There was a report written back in 2013 entitled and under, “The New Normal: Competitive advantage in the digital economy” written for the Big Innovation Centre, an initiative of The Work Foundation and Lancaster University that I would recommend your time to read.
I often go back to this as it provides a real source of understanding of the shifts being undertaken within our organizations, to make the fundamental shifts in their thinking to understand where today’s and our future value creation will come from; something that is mostly due to this increasing importance of the digital changes occurring all around us.
Radical changes in the environment we are currently witnessing requires a more radical set of responses. The tangible sources of value creation are being replaced by our abilities to manage all the intangibility that is the source of our potential competitive advantage. It is found in constantly recombining the different sources of these intangibles, turning them into dynamic capabilities. It is the synergistic effects from harnessing these different sources collectively and constantly exploring and exploiting them.
This report is suggesting that the real sources of value creation and competitive advantage in the digital economy lie in fluidity and constantly evolving the intangibles. We still are failing to come to grips with this, to understand its force and position in today’s thinking. Technology or digitization has been such an underlying catalyst to this shift going on.
They see through their research, that the increasing digitization of economic activities has improved the detailed measurement of business activities (which aids better strategy formulation and positioning), enabled faster and cheaper experimentation (which fosters organizational ambidexterity and increases the likelihood of spawning innovations), facilitated the easier sharing of observations and ideas (which allows for the capturing of insights and learning from network members), and increased the ability to replicate innovations more quickly (which improves transaction cost efficiency).
These they suggest are the dynamic ‘factors’ of the digital economy, and must be harnessed in addition to the conventional factors of production, if firms seek to not just survive but also thrive in the new normal.
They are also outlining in this report,that there are seven intangible sources of competitive advantage and are in effect, interconnected and complementary. The real sources of value creation today and gaining competitive advantage lies in fluid and constantly evolving intangibles, such as firm strategy and positioning, radical innovation and first mover advantages, intangible resources and competencies, organizational ambidexterity, network effects and externalities, transaction cost efficiency, and relational optimality.
It is the smart configurations, unique to each organization, of applying several or more of these intangibles that will create the new value in product and services and drive an even greater business model innovation change, to gain and sustain the competitive advantage.
The thinking they suggest requires a new ecosystem paradigm shift, needing a reinvention of the business model. I would suggest on the very way we manage innovation.
We must recognize our existing approaches to innovation need radically changing.