Once every decade I am introduced to a new way of thinking that stands everything I “know” on its end. This happened to me on April 29, 2006, thanks to a lecture by David Teece which, in turn, warmed a cup of coffee I’ve been stirring since working as a research assistant for Ikujiro Nonaka at Berkeley in 1989.
Traditional strategy calls on the strategist to look at business in terms of industry and competitive advantage. There’s only one problem with this. Industries are ceasing to exist as we have come to know them. In other words, Industries are Plastic. (Which is the Future, for those of you who’ve not seen “The Graduate”
David took Michael Porter to task for creating an elaborate model that fails to take into account innovation and, therefore, fails to take into account anything useful. Traditional competitive advantages — expertise in logistics, expertise in real estate, expertise in marketing, expertise in specialized markets, etc. — are increasingly commoditized at the accelerated speed of a globally networked business. In short, they’re decreasing. The only non-reproduceable, exploitable assets are 1) tacit knowledge and 2) political access (neither of which, yet, have become commoditized, despite Jack Abramoff and the US Republican Party’s groundbreaking work in the latter area). As a result, industries, unless specifically regulated as such and thus frozen in time, are finished.
What happens when you combine a mini hard drive, a scheme for digitally protecting music files, an online store to sell those files and some specialized knowledge around how all of that can be put together in a form consumers won’t be able to leave alone? You get the iPod, or more specifically, an entire “ecosystem” — arguably an industry unto itself, until such time as someone “cospecializes” or recombines it into something else. This is all there is left for the manager to do.
Aisonne will no longer do industry analysis. What we want to know is what do you and your organization know that no one else knows. And who do you know. And what is the optimal combination of those elements — what is the ideal “ecosystem” in which you can exploit your unique intangibles and secure supernormal rents. (That’s economist talk for profits.)
There is more, but that is the 2 minute version. Welcome to the 21st century. And hang on.