Technological leaps in multiple fronts create unprecedented opportunities to create new value for customer regardless of industrial domains. For example, sensors that are connected to information networks are developed frantically and new application areas are mushrooming. At the same time the prices of these components are decreasing rapidly supporting and opening avenues for new applications that have not been possible before. The simple example of monitoring temperature throughout the cold chain of food products is becoming feasible due to technical evolution and decreasing prices of solutions. This is but one simple example of how companies can experiment with new technical applications and seek for new sources of customer value thus creating competitive advantage.

Due to the increasingly complex technical systems the competition among companies is increasingly fought not between single companies but rather between networks or ecosystems of companies. This renders pivotal the need to manage the customer value creation and attainment of competitive advantage among all the players in the business ecosystem, not just in a single company. And furthermore, companies are increasingly dependent on each other’s operations and technical solutions. This interdependency creates latencies in developing new solutions and applications as companies need to navigate technical development not just in their own offering but also with multiple other actors. This kind of intertwined customer value creation and delivery requires a new approach to leadership as the competitive advantage and long-term profitability considerations need to include other actors from the ecosystem as well as the focal company itself.

As there are latencies in the development, the markets experience similar temporal frictions. This is partly due to the fast pace of technical evolution as mass markets are not able (or willing) to absorb the increasing amount of information regarding new technical solutions. End-users do not get enough or do not want the latest information of the latest solutions, they are skeptical about their functioning, and among competing alternatives they are hesitant on making their selections. From the market perspective the situation becomes increasingly complex as product life cycles have shortened and new solutions are poured into the marketplace. As a consequence, there is an acute need for the business ecosystems to outline clear arguments of the customer value that is created with new solutions.

In summary, corporate leaders should revise their mindset from creating competitive advantage of their own firms into attainment of systemic competitive advantage of their innovation ecosystems as a whole. This requires company boards to increase their inter-disciplinary bases, deep understanding of experimentation culture with their ecosystem partners, and upgrading their ability to react to changes and opportunities in their operating environment.

Writer Saku Mäkinen, Director of EMBA in Business Renewal,  works in the intersection of innovation management and competitive strategy. He is an expert in managing value creation, designing product strategy and competitive advantage.

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