Thirty years ago, Michael Porter published his book on Competitive Strategy, and gave businesses a new set of tools with which to make strategic decisions so they could outperform their competitors. It provided leaders with a basic understanding how they could gain an advantage over competitors by maximizing the bargaining power against customers, suppliers, substitute goods, and new market entrants. Through efficiencies in each ”force” companies can achieve higher margins and use them to invest in still greater efficiencies through a virtuous cycle.
Several years later, Rita McGrath observed that as change keeps accelerating, we are reaching “The End of Competitive Advantage. She notes that challenge is to “Keep Your Strategy Moving as Fast as Your Business”. The net result is that strategies become short-term focused, much like tactics.
The covid pandemic drew our attention to the limit of efficiencies to gain strategic advantages. With supply chains frozen, having the most efficient system for producing products from one or two main suppliers in China, will not enable an American company to meet its customers.
So what’s a company to do? In Your Strategy Must Reach Beyond Markets, Greg Satell offers the 21st century solution for longer-term strategy: focusing on ecosystems. “To compete in a networked world, you must constantly widen and deepen connections. Instead of always looking to maximize bargaining power, you need to look for opportunities to co-create with customers and suppliers, to integrate your products and services with potential substitutes and form partnerships with new market entrants”.
In the 21st century, power no longer resides in the top of value chains, but at the center of the networks where members can collaborate for the new competitive advantage. The key asset is connections; we need to establish them, nurture them, and enable all parties to profit from them.
As you look forward to greater success in 2025 and beyond, which ecosystems are you focused on? How are you going to nurture them? What key metrics are you going to use to measure success? How closely are you going to monitor progress so you can learn from failure?
Share with us what you’re doing? The value of our ecosystem is we can learn from each other, as individuals, teams, families, companies and communities!