Companies & Industries

The New Calculus of Competition


Too often what passes as an innovative new product is in reality an unimpressive alteration of someone else's breakthrough

Posted on Harvard Business Review: January 17, 2011 2:44 PM

If there's one phrase I might use to describe the global economy's malaise, it's this: "value" (and possibly values) of little worth.

To make my point, consider this scorcher of a post from Helen Walters, one of my favorite authors, the former editor of Innovation and Design at BusinessWeek, about the annual Consumer Electronics Show:

"The Consumer Electronics Show closes today, after four frantic days in Las Vegas in which about 20,000 new consumer technology products were unveiled to an audience that last year attracted more than 125,000 people. This year, Samsung alone announced 75 new products.

I wasn't there, but rather monitored announcements from a distance. And each one met a similar response: "What?" followed by, "But why?"

I honestly don't want to knock the hard work of executives who are struggling to survive in a terrible economy. But really. 20,000 products? Each one the result of hours, days, weeks, months of meetings and discussions and agonized decision making. Each one apparently accompanied by a breathless press release describing how it represents genuine innovation, not to mention fabulous design. And yes, some of the products will probably even be a welcome addition to our gadget-laden homes. But this as the face of modern day innovation?"

She's right — and it's a criticism that might be applied to nearly every moribund industry under the sun.

In my experience, when most boardrooms — and most governments — consider what it means to be competitive, after much wrangling, head-scratching, and brow-mopping powerpoint shuffling, the answer that emerges is all too often a minor variation on a tried, tested — and tired — theme: contesting a lowest common denominator.

You probably know the leaden, efficiency-seeking score: do it cheaper, faster, bigger. Find a cheaper country to outsource to. Find an even cheaper "input" to substitute for a once high quality ingredient (hi, high fructose corn syrup). Restructure, reorganize, slash and burn. Cut corners, "manage" your earnings, sub-sub-subcontract.

But competitiveness doesn't end there — and in fact, I'd argue that only the weakest, least enduring, most useless kind of competitiveness even begins there. What you can purchase off the shelf cheaper — whether labor, inputs, or capital — the next guy probably can, too. And in a hyperconnected, increasingly transparent world, yesterday's easily placated "consumers" are less and less likely to see "value" in your lowest common denominator, and more likely to yawn at yet another widget.

That's why the art of competition is in danger of devolving to little more than a brutish exercise in racing to a bottom already as packed a Tokyo subway train at rush hour. The result: a zero-sum global economic game. 20,000 new products, and barely a handful that delight, amaze, inspire, educate, elevate, matter. Yes, emerging markets are, sometimes slowly, sometimes rapidly, beginning to catch up to developed world standards of living, working, and playing, by squeezing two centuries of industrialization into about two decades — but globally, the bar is going nowhere, fast. That's the first catch. The second? They've got to export stuff to the developed world to do it — and then, to keep the momentum going, lend developed countries enough to keep buying those exports. See what's really happening? A vicious cycle of hypercommoditization — a global economy where there's a surfeit of faster, cheaper, bigger, harder, at the expense of a distinct lack of better.

The sum total of millions of man-years of brow-mopping human effort has got to yield a richer harvest than that. So here's my humble proposition:

Don't just lower the lowest common denominator. Elevate the numerator. Make it worthier: more meaningful, enduring, significant.

Make stuff that doesn't just perform in terms of yesterday's numerators — short-term income, "profit", shareholder value — but that performs in terms that are longer-lived, that matter more to people, communities, and society. Ask yourself:

Does your latest, greatest snoozer of a product (service, business, experience) actually make people happier? (Really? Can you prove it?)

Does it make people lastingly happier? (Really? For how long? Or is it just a supersize meal in disguise — happy today, with a hidden downside looming tomorrow?)

Does it make people lastingly happier, in a sustainable way? (As in, does it ignite happiness without literally costing the world? To go a step further, does it even benefit nature and the future?)

Does it make people lastingly happier, in a sustainable way, while being of enduring benefit to society? (Read: all the above, plus a healthy dose of what economists term "social usefulness", or residual value, that accrues and multiplies, over time, to towns, cities, communities, countries, polities.)

Hopelessly naive, thoroughly impractical, unforgivably idealistic? Maybe. Or — if you've got the impertinence to consider the heretical idea that perhaps the apex of human achievement probably hasn't been reached merely by building organizations in which hundreds of millions of tedious, harried, micromanaged hours are spent incrementally improving hundreds of thousands of humdrum, mediocre, just plain not-very-good "goods" — maybe not.

Consider a mini-case study: America. America's got a (major) competitiveness problem: its goods simply aren't in enough demand by the rest of the world — and it isn't all the fault of China deliberately keeping its currency undervalued. More deeply, it's the fault of a three decades spent chasing lowest common denominators, by any means necessary, instead of elevating numerators even slightly. To get serious about igniting its exports, America's going to have to elevate the numerator, setting incentives for a new generation of products, services, markets, industries that produce stuff that's envied, treasured, and adored by people across the globe.

My guess is that whoever stops chasing lowest common denominators — and elevates numerators instead — will seize tomorrow's high ground. That economy, and those companies, will pursue not just fast food, fast fashion, venti skinny soy extra caramel mochaccinos, and McMansions, slightly faster, cheaper, bigger — but stuff that's a quantum leap better. And that, at the end of the day, is what the essence of competitiveness has always been about.


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