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When thinking about gaining sustainable competitive advantage, one should start perhaps by defining… what it isn’t.
First, it’s not about any particular feature of your product – sooner or later your competitors will improve it or at least develop an equivalent. Neither is it about the having the most features. After all, customers only care about the ones they really need. Finally, a competitive edge is not anything you can gain and have permanently – it requires constant learning, testing, and reinvention to meet the changing customer needs.
As a matter of fact, it’s the customer needs, and the ability to deliver more value while answering them better than others, that truly define a competitive advantage.
If you look across recent business publications, you’re likely to see an interesting picture emerging: digital transformation is seen as a sure-fire way of outperforming competitors, across industries.
Among its promises, it should enable an enterprise to:
- Turn data into actionable business insights
- Increase agility and harness the power of collaboration
- Fuel innovation and provide an exceptional customer experience
- Manage resources in a more sustainable and efficient way
- Create a digital culture and attract best talents on the market
As I mentioned in my previous blog, digitization has affected virtually every industry over the last few years. The adoption of digital technologies by businesses and customers has recently accelerated even more, with the COVID-19 pandemic as a burning platform.
Does it mean that if you transform your business digitally, you will master the winning formula? Maybe, but so will other players in your market. A competitive advantage today is hidden somewhere else.
One plus one is greater than two
The new nature of competition in the digital age is really not only about technology. It’s not only about tools. Let’s say your company is working on an AI implementation to automate one of its processes. Does that mean that your business must know everything about AI, or to have every tool? The answer is no. You will be able to find the needed know-how and technology outside, easily and quickly. And even some of this technology may be available for free.
The one competitive advantage of today is digital collaboration through open ecosystems.
This reminds me of how Uber decided to open source their probabilistic programming engine to get better ideas from the outside. They use it to predict traffic and patterns and give you the best recommendation of the route, for a more reliable transportation service. They didn’t want to be closed in their own environment, and have fewer, yet proprietary, ideas.
If you are trapped in your own environment, you can’t create more value, even with the most sophisticated technology in your pocket.
Open innovation
As mentioned in the Frost & Sullivan white paper, the uberisation of industries we observe today is based on the belief that collaboration and co-creation fosters open innovation.
And it’s not because a specific company or specific group of people don’t have the right competencies. It’s because the whole is bigger than a sum of its parts. Open innovation or co-innovation are what can bring more value to your customer. If you do it in a right way, your product A and product B from the other company can lead to the creation of product C, that has more value than the sum of A and B for the customer.
This is for me the idea behind open innovation or co-innovation and the fundamental goal of Schneider Electric Exchange: create an ecosystem that allows companies to propose more value to customers, greater than the sum of their individual capabilities.
Collaboration fosters innovation
Good example is Jordan Engineering from Canada and Supertech from India. They’ve never met in the physical market, yet they did on Exchange and they used the advantage of sharing each other’s capabilities to better reply to customer needs. We are better off to address customers together. Complementarity is key here. Companies on Exchange may look at the same customers within the same problem space. It can be efficiency, sustainability, or a technical challenge specific to their industry. Either they work alone, or they start to create value together. Of course, there may be some areas of friction between them, but the complementarity that they create together is worth it.
By collaborating on an open platform like Exchange we go beyond promoting what one company can offer. It is no longer a discussion about whose tools/software/consultancy services are better. It is a conversation about how to best solve the customer opportunities and challenges that hasn’t been addressed yet, or how collectively address them in a better way.
Competitive advantage through digital communities
Now you may think, isn’t a digital community simply people talking to other people online? I strongly recommend reading Competitive Advantage through Digital Communities white paper by Frost & Sullivan to revisit this view. Indeed, collective conversation is not enough, you need more than this. That’s why we have more capabilities on Exchange: it is a combination of people, resources, assets, and also processes, workflows, and a bit of structure to interact together in order to create innovation, and to monetize your offers next through the marketplace.
Going back to the example of Jordan and Supertech, in a physical world, these companies would have never collaborated. They operate in a different environment. There have always been local communities and local conferences, such as local system integrator or panel builder networks. Those are great, but the value of digital communities is when we create something that cannot exist in a physical space. And create new value associated to this.
Experiments in a multiplayer game
A digital open ecosystem brings proximity to customers and speed in solution finding. Also, the speed of adoption of innovation is faster.
How does digital enable speed? I think it enables speed because it enables experiment. Within a trusted relationship, with people you engage with, you innovate faster. And then you are better positioned to execute.
Let’s take the example of software. In the old enterprise IT model, you needed to buy a big system. But it was a trap. When the system was in place, you couldn’t move over. And the team that had purchased it needed to demonstrate permanently that the decision was right, because they couldn’t reverse it. The old non-digital business model created a lot of one-way doors.
Then came the subscription model, where you can scale up and down the way you want. Why it is important? Because you can experiment – something you would never be able to do with a multimillion-dollar investment.
All this evolution of business models that are associated to digital enables speed. Therefore, I believe that digital is not about technology. The heart of digital is how we change experiences, how we change engagement models, how we change business models.
Digital transformation changes the game of business into a multiplayer game.
Teaming up through digital collaboration is the competitive advantage you may just need to win.
Discover a bold, new digital ecosystem and an open, global community of innovative problem solvers at Schneider Electric Exchange today.
