The Sixth Competitive Force

by eskokilpi

The terms “Knowledge Worker” and “Knowledge Society” are around fifty years old. Peter Drucker and Fritz Machlup, a less known Princeton economist, coined them at roughly the same time around 1960.

Although the concepts have now been around for a long time, it seems that the implications for corporations are not clear yet and don’t show in the way competitive strategies are made. What is quite evident is that the emerging society is different in many ways from the industrial society.

There are some things we know about knowledge work.

Effective skills are always specialized, as regards both, successful companies and effective people. This means that highly knowledge-based companies are always, by definition, only a partial answer to the opportunities available. Michael Porter made us to think that the players in the game of business were (1) companies, (2) customers and (3) suppliers together with old and new (4) competitors coming with alternative (5) offerings. This was called the five forces model. The company was seen as an independent, self-contained unit of competition.

Seven years ago, Bill Gates spoke often of the pet project of his. It was going to change computing for millions of people. It was the touch screen tablet PC. The device is still on sale, but it never raised a fraction of the interest that the iPad is now generating. Was it because Microsoft did the project alone?

Because of specialized, narrow skill sets, a new role with a new role definition is needed in knowledge work. Nobody, not even Microsoft, can be successful without supporting contributions from network partners. The new role is a “complementor”. A complementor is not the same as a supplier. The connection is based on a non-hierarchic network relation, not the hierarchic value chain. Complementary contributions may be the most important explanation of business success today. What would the iPad or the iPhone be without the applications made by people outside Apple?

A classic example of complements is computer hardware and computer software. The greatest hardware engineers are in dire straits without the greatest software programmers, as Nokia has found out. Though the idea of complements is most apparent in ICT, the principle is universal: you can never have in-house all the specialized skills you need. A complement to an offering is another offering that makes it more attractive. People value hot dogs more when they have mustard. Because knowledge work is specialized, it never pays to try to make both.

The new strategic imperative is to identify complementors and to be inviting to them. To be competitive, is to be “selfishly” cooperative.

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Thank you Barry Nalebuff