John Hagel and John Seely Brown's book "The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization" provides fresh insights into how one should get ready to rejig a company to serve more demanding customers.
They write: "When customers demand more and control more, a company cannot rely solely on its own capabilities, no matter how distinct. Similarly, a company will struggle to mobilize outside resources unless it can offer exceptional capabilities in return. After all, the best enterprises receive so many proposals to collaborate that they will likely form partnerships only with whoever provides truly compelling, unique value. And so the real strategic power comes when a company integrates and extends these two schools of thought, amplifying the value of its distinctive internal capabilities by creatively and aggressively harnessing complementary capabilities from other companies."
Here's their interview from HBR Working Knowledge:
Q: Can you tell us what that sustainable edge is?
A: We make the case that getting better faster by working with others is the only sustainable edge. Structural advantages are eroding rapidly. Distinctive capabilities provide temporary advantage, but unless they are aggressively refreshed through rapid incremental innovation, they will be rapidly overtaken by other, more aggressive competitors. Relative capability is no longer the key strategic metric; it is the relative pace of capability building.
We also take to heart Bill Joy's observation that "there are always more smart people outside your company than within it." So, if you are serious about accelerating capability building, you will need to focus on the edge of your enterprise and learn how to work more effectively with business partners in ways that help you to get better faster.
Q: Li & Fung, headquartered in Hong Kong and with a network of 7,500 business partners, is clearly an example of a company you admire. What about its strategic focus do you see as cutting edge?
A: Li & Fung is one of the most innovative companies in leveraging the capabilities of specialized business partners on a global scale to add more value to its customers. It has organized a highly flexible global process network that orchestrates activities on a truly end-to-end basis, from the sourcing of fibers to the delivery of finished apparel to retail distribution centers around the world, to create customized supply chains for each item of apparel. These relationships are loosely coupled, so that partners can be quickly brought in and out of specific apparel manufacturing assignments.
At the same time, Li & Fung has invested considerable effort to build shared meaning and trust among its partners, based in part on the potential for rapid capability building, so that it can more effectively collaborate with its partners.
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