better than the competition. These capabilities are:
- Speed β the ability to out-perform the competition by acting faster and responding quicker to both the normal and the changing business conditions in the markets you serve.
- Innovation β the ability to cause long term change in the Solution, Business, and Market status quos by continually creating, capturing, and delivering new value through the invention and introduction of new and better products, services, and processes.
Speed and Innovation, individually, are desirable business capabilities. But neither is sufficient to create sustainable competitive advantage. At best, either one can create a transient position of competitive advantage. When combined and leveraged together, they create an unassailable business capability that competitors just canβt match.
Speed
Speed of Execution is a source of competitive advantage because costs are proportional to elapsed time. The faster the execution speed of any activity, the lower the cost. Lower costs, in any activity in any business, are advantageous.
Speed of Problem Solving is a source of competitive advantage because problems decrease the speed of execution. The faster you solve problems, the higher your speed of execution.
Execution speed affects every functional area in a business; from Sales Cycle Time, to product/service Lead Time, to Inventory Cycle Times, to Manufacturing Through-put, to staffing levels, to New Product Development, to Receivables. Elapsed time metrics help drive variability in performance and waste out of activities.
High speed execution is the business capability that underlies continuously delivering the orderly results that signify good business performance. Becoming the lowest cost supplier based upon high speed execution is a short term competitive advantage.
Innovation
Innovating is a problem solving business capability that is the basis for providing distinctly differentiated solutions. Innovating that reliably delivers Innovations depends on highly developed business capabilities in the areas of:
- Sensemaking β the Discovery, Diagnosis, and Definition of problems-worth-solving.
- Invention β the Design of new solutions and the specification Decision of what and how to develop them.
- Introduction β The Development and Deployment of new solutions and all the supporting activities to make them available and supported.
- Adoption β the Diffusion of new solution in the marketplace to targeted customers making substitution and replacement possible.
Long term studies by the Boston Consulting Group show that companies that have high innovation capability outperform the average in Total Shareholder Returns by 33% over 10 years. This data demonstrates that innovation capability is a source of long term competitive advantage.
Conclusion
Speed is a source of competitive advantage that affects short term business performance.
Innovation is a source of competitive advantage that affects long term performance.
But Speed and Innovation are not mutually exclusive business capabilities.
Innovation results, when organized as a systemic business practice, are dependent upon both speed of execution and speed of problem solving.
Speed based results are dependent upon innovating business practices and processes to continually increase the speed of execution.
Developing your organization’s Speed and Innovation capabilities concurrently and continuously creates sustainable competitive advantage in both the short and long term.
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Capabilities
Competitive advantage
Innovate and speed
-Innovation Haiku, Kevin A Fee, March 27, 2024