Future Of Competition


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A summary of the key concept of the book "Future of Competition" by Dr C K Prahalad & Dr Venkat Ramaswamy

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Future Of Competition

  1. 1. Summary of Key Ideas
  2. 2. Changing Role of Consumer <ul><li>Information Access </li></ul><ul><ul><li>Consumer has access to unprecedented amount of information </li></ul></ul><ul><li>Global View </li></ul><ul><ul><li>Consumer has access to information across the globe </li></ul></ul><ul><li>Networking </li></ul><ul><ul><li>“ Thematic consumer community” in which individuals share ideas & feelings </li></ul></ul><ul><li>Experimentation </li></ul><ul><ul><li>Experiment with and develop products through Internet </li></ul></ul><ul><li>Activism </li></ul><ul><ul><li>Web as a powerful tool by which groups focused on issues seek corporate & government attention and promote reform </li></ul></ul>
  3. 3. The New Frame of Reference for Value Creation The new starting premise is that the consumer and firm Co-Create value, and so the Co-Creation experience becomes the very basis of value. The value creation process centers on individuals and their Co-Creation experiences.
  4. 4. Building Blocks of Co-Creation - DART <ul><li>D ialogue </li></ul><ul><ul><li>It focuses issues that interest both consumer & firm </li></ul></ul><ul><ul><li>It requires a forum in which dialogue can occur </li></ul></ul><ul><ul><li>It requires rules of engagement </li></ul></ul><ul><li>A ccess </li></ul><ul><ul><li>Goal of consumers is to have access to desirable experience </li></ul></ul><ul><li>R isk Assessment </li></ul><ul><ul><li>Risk disclosure to consumer and allow informed choice </li></ul></ul><ul><li>T ransparency </li></ul><ul><ul><li>To facilitate collaborative dialogue with consumer </li></ul></ul>
  5. 5. The New Dynamics of Co-Creation Co-creation challenges the traditional roles of the firm and the consumer. New framework is required for handling the emerging dynamics at the Points of Interaction between the consumer and the company.
  6. 6. The Co-Creation Experience (1 of 2) <ul><li>Company Think versus Consumer Think </li></ul><ul><ul><li>Co-creation of value exposes the disconnect between company think and consumer think at the “Point of Interaction” </li></ul></ul><ul><li>Dimension of Choice </li></ul><ul><ul><li>Co-Creation Across Multiple Channels </li></ul></ul><ul><ul><li>Co-Creation Through Options </li></ul></ul><ul><ul><li>Co-Creation Through Transactions </li></ul></ul><ul><ul><li>The Price-Experience Relationship in Co-Creation </li></ul></ul>
  7. 7. The Co-Creation Experience (2 of 2) <ul><li>Traditional Exchange </li></ul><ul><ul><li>Goal of interaction is value extraction </li></ul></ul><ul><ul><li>Locus of interaction is at the end of value chain </li></ul></ul><ul><ul><li>Quality is based on what firm has to offer </li></ul></ul><ul><li>Co-Creation Experience </li></ul><ul><ul><li>Goal of interaction is value creation as well as value extraction </li></ul></ul><ul><ul><li>Interaction can take place repeatedly, anywhere and anytime in the system </li></ul></ul><ul><ul><li>Quality of consumer-company interactions and co-creation experience </li></ul></ul>
  8. 8. Innovating the “Experience Environment” Business managers can compete in myriad ways by discovering new opportunities through an individual centric lens of choice in consumer-company interactions, and carefully managing the quality of co-creation experience.
  9. 9. Experience Innovation (1 of 3) <ul><li>Innovating Experience Environment </li></ul><ul><ul><li>Offer Opportunities for consumer to Co-Construct their own-experiences </li></ul></ul><ul><ul><li>Recognize that every consumer does not always want to Co-Create </li></ul></ul><ul><ul><li>Facilitate new opportunity afforded by emergence of new technology </li></ul></ul><ul><ul><li>Accommodate & involve consumer communities </li></ul></ul><ul><ul><li>Engage consumer emotionally & intellectually </li></ul></ul><ul><ul><li>Recognize social & technical aspect of Co-Creation experience </li></ul></ul>
  10. 10. Experience Innovation (2 of 3) <ul><li>Emerging Technology Capabilities as Experience Enablers </li></ul><ul><ul><li>Miniaturization </li></ul></ul><ul><ul><li>Environmental Sensing </li></ul></ul><ul><ul><li>Embedded Intelligence </li></ul></ul><ul><ul><li>Adaptive Learning </li></ul></ul><ul><ul><li>Networked Communication </li></ul></ul>
  11. 11. Experience Innovation (3 of 3) <ul><li>Levers for Experience Innovation </li></ul><ul><ul><li>Granularity – giving consumer the choice </li></ul></ul><ul><ul><li>Extensibility – established function in new way or create entirely new functionality </li></ul></ul><ul><ul><li>Linkage – recognition that events connect in multiple ways </li></ul></ul><ul><ul><li>Evolvability – capturing the learning & using it to develop experience environment </li></ul></ul><ul><li>Experience Innovation & Efficiency </li></ul><ul><ul><li>Two side of the same coin </li></ul></ul>
  12. 12. Unique Value for Each Individual To innovate experience environments that allow for co-creation of unique value for each individual, we must appreciate what constitute personalized co-creation experience.
  13. 13. Experience Personalization (1 of 2) <ul><li>Key Dimensions of Personalized Co-Creation Experience </li></ul><ul><ul><li>Events </li></ul></ul><ul><ul><li>Context of Events </li></ul></ul><ul><ul><li>Individual Involvement </li></ul></ul><ul><ul><li>Derivation of Personal Meaning </li></ul></ul>
  14. 14. Experience Personalization (2 of 2) <ul><li>Traditional Customization </li></ul><ul><ul><li>Segment of one </li></ul></ul><ul><ul><li>One off-products and services </li></ul></ul><ul><ul><li>Features, menus, components, costs, speed </li></ul></ul><ul><ul><li>Fulfillment of variety of customized products & services through modularity </li></ul></ul><ul><ul><li>Configuration & fulfillment services for build-to-order processes </li></ul></ul><ul><li>Experience Personalization </li></ul><ul><ul><li>Experience of one </li></ul></ul><ul><ul><li>Personalization of interactions with the experience environment </li></ul></ul><ul><ul><li>Events, context of events, individual involvement & personal meaning </li></ul></ul><ul><ul><li>Facilitating a variety of personalized experiences through heterogeneous interactions </li></ul></ul><ul><ul><li>Infrastructure to support an experience network </li></ul></ul>
  15. 15. Infrastructure for Personalized Co-Creation What kind of experience network do we need? What would such network look like, and how would it function? This infrastructure should enable managers to compete on experience.
  16. 16. Experience Networks ( 1 of 2) <ul><li>Building Experience Network </li></ul><ul><ul><li>Aim is to allow consumers to easily interact with experience environment </li></ul></ul><ul><ul><li>Has a technical and social dimension </li></ul></ul><ul><ul><li>Nodal Firms can create the experience enablers </li></ul></ul><ul><ul><li>Rapid Resource Reconfiguration </li></ul></ul><ul><ul><li>Access to Competence </li></ul></ul><ul><li>Experience Quality Management </li></ul><ul><ul><li>Quality is associated with individual co-creation experience </li></ul></ul><ul><ul><li>Accommodate heterogeneity of consumer experiences </li></ul></ul><ul><ul><li>Co-creation protocols, disciplines and rules of engagement </li></ul></ul><ul><ul><li>Each outcome is unique </li></ul></ul>
  17. 17. Experience Networks ( 2 of 2) <ul><li>Migrating to Experience Networks </li></ul><ul><ul><li>Continuous co-creation of experience at point of interaction </li></ul></ul><ul><ul><li>Employee as experience gateway </li></ul></ul><ul><ul><li>Consumers to initiate experience on demand </li></ul></ul><ul><ul><li>Accommodating consumer heterogeneity is crucial </li></ul></ul><ul><ul><li>Experience network to provide mechanism for dialog and ways to manage risk </li></ul></ul><ul><ul><li>Balance consumer’s desire for access with company’s desire for control </li></ul></ul><ul><ul><li>To win consumer trust requires transparency </li></ul></ul><ul><ul><li>Managers need capacity to react quickly </li></ul></ul><ul><ul><li>Effective experience network requires both social and technical enablers of experience </li></ul></ul><ul><ul><li>Selective activation of competence base </li></ul></ul><ul><ul><li>Heterogeneous individual-centric experience </li></ul></ul>
  18. 18. Changing Perspective of the “Market” Is the traditional marketplace still the locus for exchange between the firm and the consumer, and place where the firm extracts value from the consumer? How does meaning of market change in the light of the new paradigm?
  19. 19. Market as a Forum (1 of 2) <ul><li>Heterogeneity of Interaction </li></ul><ul><ul><li>Sophistication </li></ul></ul><ul><ul><li>Eagerness to Engage in Dialogue </li></ul></ul><ul><ul><li>Tolerance for Irritants </li></ul></ul><ul><ul><li>Willingness to Switch Suppliers & Products </li></ul></ul><ul><li>Stages in Co-Shaping Expectations & Experiences </li></ul><ul><ul><li>No Focus </li></ul></ul><ul><ul><li>Reactive </li></ul></ul><ul><ul><li>Responsive </li></ul></ul><ul><ul><li>Anticipatory </li></ul></ul><ul><ul><li>Shaping </li></ul></ul><ul><ul><li>Co-shaping individual experience </li></ul></ul>
  20. 20. Market as a Forum (2 of 2) <ul><li>Migrating to Market as a Forum </li></ul><ul><ul><li>The firm and the consumer converge </li></ul></ul><ul><ul><li>Supply is associated with facilitating a unique consumer experience </li></ul></ul><ul><ul><li>Value is co-created at multiple points of interaction </li></ul></ul><ul><ul><li>Consumer and consumer communities can initiate a dialog among themselves </li></ul></ul><ul><ul><li>Consumer choose the nodal firm and the experience environment to interact with </li></ul></ul><ul><ul><li>Trust and stickiness emerges from compelling experience outcome. </li></ul></ul><ul><ul><li>Consumers are competitors in extracting value </li></ul></ul><ul><ul><li>Experience Is the Brand </li></ul></ul>
  21. 21. Experience based view of Economic Theory The new frame of value creation challenges the traditional economic view of the market. It also creates new competitive space for firms and the need for building new strategic capital.
  22. 22. Building New Strategic Capital <ul><li>Source of Competence </li></ul><ul><ul><li>Corporation  + Extended Enterprise  + Consumer </li></ul></ul><ul><li>Shifting Locus of Innovation </li></ul><ul><ul><li>Product Space  Solution Space  Experience Space </li></ul></ul><ul><li>Building New Strategic Capital </li></ul><ul><ul><li>Building Bridges Between Managers & Consumers </li></ul></ul><ul><ul><li>Facilitating Rapid Knowledge Creation </li></ul></ul><ul><ul><li>Strategy as Discovery </li></ul></ul><ul><ul><li>Building New Capabilities for the Future </li></ul></ul>
  23. 23. Changing Role of Manager What are the challenges & opportunities the new competitive space presents? What are the constituents of the strategic capital that need to be created? What are the new capabilities that will be required?
  24. 24. Manager as Consumer (1 of 2) <ul><li>Providing Manager with “Embedded Intelligence” at Point of Company-Consumer Interaction </li></ul><ul><li>Building the Managerial Environment </li></ul><ul><ul><li>Rapid Resource Reconfiguration </li></ul></ul><ul><ul><li>Access to Information in Context </li></ul></ul><ul><ul><li>Capacity to Create New Knowledge and Insights </li></ul></ul><ul><li>Recognizing Managerial Heterogeneity </li></ul><ul><ul><li>Sophistication & Domain Knowledge </li></ul></ul><ul><ul><li>Willingness to Operate in Real Time </li></ul></ul><ul><ul><li>Propensity & Need for Dialogue </li></ul></ul><ul><ul><li>Willingness to Experiment </li></ul></ul><ul><ul><li>Risk Preference </li></ul></ul>
  25. 25. Manager as Consumer (2 of 2) <ul><li>Capability of the Managerial Environment </li></ul><ul><ul><li>Consistency of Decentralized Action </li></ul></ul><ul><ul><li>Visualization of Experience </li></ul></ul><ul><ul><li>Aggregation & Disaggregation of Events & Metrics </li></ul></ul><ul><ul><li>One System, Multiple Experiences </li></ul></ul><ul><ul><li>Ability to Ask New & Non-routine Questions </li></ul></ul><ul><li>Enabling Managers to Evolve with Consumer Experience </li></ul><ul><ul><li>Personalized Alerts </li></ul></ul><ul><ul><li>Contextual Information </li></ul></ul><ul><ul><li>Real-time Collaboration </li></ul></ul><ul><ul><li>Rapid Resource Reconfiguration </li></ul></ul><ul><ul><li>Real-time Monitoring </li></ul></ul><ul><ul><li>Experience-based Operating Rules & Procedures </li></ul></ul>
  26. 26. Knowledge Environment When heterogeneous customers interact with a firm, they will make demands that cannot be predicted. How can the organization combine the experience and skills of its employees to co-create new knowledge?
  27. 27. Rapid Knowledge Creation (1 of 2) <ul><li>Building a Knowledge Environment </li></ul><ul><ul><li>Competitive discontinues put premium on new knowledge creation </li></ul></ul><ul><ul><li>Globalization puts a premium on access to competence across the firm, since redundancy increases cost </li></ul></ul><ul><ul><li>Knowledge is different from information. Knowledge, like experience, is inherent in the individual and cannot be separated from the individual. </li></ul></ul><ul><ul><li>The creation of new knowledge requires that individuals have access to competence, not just databases </li></ul></ul><ul><ul><li>The knowledge environment is as much about people as about technology </li></ul></ul><ul><ul><li>The knowledge environment must be woven into the culture of the organization </li></ul></ul>
  28. 28. Rapid Knowledge Creation (2 of 2) <ul><li>Catalyzing Tacit Knowledge Versus Managing Explicit Information </li></ul><ul><ul><li>Creating Access to Competence for Knowledge Creation </li></ul></ul><ul><ul><li>Co-Constructing & Codifying Knowledge </li></ul></ul><ul><ul><li>Harmonizing Multiple Streams of Knowledge </li></ul></ul><ul><ul><li>Engaging the Total Organization </li></ul></ul><ul><ul><li>Co-Evolving the Knowledge Environment </li></ul></ul><ul><li>Seven Layers of Knowledge Environment </li></ul><ul><ul><li>Layer 1: Training & Development </li></ul></ul><ul><ul><li>Layer 2: Information Sharing </li></ul></ul><ul><ul><li>Layer 3: Using Information </li></ul></ul><ul><ul><li>Layer 4: Leveraging Sources of Competence </li></ul></ul><ul><ul><li>Layer 5: Mobilizing Action Teams </li></ul></ul><ul><ul><li>Layer 6: Facilitating Discovery </li></ul></ul><ul><ul><li>Layer 7: Co-Creating Value </li></ul></ul>
  29. 29. Strategy – a Process of Innovation & Discovery In the world of co-creation, strategy is a process of continuous experimentation, risk reduction time compression, and minimizing investment while maximizing market impact.
  30. 30. Strategy as Discovery (1 of 3) <ul><li>Collaboration & Strategy </li></ul><ul><ul><li>Improved Cycle Time & Cost Reduction </li></ul></ul><ul><ul><li>Achieving Scale & Scope </li></ul></ul><ul><ul><li>Access to Knowledge </li></ul></ul><ul><ul><li>Investment Leverage </li></ul></ul><ul><ul><li>Method for Change </li></ul></ul><ul><ul><li>Partitioning Risk </li></ul></ul><ul><li>The Risk & Cost of Collaboration </li></ul><ul><ul><li>What Information Should be Shared? </li></ul></ul><ul><ul><li>Supply Chain Volatility – Who Pays the Price? </li></ul></ul><ul><ul><li>Who Extracts the Value from the New Efficiency? </li></ul></ul><ul><ul><li>Who Bears the Burden of Learning Multiple Systems? </li></ul></ul><ul><ul><li>Who Owns Intellectual Property that is Co-Created through Collaboration? </li></ul></ul><ul><ul><li>Who Bears the Costs of Creating IT Capabilities? </li></ul></ul>
  31. 31. Strategy as Discovery (2 of 3) <ul><li>Building the New Capacity to Collaborate & Compete </li></ul><ul><ul><li>The ability to provide a compelling view of the opportunity, so that the firm can be the nodal firm </li></ul></ul><ul><ul><li>An infrastructure that spans the network and can selectively activate any combination of firms </li></ul></ul><ul><ul><li>An information infrastructure within the experience network that is transparent and operates in real time </li></ul></ul><ul><ul><li>A managerial mind-set and skill that enables participants to access competence and build consensus rapidly within the experience network </li></ul></ul>
  32. 32. Strategy as Discovery (3 of 3) <ul><li>Role of Company’s Leadership </li></ul><ul><ul><li>Invest in developing the capacity to compete on experiences </li></ul></ul><ul><ul><li>Develop and articulate a clear point of view about the future </li></ul></ul><ul><ul><li>Reinforce the mind-set and skill set of managers </li></ul></ul><ul><ul><li>Foster internal collaboration </li></ul></ul><ul><ul><li>Support and nurture the knowledge environment </li></ul></ul><ul><li>Role of Line Managers </li></ul><ul><ul><li>Have a deep understanding of the strategic intent </li></ul></ul><ul><ul><li>Understand relationship between their job & strategic intent </li></ul></ul><ul><ul><li>Continually monitor the experience of customers, suppliers & employees </li></ul></ul><ul><ul><li>Continually adjust actions as demanded by change in environment </li></ul></ul>
  33. 33. New Capacity to Govern and Compete We must re-examine every functional skill in the organization and ask: Are the assumptions behind this function and its management consistent with the new requirement. What new capabilities are needed?
  34. 34. Building New Capabilities for Future (1 of 2) <ul><li>Product Design & Development </li></ul><ul><ul><li>Experience Design </li></ul></ul><ul><ul><li>Evolvability </li></ul></ul><ul><li>Information Technology </li></ul><ul><ul><li>Event Orientation </li></ul></ul><ul><ul><li>Contextual Navigation </li></ul></ul><ul><ul><li>Multidirectional Transparency </li></ul></ul><ul><ul><li>Unified View </li></ul></ul><ul><ul><li>Support for Hypothesis Generation & Evolution of Next Practices </li></ul></ul><ul><ul><li>Application Portfolio Approach </li></ul></ul><ul><ul><li>Accommodation of Heterogeneity in Interactions </li></ul></ul><ul><ul><li>Balance between Innovation & Efficiency </li></ul></ul>
  35. 35. Building New Capabilities for Future (2 of 2) <ul><li>Becoming an Experience-Centric Company: The Managerial Challenges </li></ul><ul><ul><li>Managing Collaboration </li></ul></ul><ul><ul><li>Managing Migration Paths </li></ul></ul><ul><ul><li>Managing the Mind-Set </li></ul></ul><ul><ul><li>Managing the Skill-base </li></ul></ul><ul><ul><li>Managing Teams </li></ul></ul><ul><ul><li>Managing Reaction Time </li></ul></ul><ul><li>Internal Governance Dilemma </li></ul><ul><ul><li>Growing Complexity of Networks </li></ul></ul><ul><ul><li>Need for Collaboration Agenda </li></ul></ul><ul><ul><li>Coping with Rapid Change in the Competitive Landscape </li></ul></ul><ul><ul><li>Zero Latency Decentralization </li></ul></ul><ul><ul><li>Balancing Flexibility & Accountability </li></ul></ul>
  36. 36. Welcome to the Future of Competition A world of co-creation is emerging on the horizon with opportunity to co-shape and co-create the future.