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Saturday, July 19, 2008

Co-Creation – The Competitive Advantage in the Connected Age

In the GIXBang world (The interacting trends of increasing globalization, innovation and complexity we term as the GIXBang world) what is our competitive advantage? This is a key question enterprises need to ask. Not many years back competitive advantage was determined by how much of natural resources one possesses. In the era of industrialization, competitive advantage shifted to how much one can produce or manufacture. One can see that the era of industrialization created a world which was more connected through multiple advances in communications, transport and movement of goods. The information era that was born from the advancements in electronics, shifted the loci of competitive advantage to how much and how rapidly one gets information about everything that impacts the business.
Soon people realized that amount of information is not really what is useful for competitive advantage. It is the processed information combined with experience based rules and heuristics, that is the knowledge to act, that will lead to competitive advantage. The start of new millennium has brought to the center stage the ability to rapidly adapt to change as the key competitive advantage. As we all know the cliché the best way to adapt to a change is to create that change. Hence the first decade of new millennium has shown us the ability to create successful change, i.e., Innovation is the key competitive advantage. This has resulted in mass creation of books on Innovation, Innovation processes, methodologies and what not. Continuous Innovation as the only competitive advantage is the current thinking, as the world is changing so rapidly that complexity is exponentially increasing. The globalization which increases connections across geographies and dependencies across fields fuels complexity through rapid pace of change. This is unprecedented and our old methods and philosophies are failing, failing miserably. The new world seeks and feeds on connections and change. Hence innovation is the new competitive advantage.
As we enter the last twenty percent of the first decade of the new millennium, a new reality is emerging - competition is not about thriving alone. One needs to collaborate to compete. A lone innovator most likely will not win the long-race, one needs to collaborate continuously with all the stakeholders in creating the change that add more overall value than creating zero-sum games of the past century. Your competitive advantage lies in co-creation. One needs to co-create with one’s customers, one’s complementors (a term borrowed from the book Co-opetition), one’s suppliers and even one’s competitors. This is a new world and it has its new ways. Everyone in this world wants to be creating something new, different and unique for oneself. If we provide our customers tools, modules and techniques to create products and services that our customers need, we will be more successful. How do we create this co-creation system in the new world of increasing complexity, increasing globalization and increasing innovation? Well, that’s the main question in the GIXBang world.

GIXBang World – Emergence of Co-Creationization

The Emergence of a New World – Co-Creationization
In August 2005, I was sitting in a group meeting with a Professor from one of the Ivy League Business Schools. In Bangalore, India, it is not every day one get to sit and work with the elite business gurus. I mentioned as a casual remark, that may be to understand and solve business problems using Information Technology (IT), we need to involve our clients in brainstorming. There was a loud No from the Professor. His logic- the customer will color the perception in the brainstorming session with what the customer already has faced and hence will reduce the brainstorming to non-optimal interaction.
Everybody in the room rejected the idea as soon as he said No. This is nothing new for me, as I am used to the usual reaction to anything different that will come up in discussions. We relish the process of nipping the idea in bud! We all wear the De Bono’s black hats – judge before it emerges. The stillborn output of dead brainstorming sessions, we all have seen, participated, and have done nothing about it – it is remarkable we keep on doing same meetings, in same way with same output. The Brainholes that our brainstorming sessions typically reduce to, indicate that we need different tools, techniques and methodologies with some structure to improve the efficacy of our Brainstorming sessions. “We” encompass – all organized human enterprises where problem solving is the core competence. This can be a software development project, a management problem, a research question, design of a new product, movie or advertisement, a manufacturing problem, a process improvement problem, a market expansion problem, a funds allocation problem, and so on. These issues are independent of any type of organization. Even in our family meetings we can observe the output of collective problem solving – typically driven and controlled by the head of the family.So back in August 2005, as soon as the Professor said no, and the body language of each one of the members in the room indicated my foolishness in creating this uncalled for perturbation, I knew that’s the way it has to be. An ability to work with our customers in a brainstorming session may be for half a day workshop is what we all really need. If done properly, one can get to the core of the issues with lot of solution directions thrown in by both sides. The amount of rework, labor burn, heart burn and dollar burn our current approaches lead to can be cut down to zero in a half day brainstorming session with our customers.Before the release of a recent Bollywood movie, the director giving an interview on the Television told that the movie has been shown to “interest groups” chosen from the target audiences of the movie. Further, some of their feedback, comments and suggestions have been taken up to change the movie. If we extend the trend - the director, writer and producer could have brainstormed with the group much before the movie started. The concepts of various story ideas could have been discussed with potential viewers and they could have been part of the process from the beginning. Better still, there could have been partial brainstorms, feedbacks and discussion sessions during the movie making so as to adapt the movie as per the inputs. This is the age of co-creation. The dawn of the age may be signified when “interactive movie production” becomes the new reality. This is after “interactive TV” and “interactive story writing” on the Internet is becoming a reality. The individual in the new world demands continuous involvement in the co-creation. The new world demands, defines and develops new ways. These are not the bland ways of making the world flat – it is really about thriving in the melting pots of creative juices. Evolving the interactions, connections, the networks, and the chaos into rapidly moving and changing structures where the value is not in any fixed static structure or organization. The value lies in the dynamic of the structure. The new thriving, creative and ever evolving world demands new ways to capture value and create value.Are we ready to Co-Create continuously!!!

Value Creation in the GIX Bang World

We are living in a rapidly globalizing world. In this shifting world, rules of the game can change anytime; success will come to those who adapt quickly to the new rules. This new world has been defined by Thomas L. Freedman [“Lexus and Olive Tree”] in contrast to the earlier era as, “While the defining measurement of cold war was weight – particularly the throw weight of missiles – the defining measurement of the globalization system is speed – speed of commerce, travel, communication and INNOVATION”. How fast you innovate and adapt to the globalization is the recipe for success.
As is common understanding, the best way to adapt to the new rules is to write these rules. In these highly competitive times, with extreme uncertainties and time compressions, it is the successful exploitation of ideas, i.e., Innovation, which can be the only competitive advantage. New ideas can come from -- other industries, your competitors, your employees or your customers.
With the plethora of ideas available it is essential that the organizations need to choose the right and relevant ideas to pursue in their quest for competitive advantage. This involves choice, hence decision-making. One of the greatest challenges of human decision-making methodologies has been to help the homo-sapiens in choosing the right path out of many alternatives under the conditions of partial, incorrect and stochastic information about the future. To pursue a particular idea (especially a new technological idea) with unknown returns on investment is becoming one of the most risky decision making problem in the new world.
This brings to the third leg of puzzle, the compleXity (X) of the world. Number of alternatives, time pressure, need for analysis, information de-coherence, connections and networks are increasing at an unprecedented rate. However, human mind has a limitation as discovered of being able to process information within 5 to 9 things as discovered by George A. Miller (1956) and described in the landmark paper Magical Number Seven plus minus two (http://psychclassics.yorku.ca/Miller/). Further there is a fundamental issue of framing the right problem before solving the problems; this is leading to an increasing depreciation of confidence of human beings on their minds. The result is the rapid explosion of complexity. The connections create value but dependencies create complexity, future is approaching us faster than history is leaving us, there is an increasing distance between user requirements of what they really need versus what they claim they want, and with every choice we make today we kill many possible futures.

Globalization, Innovation and complexity (GIX) are increasing simultaneously. This rapid acceleration - I call this the GIX Bang - on the lines of Big Bang. The GIX Bang is happening due to the three inherently coupled trends of increasing globalization, increasing complexity and increasing Innovation. However, these three are so deeply knotted with each other that one can’t have a model of GIX Bang. A mathematical model of GIX bang will involve coupled non-linear equations of rates of change of Globalization (G), Complexity (X) and Innovation (I). Of course, I am not proposing to create that model here. However let us look at the parameters that are impacting these three trends
G is impacted by connections (new ways of technological connectivity across the world), Value (economic, social, military, political, technological, human) across the globe that the connections are enabling, Global real time awareness that creates Ideas to increase globalization, Have-nots of the globalizing world are creating various barriers for controlling these connections which impact globalization adversely.
X is increasing due to dependencies which are global, in multiple dimensions, and much deeper with multiple feedbacks that can create pockets of chaos and pockets of order in the world which leads to more and more of possibility of new - the emergence phenomenon that we all know of.
I is the by product - the G and X interactions demand and will lead to more Innovations - it is the only way for all of us. Innovation feed on and feeds globalization; similarly Innovation reduces complexity and may be constrained by Complexity.
The question that becomes imperative is, “How to create Wealth and Value in the GIX Bang world”?

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