Conventional competition-based approaches to strategy no longer work and can actively prevent an organisation from achieving its goals. Paul Skinner proposes an alternative model, that of Collaborative Advantage, to drive a greater level of success that is better for you, better for your customers and better for society.
In the twentieth century, Competitive Advantage may have stemmed from restricted access to knowledge and resources. Intermediaries such as high-street travel agents had access to information (flight bookings) and privileged access to customers (high-street shoppers, achieved through prime site rental) and made their money by taking their middlemen’s fees. Universities educated the elite behind closed doors with knowledge that was unavailable elsewhere. Manufacturers used capital-intensive machinery to produce goods on a scale that prohibited new market entrants.
But is the twenty-first century shaping up to be sufficiently different to merit re-framing the whole goal of doing business and moving on from the incumbent goal of creating Competitive Advantage? Could framing strategy in that way be as out of date as the idea that the only way to gain knowledge is to walk to a reference library?
If business in the twentieth century was about dominating restricted channels of access to knowledge and the means of production in the pursuit of Competitive Advantage, in the twenty-first century these channels are potentially open to anyone with access to the internet and its new means of production. Successful innovation increasingly now derives less from the individually minded pursuit of Competitive Advantage and more from a coalition of the willing to create shared value.
If you attended a party and demonstrated through your actions that your sole goal was not only to eat as much of the food and drink as possible, but specifically to eat and drink more than any of the other guests, leaving the now impoverished party with dwindling provisions, your chances of a second invitation might be slim. If the twenty-first century party is on a global scale then the guests are not just your customers – invitations are extended to at least the three billion people with access to the global conversation of the internet and a chance to influence and to innovate – on their own behalf and on behalf of the four billion who are not yet connected. We face inequality, resource depletion and the suffering associated with complex emergencies, climate change and an accumulation of ever more pressing social challenges. Diminishing our shared resources while offering no true value creation risks retaliation on a scale that no organisation may be able to resist for long.
My hope is that the most successful leaders in the twenty-first century will be those who accurately read the mood and the needs of their audiences, customers and society and provide genuine opportunities to improve people’s lives.
A radical alternative
While the story of Competitive Advantage may have helped businesses all around the world to achieve growth from the 1960s, I believe that it is now time to change the story of strategy to support the kind of growth our businesses will be best placed to build now and in the decades to come.
The idea of Competitive Advantage is built on the assumption that the individual organisation is a closed entity and that the value it creates is generated by the careful control of resources that it owns and manages. It was developed in response to the pressing awareness of the arrival of a much greater degree of competitiveness as markets opened up and entrants from other countries started to appeal to previously loyal customers.
Collaborative Advantage better supports and activates the true nature of the value-creation process.
Collaborative Advantage, however, recognises that value can also be created anywhere in the eco-system in which a business operates. It is a concept developed at a time of increased interconnectedness in which a much broader range of people and organisations outside the business become relevant as possible allies, with the potential to co-create, advocate and scale the business’s offerings. From the perspective of creating Collaborative Advantage, organisational success is born out of fostering an optimal relationship with the entire external environment that maximises the combined total value-creating process and generates benefits for the organisation, further enhancing the lives of the customers it serves.
Collaborative Advantage is an inherently optimistic concept. As strategy, innovation and marketing become more open and tie more deeply into our innate capacity for collaboration, I believe organisations can be more successful by engaging greater support and also contribute more to society by reflecting a broader range of needs. This positive conclusion appears to open the door to a world of business activity that touches us more deeply and does more to improve the lives of the people it serves, as well as create greater financial and other rewards for its owners and employees. It can resolve the dichotomy between giving and taking and implies that the best way to achieve private success is through the creation of public good, aligning the interests of shareholders with broader stakeholders and ushering in more inclusive approaches to business.
Increasing numbers of people and organisations today are already doing more to harness our essential interconnectedness, recognising as a basic starting point that, no matter who you are, there is more talent and resource outside your organisation than inside it. They understand that the better you can become at harnessing and working with that external resource to achieve goals that you can share with others, the more success you are likely to achieve.
Such an approach builds business success not by focusing on outperforming rivals but rather by harnessing the fuller value-creating capabilities of the broader external environment. It tells new stories about what we are in the business of doing and unlocks new types of participation that help us achieve our goals.
The above is an extract from Collaborative Advantage by Paul Skinner (Robinson, 2018)