How to Create Sustainable Competitive Advantage in the Rapid Imitation Economy
Whether you are a startup or an established business, if you are only thinking about product innovation, then your days are numbered in today’s Rapid Imitation Economy. No matter how innovative or cool your product is, you are likely to see a copycat with a similar version of that product in less than a year. So, what do startups and established businesses, which have got innovative or unique products, got to do? How can startups and established businesses achieve sustainable competitive advantage in today’s Rapid Imitation Economy (RIE)? If not sustainable competitive advantage, how can organizations at least achieve transient competitive advantage?
The answer lies in business model strategy and innovation. To quickly achieve sustainable or transient competitive advantage, an organization must continually focus and innovate on its value sharing (profit) model, which is one of the three sub-models of a business model. Although businesses may appear different within and across industries, the “skeletal structure” or DNA-template of every business is the same. The template of every business model or living system has 3 sub-models: Value Creation Model; Value Proposition Model; Value Sharing (Profit) Model; see http://goo.gl/FVqKER
Each sub-model may be further divided into “building blocks.” For instance, a profit model consists of a “cost” building block, a “revenue” building block and a “profit” building block. To achieve transient or sustainable competitive advantage, the network of the 3 main parts of a business model must grow and be aligned with present and future environments. A robust business model is internally as well as externally stable, flexible, and adaptive. But, how specifically can a startup or an established business simply innovate on its business model while achieving competitive advantage?
An innovator has 3 main categories of options for Business Model Disruption: Value Creation Disruption, Value Proposition Disruption, and Value Sharing (Profit) Disruption. Although in theory, one could start innovating using any of these sub-models, my suggestion is to start with the Value Sharing (Profit) Model. Thereafter, the Value Proposition Model and Value Creation Model can be derived and field-tested for alignment with the Profit Model as well as Industry and Global Environments. This view is consistent with tenets of Rita McGrath’s Discovery-Driven Growth. The rationale is that profit is the oxygen of a business: Without profit (or capital injection), a business dies. And as Stephen Covey would have said, “Begin with the end in mind.” Nevertheless, I have presented 51 Business Profit Patterns that cover the 3 sub-models and facilitate the process of business model innovation; see http://goo.gl/FVqKER