Sunday, August 9, 2015

Creating Competitive Advantage through Diversity and Information

Competitive advantage is commonly defined as “an advantage that an individual/firm has over its competitors”. While very generic, the definition is very insightful, it compares an entity not to itself but to the rest of the population, highlighting how this self is different from the remainder of the population, explicitly calling them competition.  

From the moment a human being is born, we are mentally wired to compete for our mother’s attention and resources. As a baby, we might not be aware of our surroundings, and perhaps more importantly, we don’t care. We define our needs as absolute, and whenever these needs are not met, we cry.

As we grow-up and mature, the manifestation of how we intend to fulfill our needs might change but the same nature remains: we are always competing with people around us, pretty much on everything. A kid with a natural ability for numbers might want to be the “smartest” kid in the classroom, while an athletic kid might compete on different sports, and maybe one more can excel in making relationships and compete for class president.

Reality is that we are all born different and each of us has unique gifts or natural talents that give us a competitive advantage in particular areas. However, as you grow-up, you start to realize that nothing is absolute and you cannot rely on your natural talents forever. Other’s will improve theirs through hard work & creativity which will generally lead to innovation.

Business organizations are very akin to individuals, given that they are created, run and controlled by individuals. Individuals get together in companies to form new structures that combine the competitive advantages of individuals to form something bigger than the sum of its parts.  By being able to provide a medium for multiple individual talents to come together and compete as one in a “business marketplace”

This blog will postulate that the most successful firms take advantage of two principles to further create competitive advantage: 1) Diversity and 2) Information. Let us explore each of them separately.

Diversity: it is incredible that even with 7+ Billion humans on Earth, each of us continues to be unique. We are born with a specific set of gifts that are shaped & developed by where and how we were raised. The different experiences that we all go through as we grow-up leave behind specific learnings which when properly leveraged with talents from other individuals’ create a unique value proposition that is incredible hard to replicate by a single individual or a group of similar individuals.

Information: as individuals we shape our perception of the world through the information that we receive. However, as we start maturing, we start setting-up filters on that information that protect us from the “wild” world. It is a natural outcome of this process after a while for people to stop processing new information and focus on what they know & like. We carry our assumptions and our experiences forward, trying to fit all new situations that we might find in life to a template of a past situations and we tend to make decisions based on gut feelings rather than hard facts.

Diversity and information are tightly coupled because in order to effectively use information for decisions, you need to overcome many obstacles. Surprisingly the obstacles for effectively leveraging diversity and information are very similar and can be summarized in two fears:

Fear of unknown: we all fear what we don’t know, and typically both being inclusive of diversity and using information require us to take a leap of faith, by trusting new paradigms that take us out of comfort zone. We need to control our fears and be reasonable and have confidence in the outcome of the process which we might not be able to immediately see nor it is familiar  

Fear of change: once we get comfortable with something, we don’t want to let it go as we don’t know if what is coming next will be better than what we have today. It takes real effort and some bravery to face change and convince yourself that this is required to continue to grow

Early on this blog, I postulated that we are wired to compete from birth using our natural talents; however, in order to effectively compete we need to do it as an organization, not as individual, and in order for organizations to be competitive, they need to rely on diversity and information which requires the individuals within the organization to overcome their fears.

Getting to this level of personal maturity is not easy, our journeys are filled with obstacles – most of them created by ourselves over the years – but it is the intent that matters and results will show along the way.

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