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Business Guide : Winning Business Organization / Sustainable competitive advantage (SCA) in businessHow to survive against your business competition over a long period of time."Companies that endure are able to reinvent themselves to stay ahead with customers and markets as they evolve." – Jeff Immelt, CEO, GE Seven-Ss model: how to organize your company for competitive advantageThe Seven-Ss model is a framework for analyzing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful, or not: strategy; structure; systems; style; skills; staff; and shared values. To be effective, your organization must have a high degree of fit, or internal alignment among all the seven Ss. All Ss are interrelated, so a change in one has a ripple effect on all the others. Thus, to improve your organization, you have to pay attention to all of the seven elements at the same time. Sustainable business modelsSustainable business success is based not on great ideas, guts, or instinct alone – but on your ability to create an master your business model. In the new era of unrelenting change and competition, your face a daunting challenge: how to sustain the business model of your firm. Sadly, mature companies often forget or forsake the thing that made them successful in the first place: a customer-centric business model. They lose focus on the customer and start focusing on the bottom line and quarterly results. They look for ways to cut costs or increase revenues, often at the expense of the customer. They forget that satisfying customer needs and continuous value innovation is the only path to sustainable growth. This creates opportunities for new, smaller companies to emulate and improve upon what made their bigger competitors successful in the first place and steal their customers. The fact is, no matter how bulletproof your firm's current business model, it will be challenged by new business models. The new reality is that business models have shorter shelf life. You must constantly attempt to discover new business models if you hope to survive and grow. More about Sustainable business models Harnessing the power of changeOne of the keys to dealing with change is understanding that change in never over. Change brings opportunity to those who can grasp it, and the discontinuities of the new economy offer unlimited opportunities.For truly adaptive firms, a rapidly changing environment becomes a strategic advantage. More about Harnessing the power of change Inclusive approachAt the heart of the inclusive approach is the belief that understanding stakeholder needs – the needs of customers, employees, suppliers, shareholders, society, and the environment – and incorporating them into enterprise strategy are central to the achievement of sustainable growth and competitiveness. Innovation in businessInnovation is the key driver of competitive advantage, growth, and profitability. There are many parts of the whole field of innovation: strategy innovation, new product development, creative approaches to problem solving, idea management, suggestion systems, etc. All of these components are important. Yet approaching them piecemeal will bring piecemeal results. These seemingly disparate issues must be integrated into a single overarching strategy if they are to be mobilized in the quest for growth. In this new era of systemic innovation, you must design your firm's innovation process holistically. Sustainable competitive advantage may result from those innovations which are consistent with the firm's culture, people, processes, systems, and technologies, and provide some distinct value to customers, either directly or indirectly. More than three-quarters of CEOs of fast-growing companies cited innovation as their strongest competitive advantage, according to a PricewaterhouseCoopers survey. Establishing institutional excellenceThe leaders of great companies are not just great at growing profits. Most importantly, they are organizational architects determined to establish institutional excellence for as long as the company is in business. When institutional excellence is in place, companies can achieve industry leadership for decades and generations. More about Establishing institutional excellence Moving with speed – staying ahead of your competitionIn the new economy where everything is moving faster and it's only going to get faster, the new mantra is, "Do it more with less and do it faster". If you wish to stay ahead of your competition, you should learn how to move with speed and build four main fast-moving competencies: fast thinking, fast decision-making, getting to market faster, and sustaining speed. In order to get real speed decisions at virtually every level must be made in minutes, not days or weeks. Decisions also have to be made face-to-face, not memo-to-memo. This means that people have to think on their feet, and that the forests of meaningless paper trails and approvals – so common in large organizations – must be eliminated. More about Moving with speed – staying ahead of your competition What is sustainable competitive advantage?Sustainable competitive advantage is the prolonged benefit of implementing some unique value-creating strategy based on unique combination of internal organizational resources and capabilities that cannot be replicated by competitors. Sustainable competitive advantage allows the maintenance and improvement of your enterprise's competitive position in the market. It is an advantage that enables your business to survive against its competition over a long period of time. Todays' age of hypercompetitionHypercompetition is a key feature of the new economy. New customers want it quicker, cheaper, and they want it their way. The fundamental quantitative and qualitative shift in competition requires organizational change on an unprecedented scale. Today, your sustainable competitive advantage should be built upon your corporate capabilities and must constantly be reinvented. Innovative business architectureThe integrated business systems approach to business development and the management process is what distinguishes modern cross-functionally excellent business architects from functional managers. As a business architect and an extremely effective leader, you must have a broad view to be able to link together – synergistically! – the key components of corporate success – from functional planning to cross-functional cooperation, from supply chain management to customer value creation, from the art of continuous learning to the practice of effective communication and influencing people – and bundle them in an intellectual, innovative and pragmatic package that can be used to achieve sustainable competitive advantage and business growth, both top-line and bottom-line. Distinctive capabilities – basis of your competitive advantageAccording to the new resource-based view of the company, sustainable competitive advantage is achieved by continuously developing existing and creating new resources and capabilities in response to rapidly changing market conditions. Among these resources and capabilities, in the new economy, knowledge represents the most important value-creating asset. The opportunity for your company to sustain your competitive advantage is determined by your capabilities of two kinds – distinctive capabilities and reproducible capabilities – and their unique combination you create to achieve synergy. Your distinctive capabilities – the characteristics of your company which cannot be replicated by competitors, or can only be replicated with great difficulty – are the basis of your sustainable competitive advantage. Distinctive capabilities can be of many kinds: patents, exclusive licenses, strong brands, effective leadership, teamwork, or tacit knowledge. Reproducible capabilities are those that can be bought or created by your competitors and thus by themselves cannot be a source of competitive advantage. Owning your competitive advantageEvery business can own one or several competitive advantages - the difficulty is figuring out what they are. Market leading companies have figured out the importance of owning their competitive advantage in order to get fast to market and sustain speed. The value systemYour firm's value chain links to the value chains of upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a competitive advantage depends not only on your firm's specific value chain, but also on the value system of which your firm is a part. Cross-functional excellenceAlthough innovation is driven by technology, required competence extends beyond technical know-how. In the new knowledge economy and knowledge-based enterprises, systemic innovative solutions arise from complex interactions between many individuals, organizations and environmental factors. The boundaries between products and services fade rapidly too. If you wish to be a market leader today, you must be able to integrate in a balanced way different types of know-how that would transform stand-alone technologies, products and services into a seamless, value-rich solution. More about Cross-functional excellence Building on your ñore ñompetencies and accessing missing onesThe core competencies are the things your company can do better than your competitors. If a core competency yields a long term advantage to the company, it is said to be a sustainable competitive advantage. As a leader, you must focus your firms resources on what it does best and what creates competitive advantage. Some technical and business competencies can be in short supply however. You can address these missing competencies by using three approaches: internal development, acquisition of an outside firm and partnering. Corporate culture as a fundamental competitive advantageThe strength of your organization's culture is one of the most fundamental competitive advantages. If you can build and preserve an innovation-adept culture, a culture of commitment, one where employees passionately pursue your organization's cause and mission, you will be better positioned for success. More about Corporate culture as a fundamental competitive advantage People as main source of competitive advantageYour technologies, products and structures can be copied by competitors. No one, however, can match your highly charged, motivated people who care. People are your firm's most important asset and, the same time, its most underutilized resource. People are your firm's repository of knowledge and skill base that makes your firm competitive. Well coached, and highly motivated people are critical to the development and execution of strategies, especially in today's faster-paced, more perplexing world, where top management alone can no longer assure your firm's competitiveness. Trust as source of competitive advantageTrust – both between individuals and organizations – is at the core of and delivers significant benefits in today's complex and rapidly changing knowledge economy. Trust-based working relationships are an important source of your sustainable competitive advantage because trust is valuable, rare, imperfectly imitable, and often nonsubstitutable. Trust elevates levels of commitment and sustains effort and performance without the need for management controls and close monitoring. Trustworthy firms have also competitive advantage when it comes to forming and using cooperative strategies. Dynamic strategy as a source of competitive advantageIn today's fast pace, effective self-management and opportunism create a competitive advantage. To be successful in today's world of rapid change, corporate strategy must be dynamic. Executives of fast-moving companies reassess their strategy continuously to ensure that it reflects the changes in the business environment, the company, and its goals. The source of sustainable competitive advantage is the pursuit of an evolving strategy that cannot be easily duplicated by competitors. Leveraging the power of knowledgeMarket champions keep learning how to do things better, and keep spreading that knowledge throughout their organization. Learning provides the catalyst and the intellectual resource to create a sustainable competitive advantage. "The desire, and the ability, of an organization to continuously learn from any source, anywhere – and to rapidly convert this learning into action - is its ultimate competitive advantage", says Jack Welch. Organizations obtain competitive advantage from continuous learning, both individual and collective. Learning by the people within an organization becomes learning by the organization itself. The changes in people's attitudes are reflected in changes in the formal and informal rules that govern the organization's behavior. Tacit knowledge as a source of competitive advantageOne source of competitive advantage is to diffuse throughout your company the unique, proprietary knowledge about customers, competitors, products, and techniques that resides in the minds of your employees. All knowledge isn't the same. There is explicit knowledge – the kind that can be easily written down (for example, patents, formulas, or an engineering schematic). The explicit knowledge can create competitive advantage, but its shelf-life is increasingly brief, as it can be replicated easily by others. Tacit knowledge, or implicit knowledge, is far less tangible and is deeply embedded into an organization's operating practices. It is often called 'organizational culture'. Tacit knowledge includes relationships, norms, values, and standard operating procedures. Because tacit knowledge is much harder to detail, copy, and distribute, it can be a sustainable source of competitive advantage. Tacit knowledge, or implicit knowledge, as opposed to explicit knowledge, is far less tangible and is deeply embedded into an organization's operating practices. It is often called 'organizational culture'. Tacit knowledge includes relationships, norms, values, and standard operating procedures. Because tacit knowledge is much harder to detail, copy, and distribute, it can be a sustainable source of competitive advantage. What increasingly differentiates success and failure is how well you locate, leverage, and blend available explicit knowledge with internally generated tacit knowledge. Inaccessible from explicit expositions, tacit knowledge is protected from competitors unless key individuals are hired away. More about Tacit knowledge as a source of competitive advantage Leadership as business advantageLeadership is the necessary condition for long-term competitiveness. In particular in the knowledge economy, what is proving to be most effective is the emerging style of values-based leadership, both as motivation for constant innovation up and down all organization levels and as a source of unity and coherence across fragmented firm boundaries. Harnessing your abilities to lead through the power of intellect, will, persistence, and vision creates synergies that propel successful companies in the quest for, and achievement of, competitive advantage. More about Leadership as business advantage Creating a workforce that would provide a competitive advantageAn intelligent and integrated human resources strategy is the only sustainable competitive advantage... Every other corporate asset can be bought or replicated virtually overnight, but competitors seeking to duplicate a well-trained, motivated, and committed workforce will need at least a decade to catch up. Exceptional cultures just can't be created with the wave of wand – or a major infusion of capital. Radical innovation in businessLong-term corporate success linked to the ability to innovate. Although corporate investment in improvements to existing products and processes does bring growth, it is new game changing breakthroughs that will launch company into new markets, enable rapid growth, and create high return on investment. Systemic innovationInnovation used to be a linear trajectory from new knowledge to new product. Now innovation is neither singular nor linear, but systemic. It arises from complex interactions between many individuals, organizations and environmental factors. Firms which are successful in realizing the full returns from their technologies and innovations are able to match their technological developments with complementary expertise in other areas of their business, such as manufacturing, distribution, human resources, marketing, and customer relationships. Role of intellectual property rights (IPR) and strategyIn most industries, intellectual property rights, especially patents and their exploitation, hold key significance in the development and commercialization of new products. Businesses should have an intellectual property strategy as part of their corporate planning and strategy. More about Role of intellectual property rights (IPR) and strategy Continuous improvement firm (CIF)Continuous improvement firm (CIF) is a firm continuously improving on customer value due to improvements in productivity initiated by the members of the general work force. The key success factor in this endogenous, incremental and continuous technological and operational change is the organization and management of the firm in such a way that all members are motivated to promote change and are supported in their effort to do so. What is remarkable about the CIF is its ability to operate simultaneously in all innovative arenas: new products, new technology, new organizational forms, and new customer relationship management. Competing: art, science and practiceCompetition is all about value: creating it and capturing it. A fundamental rule in crafting a competitive strategy is to view competition from the other player's viewpoints. To be successful today, your company must become competitor-oriented. You must pursue the right competitive strategy – avoid strengths of your competitors and look for week points in their positions and then launch marketing attacks against those weak points. More about Competing: art, science and practice Differentiation strategiesDifferentiation is the key to building a maintaining your competitive advantage. It refers to your ability to separate yourself and your product or service from that of your competitors. This is the advantage that you and your company have over your competitors in the same marketplace – the unique and special benefits that no one else can give your customer. Customer intimacy and serviceBusinesses have traditionally relied on technology and product innovation for competitive advantage. However, as products became commodities due to global competition and relentless technological advances, the battleground for differentiation and customer value creation shifted to customer intimacy and service. This service-focused competitive strategy has worked well for numerous companies across various industry sectors. While service still remains an important differentiator, industry leaders expand their focus to the overall customer experience, of which service is an important element. They are managing the entire customer life cycle, including moments of truth that may make or break the customer relationship. Ultimately, these companies are fortifying their brand equity and customer loyalty to dominate their markets. Leveraging opposite forcesYou can find a strategic competitive advantage in an organizational and cultural context by seeking to leverage, rather than diminish, opposite forces. An important but widely overlooked principle of business success is that integrating opposites, as opposed to identifying them as inconsistencies and driving them out, unleashes power. This is true on both a personal level and on organizational level as well. To be successful in today's complex, rapidly changing and highly competitive world, you must embrace and manage critical opposites. You can inspire innovation and find a strategic competitive advantage in an organizational and cultural context by seeking to leverage, rather than diminish, opposite forces. People with different cultural, educational, scientific, and business backgrounds will bring different frames of reference to a problem and can spark an exciting and dynamic cross-pollination of ideas. More about Leveraging opposite forces Building synergiesA corporation that builds on core competencies utilizes skills that combine to strengthen value chains and build greater competitive advantages. This leads to synergies among business units, whereby they become more productive together than independently. The collection of skills used in this situation is largely intangible, but corporations can also build synergies by sharing tangible resources. Connecting power in businessIn the knowledge economy (1995 to date), competitive advantage accrues to those who invest more than their competitors to connect to more people and share knowledge faster and farther. Synergy showcase: General ElectricAt General Electric (GE) the sum is greater than its parts as both business and people diversity is utilized in a most effective way. A major American enterprise with a diverse group of huge businesses, GE is steeped in a learning culture and it is this fact that makes GE a unique company. As Jack Welch puts it: "What sets GE apart is a culture that uses diversity as a limitless source of learning opportunities, a storehouse of ideas whose breadth and richness is unmatched in world business. At the heart of this culture is an understanding that an organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive business advantage." More about Synergy showcase: General Electric Sustainable competitive advantage (SCA): ToyotaToyota’s global competitive advantage is based on a corporate philosophy known as the Toyota Production System. The system depends in part on a human resources management policy that stimulates employee creativity and loyalty but also on a highly efficient network of suppliers and components manufacturers. More about Sustainable competitive advantage (SCA): Toyota Competitive advantage showcase: Dell Computer CorporationStarting with an idea, Michael Dell created Dell Computer Corporation with $1,000 startup capital in 1984 when he was 20. Three years later, the market value of the company was $85 million. The private placement memorandum published in July 1987 listed and described the three key strengths that gave the company a competitive advantage:
More about Competitive advantage showcase: Dell Computer Corporation Competitive advantage case study: Microsoft's concept of network externalityOne of Bill Gate's favorite concepts is network externality. This holds that ubiquity creates a sustainable advantage, and the value of a product increases with the size of its installed base. Increase the number of your products significantly and you have an explosion of use that leads to related products and vastly increased value. More about Competitive advantage case study: Microsoft's concept of network externality Sustainable competitive advantage showcase: Warren Buffet's investment criteriaWarren Buffet was once asked what is the most important thing he looks for when evaluating a company to invest in. Without hesitation, he replied, "Sustainable competitive advantage". More about Sustainable competitive advantage showcase: Warren Buffet's investment criteria Topics related to "Sustainable competitive advantage (SCA) in business"Sustainable competitive advantageSustainable competitive advantage is the prolonged benefit of implementing some unique value-creating strategy based on unique combination of internal organizational resources and capabilities that cannot be replicated by competitors. Sustainable competitive advantage allows the maintenance and improvement of your enterprise's competitive position in the market. It is an advantage that enables your business to survive against its competition over a long period of time. Building sustainable competitive advantageYou must focus your firms resources on what it does best and what creates sustainable competitive advantage. Continuously assess, redefine, and then secure core competencies that your firm must have to compete. The following are three main characteristics of your core competences:
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