What Is A Competitive Advantage?: Steve Jobs, Apple, and Nondecomposable Design - Strategy Saturday

Описание: What a competitive advantage? A competitive advantage is where a firm possesses some attributes or features that allow them to offer better produces or services than a comparable rival firm.

What is competition? A competitive advantage implies that firms compete in an environment. What is the mean of competition in this framework? Generally, most people assume that competition in this type of environment is a zero-sum game. That is, that resources taken from one firm are given to another. This assumption only works if the firms are non-complementary and resources are somewhat fixed. However, this might be a strong assumption, particularly in environments that compete on knowledge (which are most environments).

How does a company establish a competitive advantage? A company can establish a competitive advantage when they have some attributes that allow them to serve the customer better than its competitors. Competitive advantages that firms require to get these are often fleeting, and a company achieves sustainable competitive advantage when it can possess a competitive advantage for a long time. Often, we will talk about a company possessing resources that are valuable, rare, inimitable, and non-substitutable (Jay Barney first thought of this idea). Moreover, these resources have to be organized in such as way that firms can take advantage of them. If you possess these resources, you can have a sustainable competitive advantage.

A perhaps accurate way to possess a competitive advantage, which is not talked about as much in the textbooks, is to think of knowledge possessed within the firm in terms of complexity.

The is a model that we use in organizations, called an NK model, first developed in ecology by Kauffman. The logic argues that knowledge sets possessed within firms can be arranged in terms of complexity. There are N nodes and K interactions between these nodes. The more nodes and interactions, the model complicated the knowledge that firms possess. Herbert Simon pointed out that some problems cannot be solved, and these are called nondecomposable problems because they have so many nodes and interactions.

In my view, and probably the view of Nickerson and Zenger (2004), is that a firm possesses a sustainable competitive advantage when they work on, are part of, and solve non-decomposable problems. It is very difficult to work on these problems without being in an organization that takes advantage of these kind of problems.

For example, Steve Jobs, the creator of Apple, created most of their products as closed stand-alone products that where highly interconnected in design. It was very difficult for anyone to understand how to create this product, and it was very difficult to replicate the culture of Apple.

Check out:

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References:

Nickerson, J.A., T.R. Zenger. 2004. A knowledge based theory of the firm - The problem-solving perspective. Organization Science. 15(6) 617-632.

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