Part scientist and part strategist, John Seely Brown’s views are distinguished by broad view of the human context in which technologies operate and healthy scepticism about whether change always represents genuine progress. He talks here about how accelerated capability building as new source of competitive advantage can lead managers to discard their short-sighted focus on existing resources and fundamentally rethink strategy development and the nature of the firm.
In 2000, along with Paul Duguid, Brown co-authored The Social Life of Information and most recently he co-authored with John Hagel The Only Sustainable Edge, which argues that as growth opportunities migrate to the edges of companies, industries and the global economy, traditional strategies are less effective.
Can you give us the essence of your worldview of how companies need to pursue competitive advantage in global economy?
It’s that new opportunity and new imperative – the acceleration of capability building – will shift our individual and collective mindsets from worldview that focuses on static, zero-sum relationships to one that emphasises dynamic non-zero-sum relationships. As we adopt these different perspectives, we’ll find that most of our enterprises today are fundamentally lacking.
Static, zero-sum worldviews generally arise when people focus on the allocation of existing resources. These have fixed qual-ity, and with few exceptions if one party acquires resource, then other parties are deprived of it. This worldview is natural orientation of large, well-established players. They become more concerned with defending existing resources because they have lot to lose on this front, compared with the opportunity to create even more resources. And with its 70-year focus on equilibrium states, the economics profession has reinforced this orientation. These are easier to model quantitatively, but these models over-simplify the world, including the key assumptions that capabilities and consumer preferences are given.
But if we recognise that capabilities are not given, and can quickly be built, then our worldview undergoes fundamental shift. Now, we become less concerned with the distribution of current proceeds and more focused on the creation of new proceeds. The relationships that were previously viewed as competitive become more complementary, and we begin to realise that we need other specialised players if we want to deepen our own capabilities faster. The new value we can create together moderates the concern about the distribution of proceeds. Physical and even intellectual property becomes less central because this property is fixed in its capabilities.
So we begin to turn our attention more to the people and companies we work with, because they hold the key to the acceleration of creatively building capability – and therefore the creation of new value. By discovering new uses for the physical and intellectual property we own, new capabilities can help make this property even more valuable.
Traditionally, we viewed comparative advantage as the natural resources and labour costs that were relatively stable over time. As we begin to view comparative advantage in talents, skills and practices, we realise that the advantage is not fixed, it can shift rapidly as local ecosystems help accelerate capability building. The global patterns of production and trade will become much more dynamic.
You’ve written that in the new global economy, specialisation is crucial to competitive advantage. Why?
The focus for value creation and value capture is shifting from product and financial markets to talent markets. Enterprises that can do the most effective job of accelerating the building of capability will create and capture value – the rest will fall by the wayside. This will become the mandate and organising rationale.
In line with this, specialisation has been an important engine of capability building and productivity gains from our earliest history. The emergence of agricultural societies 12,000 years ago depended on specialisation. Then the industrial revolution in the late 18th and early 19th centuries was made possible by even greater specialisation. We are now seeing another wave of dynamic specialisation building momentum and offering the prospect of productivity breakthroughs on global scale. An example is health care institutions which are realising impressive productivity gains by specialising in treating only certain types of illness.
Important advances in technology infrastructure have been crucial to each wave of specialisation, especially in the communications arena since specialisation requires connectivity and effective methods of coordination. If enterprises cannot depend on other specialised entities to complement their own activities, they will avoid specialisation themselves and suffer productivity losses as result. But connectivity requires more than just communications infrastructure. Trade, financial and immigration policies all come together to determine the level and reliability of connectivity. By connecting with other specialised enterprises we create the opportunity for leveraged capability building – getting better faster by working with others.
What key success factors should companies be targeting in order to get better faster?
The three cornerstones are dynamic specialisation, connectivity and leveraged capability building. These come together to help enterprises get better faster. The convergence of these three elements creates powerful dynamic as enterprises, regions and even countries can benefit from orchestrating these elements to move quickly from relatively limited capabilities to leading-edge capabilities, especially in areas of specialisation. Patterns of economic development around the world over the next several decades will be shaped increasingly by the relative convergence of these elements.
As this convergence unfolds, decision makers will need to avoid the trap of focusing narrowly on the absolute rate of capability building. Success in the global economy will hinge on an even more dynamic notion – the relative rate of capability building, especially in comparable areas of specialisation. If one area is building capability at faster rate than comparable areas, it will overtake the others, and acceleration effects are likely to further expand the gap over time. Capability building also tends to be path dependent, so laggards have difficult time trying to copy the process innovations of leaders.
So at the company level, speed is vital in pursuing advanced capability building.
Yes, and as global competition intensifies, managers who see their capabilities as static will find themselves rapidly outflanked by more aggressive competitors. The challenge is to accelerate and convert capability building into performance improvement as rapidly as possible, and this across enterprises.
What do you mean when you say growth opportunities migrate to the edges of companies and industries?
You can picture this as similar to the open-innovation model used in product and technology innovation processes. Open innovation rewards those who reach beyond their institutional boundaries and tap into specialised expertise distributed across many enterprises to strengthen product innovation. This open-innovation mindset will help you think about accelerating capability building in general, not just about product innovation, but also about process and business model innovation.
It builds on the insight attributed to Bill Joy, one of the founders of Sun Microsystems, that, “there are always more smart people outside your company than within it”. By heeding this advice companies will start finding creative new ways to connect with range of other companies to accelerate their own capability building.
In pursuing capability building, how can firms best balance speed and long-term direct
