Posted on 24 August 2011.
What is it that really makes the difference when it comes to being successful in business and be the leader in your industry?
If one digs behind the machinery in the modern day market economy there seems to be some common denominators and economics professor and author Kjell A Nordström has some noteworthy insights on the topic which I have synthesized.
In advanced economies approximately 70% – 80% of the work is done through our intellects, which means that we have transitioned into what is termed as a knowledge economy. Peter Drucker, the management guru, was the first to coin the phrase “knowledge worker” and the knowledge economy in 1959 already! And he was one of the first ones to realize the shift our society would take in the decades to come. Keeping that in mind, Nordström points out that Karl Marx was right – that workers should own their means of production, and in a modern economy they do as the work is produced by your intellect – or the brain if we prefer to be more clinical.
But why is this important?
It’s important because for a business to find itself grossly successful it needs to create what Nordström calls a temporary monopoly, and a temporary monopoly is derived from innovation and innovation is created by people. So if you understand people and how to foster an environment that is conducive for innovation to take place – then the odds are on your side.
Temporary monopoly, innovation or whatever you chose to call it all revolves around how successful companies have managed to develop and communicate a perception of uniqueness of what they are doing. The objective should be to achieve these temporary monopolies and hold on to them for as long as possible! That is the key to unlock the potential of a market economy.
As just mentioned, temporary monopolies are born out of innovation but there is a significant hurdle to reach innovation because it can’t be manufactured. For innovation to occur there needs to be experimentation which will result in failures, mistakes and rejections in the process. As discussed in this post, failure is not rewarded.
Therefore, if the system, infrastructure or culture in a company is not set-up properly to handle failures innovations will become considerably harder to achieve. To get innovation, people must be given the chance to experiment and they’re going to create a mess around them so they have to be in an environment that is flexible enough to handle it.
There examples of companies that are doing very well job of this today, obvious examples Apple, Google and Facebook. They have managed to create a temporary monopoly, a perception of uniqueness that competitors find hard to out-compete. Non-technology examples would be Ikea, Virgin and Zappos.
As a means to bring about innovation in a company Nordström proposes two different strategies:
A “fit” business refers to a company that can quickly adapt itself to meet the changing market dynamics and readily reacts to consumer trends or competition more effectively than its competition.
A “sexy” business refers to a company that appeals to human emotions by creating a connection or a feel between the customers and the product.
Where you actually make the difference and how well innovation is fostered comes down to how the company itself is structured and how the people in the company are managed. Nordström emphasizes this by saying that organizing is the art of achieving extraordinary things with ordinary people – or to put it in other words – creating conditions within the company that enables a constant flow of creativity. This is not achieved by rigid social hierarchical pyramids. The company needs to be different and work in new ways.
This is where I can actually bring up a concept that I learned in my management class – the learning organization, and I quote directly from my old textbook “An organization that has developed the capacity to continuously learn, adapt and change”.
This is important to take quite literally because creativity cannot be forced upon people, it requires resources, time and reflection. That, and in combination with the increasing difficulty to differentiate yourself in the marketplace forces you to stand out. You have to invent something that the world has never seen before – and it needs to be a unique selling point that is not based on technology as that will be copied in an instance.
The average never wins. It never has and never will. But if we are willing to take one risk, break one rule, disregard one norm there is at least a chance to create a short-term monopoly and make a little bit of money.
For more information on Kjell Nordström and his ideas and concepts check him out Amazon here.