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Sustainable Advantage

  • Developing a sustainable competitive advantage is the primary goal of most progressive companies today. Over the past three decades, firms have tried reengineering, automation or outsourcing to improve results, but, for the most part, any advantage in costs or distinctiveness that were gained in this way was usually short-lived, as competitors adopted similar process improvements and thus quickly matched the market leaders.
  • The advantages that companies gain by raising the productivity of their most valuable workers is proving to be more effective and enduring, as competitors find these improvements are much harder to copy. Different than creating prototypes and repetitive best practices and processes, as in an ISO 9000 model, the kind of work critical to the success of the systems integration firm today is undertaken by managers, salespeople and customer service reps, whose tasks are anything but routine. These employees interact with other employees, customers, and suppliers and make complex decisions based on knowledge, judgment, experience and instinct.
  • New research reveals that these high-value decision makers are growing in number and importance. As businesses come to have more problem solvers and fewer doers in their ranks, the way they organize for business changes.
  • Raising the labor performance of professionals is not easy. It is unclear whether any of the innovations and experiments being pioneered now will prove to be winning formulas. But, as in the early days of the internet, the direction is clear but the path isn't. That's the bad news, or, rather, the challenge (and opportunity) for innovators. The good news concerns competitive advantage. As companies figure out how to raise the performance of their most valuable employees in a range of business activities, they build distinctive capabilities based on a mix of talent and technology.
  • Today's most valuable workers perform what economists call "interactions." These include the searching, coordinating and monitoring required to exchange goods or services.
  • In business today, complex interactions require people to deal with ambiguity-there are no rulebooks to follow-and exercise high levels of judgment. These are the people on your staff (such as managers, salespeople and engineers) who often draw on deep experience, or "tacit knowledge." Rather than transactional or routine, these tacit interactions are growing at a phenomenal rate, putting greater value and importance on the knowledgeable worker.
  • As technology enables, and sometime eliminates the need for staff at the transactional level, companies have moved to eliminate or outsource transactional jobs to reduce cost. However, unproductive tacit employees are an equally costly disadvantage. Regardless of how many tacit interactions occur in your company, each one should add value. This upends the traditional organizational pyramid, where a limited number of leadership (managers) sat on top coordinating a broad span of workers engaged in transactional labor. The new hierarchical structure puts the tacit interaction-skilled employee at the top of an inverted pyramid with corporate/strategic management at the bottom point, developing resources and setting direction based on strategies and goals developed at the customer interface point with the frontline knowledge worker.
  • There are critical changes that executives must take into account as they explore how to make tacit employees more productive. Companies must deploy technology to improve the performance of the tacit workforce. Your most important workers recognize patterns, solve novel problems, or sense emotional responses and react appropriately to customer needs. Technology to support these people will have to complement and extend their capabilities and activities.
  • However, it is less likely that companies will succeed in adopting best practices quite so readily. Capabilities founded on talented people who make smarter decisions about how to deploy tangible and intangible assets can't be coded in software and process diagrams and then disseminated throughout a sector. As we've seen with various customer relationship management (CRM) system implementations, what sounds good on paper is usually much more difficult in the actual field implementation. However, technology can make it possible to boost the quality, speed and scalability of the decisions employees make. It can give them easier access to filtered and structured information, thereby helping to prevent such time wasters as volumes of unproductive e-mail. Technology tools can also help employees to identify key trends, such as the buying behavior of a customer segment, quickly and accurately.
  • Broadband connectivity and novel applications (including collaborative software, multiple-source videoconferencing and IP telephony) can facilitate, speed up and progressively cut the cost of such interactions as collaboration among communities of interest and build consensus across great distances.
  • Companies will be seen as providing more effective value-added products and services when interactions among its sales and marketing, systems development staff and suppliers better discern what customers really want. That approach creates a formidable competitive capability that will be difficult for rivals to easily implement. The rigidity of traditional organizational models often limits innovation and learning. As a result, it won't be easy for most companies to identify and develop distinctive new capabilities based on the best new ways to speed innovations to market, to make sales channels more effective, or to divine customer needs. But, such capabilities are also difficult for competitors to duplicate.