How and why downstream, customer-led activities and preferences will dominate the competitive landscape in the future
Niraj Dawar offers an exceptionally thoughtful and thought-provoking examination and explanation of what could be viewed – what indeed I view – as a global, multidimensional paradigm shift. More specifically, every business has a center of gravity and, until recently, companies have gained competitive advantage and achieved success upstream, “the value-creation activities related to production and products. Notable examples include De Beers, Ford Motor Company, Infosys, Toyota Motor Company, and Walmart. Dawar asserts that, in months and years to come, with rare exception, success in business will be determined by three critically important factors that continue to shift downstream: the locus of competitive advantage, the locus of activities that add value (those the customer is willing to pay for), and the primary fixed costs in the business. “The erosion of upstream competitive advantage is not particular to one geographic location or industry. It is taking place all over the world, throughout many industries, and if affects [directly or indirectly] firms of all sizes.”
Dawar organizes his material within four Parts: First in Chapters 1-3, he sharpens the “upstream-versus-downstream distinction”; next, in Chapters 4-5, he takes a Big-Picture perspective on the global marketplace “and shows how business can harness and channel information flowing through marketplace networks to reduce customers’ costs and risks [to] create lasting competitive advantage”; then in Chapters 6-8, he enables his read to “drill down to the level of the individual customers to draw implications from the dynamics of competition and the information networks insider the customers’ minds” ; finally, in Chapters 9-11, he reviews and consolidates the strategic implications of a downstream tilt and addresses several key questions such as “Can you choose your competitors”?
These are among the dozens of business subjects and issues of special interest and value to me, also listed to indicate the scope of Dawar’s coverage.
o Your Center of Gravity (Pages 4-7)
o A Road Map for Tilt (13-16)
o Value Shifts Downstream, and, Percolating Downstream Value (29-34)
o Downstream Innovation (50-52)
o Identifying Innovation Opportunities, and, Operational and Informational Solutions (64-67)
o Breaking Out of the Wells (72-74)
o The Big-Picture Opportunity (82-84)
o Obstacles to the Big Picture, The Big Picture’s Potential, and The Big Picture as Business Model (93-98)
o Relaying and Connecting (102-110)
o The Boundary of the Playing Field (127-129)
o Challenging the Established Order (137-141)
o Customer Involvement (166-170)
o Listening to Customers? (175-179)
o Technology as the Driver of Innovation? (183-184)
o Cognitive Inertia (191-198)
o The Global Competitive Landscape (212-214)
In the final chapter, Niraj Dawar suggests several implications for strategy, observing, “The tilt to downstream competitive advantage carries three implications that go to the heart of strategy. First, its locus is no longer within the firm, but resides increasingly downstream, in the marketplace, in interactions with customers. Second, forms have an opportunity to aim for more than merely sustainable competitive advantage; they can build accumulative competitive advantage. And third, the skills and resources required to make and move stuff can be bought or brought in, while those required to connect and engage with customers need to be owned and honed.” Here in a single volume is just about all the information, insights, and counsel an executive needs to help her or his organization navigate the perilous but promising journey downstream to gain accumulative advantage before its competition does.