Businesses thrive when they are able to provide something not easily replicable by other players in the same industry or the same market segment. There are different sources of competitive advantage: cost savings, access to a critical source of raw material, first mover advantage, etc. These competitive advantages do not last forever. They have to be renewed over time. The weakest source of competitive advantage is cost savings, it is the one that is the most popular in many industries.
Cost savings do not imply that costs disappear. They are actually transferred from people who have power and money to those who have nothing. Operating a business based on cost savings actually signals, most of the time, the loss or a lack of creativity. No business can be sustained over the long term by continuous cost cutting. Such strategy will eventually lead to the build-up of unseen risks that will arise unexpectedly, leading to more value destruction and thus to the closing down of the business activities. So, cost savings is more a race to the bottom rather than to the moon!
The recent fire at Grenfell Tower is an example of the race to drive down costs which led to huge loss of lives. It is important to bear in mind that organisations operate within a society, the impact of their race may spread far beyond their immediate operations. Outsourcing activities to third parties in an effort to cut costs is another strategy that can lead to potential collateral damage. It is true that outsourcing is a major source of employment in some countries which are known to provide excellent levels of service. It is unfortunately not always the case. It is the responsibility of business owners to ensure that any outsourced activity is being carried out with the same ethos as theirs because collateral damages to their business brand can be irrecoverable.
When activities are being outsourced hastily in an effort to generate “quick wins” without any attention given to risk management, it can be disastrous. It is to the long term advantage of any business not to get cheaper but to get smarter about what consumers really wants and how to make it well. According to Ray Henderson from Interface, “Sustainability is all about coming up with ways to meet our needs (not wants) today without undermining the ability of other folks to meet their needs tomorrow.” See his TED Talk.
Instead of seeing Interface as being separate from society, he viewed it as being integrally connected to the entire world. According to Ray Anderson, businesses need to identify all of their costs and then had to find or invent ways to eliminate them completely and permanently – not just pass them along.
In the extensive research carried out by Margaret Heffernan, “innovative institutions and organizations thrive not because they pick and breed superstars but because they cherish, nurture and support the vast range of talents, personalities and skills that true creativity requires”. A collaborative culture requires continued commitment from all parties involved and can be achieved with a genuine effort to communicate without status, awe or intimidation. Part of this collaborative culture is the permission to fail and to learn from those mistakes made. This is necessary if employees are meant to add value, give useful feedback and go the extra mile to make things work.
For decades, the theory of Darwin prevailed. It emphasized life’s competitive nature leading to a dog eat dog attitude in many spheres of life: business, social, political etc. We now know the results: the emergence of systemic risks, the breakdown of conventional systems and regulations in various industries.
In Bruce Lipton’s book, “The Biology of Belief”, he explains that in the past few years, research in the field of epigenetics have determined that environmental influences, including nutrition, stress and emotions can modify our genes without changing their basic blueprint. In other words, if someone tends to live in a certain environment where certain core values prevail, over time that person will inevitably be influenced by those same set of values unconsciously. As a result, asking a group of people to team up and collaborate genuinely is not going to happen overnight. .
For a group of people to endorse values such as cooperation, professionalism, there needs to be a fundamental shift in the culture prevailing in the workplace. The business needs to operate on an operational model where people are encouraged to be supportive and failures are viewed as opportunities to create something new. For a few to be rewarded whilst the rest of the team are considered as “ordinary” or “losers” sends the wrong message that there are winners and losers. For outstanding performance to take place, there has been the correct flow of information, the right kind of infrastructure and the right sort of training. All this is the outcome of good collaboration between multiple parties who are “unsung” heroes.
Racing to the moon requires more than replicating successful business models or cutting costs. It is the result of a rigorous commitment to taking a long term view of encouraging a thriving collaborative culture.
The following books have been used as reference for the write up of this post.
- A Bigger Prize by Margaret Heffernan
- The Biology of Belief : Unleashing the Power of Consciousness, Matter and Miracles by Bruce H Lipton