The industrial revolution had a far-reaching and long-term impact on our economy. It turned us from an agrarian society to a product-oriented society. The focus of business was to make products, more efficiently and effectively. We are still dealing with that mindset, as most corporate executives advanced through the ranks of finance or operations, and very few through marketing.
In a product-oriented economy, competitive advantage is driven by making products. Who can make them faster and cheaper? Who can make more new products? However, as we change to a digital society, competitive advantage is no longer derived from products. Rather a competitive advantage must now be derived by serving customers better. As Niraj Dawar wrote in Harvard Business Review, “The strategic question that drives business today is not “What else can we make?” but “What else can we do for our customers?” Customers and the market—not the factory or the product—now stand at the core of the business.”
This shifting orientation means that we have to re-think some of the key pillars of corporate strategy. First, the source of competitive advantage is outside the organization, not inside as it was with production-oriented competition. Second, your competitive advantage does not decrease as your competitors copy you; it grows as you gain experience and knowledge of consumers. Third, you determine how you are perceived by the marketplace, and you choose your competition. Finally, product innovation does not move consumer purchase decisions – shifting consumer purchase criteria is what drives market movement. As Jeff Boss, in Forbes, says, “To stay relevant in today’s constantly changing competitive landscape requires the capacity to learn continually, evolve and grow into a better—more valuable—version of what you were yesterday.”
Is this real, or just wishful thinking on the part of Marketers? Think about these examples of today’s most successful, profitable, and competitive companies:
- Used to be a computer company, now is an $800 billion technological force. From computers, Apple has shifted to payments, self-driving cars, and augmented reality, competing in many different (and non-computer) industries.
- The company that developed today’s most popular search engine is now the company that owns mobile operating systems, with its’ Android creation. It’s conquered Maps and GPS systems, so might self-driving cars be next?
- Beginning life as a social networking site has grown to be a technology powerhouse. Facebook is now in augmented reality, as well as other ways for humans to interface more naturally with computers.
- Founded as an online bookseller, Amazon has morphed to dominate consumer purchase behavior in many categories.
The common theme to all these company’s success stories is “try, learn, adapt.” Amazon’s recent acquisition of Whole Foods is a prime example of this adaptation. By choosing where it competes, and how it meets customer needs, Amazon had created not only a new company, but an entirely new capability., and a new competitive advantage over traditional retailers (grocery and otherwise). Competitive advantage does not come from innovation, efficient operations, or finance – competitive advantage comes from knowing your market and being able to serve it nimbly and creatively.