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(From Business Today (India))
The Future of Competition
By C.K. Prahalad and Venkat Ramaswamy
Price: Rs 1,500
Once in a long while, a book comes along that changes the way corporations think. C.K. Prahalad, the Harvey C. Freuhauf Professor of Business Administration at the University of Michigan, did that once when he and Gary Hamel came up with the concept of core competence in an Harvard Business Review article in 1990. Circa 2004, he's ready to do that all over again with The Future of Competition, co-authored not by Hamel but Venkat Ramaswamy, the Michael R. and Mary Kay Hallman Fellow of Electronic Business and Professor of Marketing also at the University of Michigan. The book, as the authors note in its preface, "results from unusual six-year collaboration between a nontraditional strategy researcher (Prahalad) and an eclectic marketing scholar (Ramaswamy)", who looked at the changes that the 90s had ushered in, especially in terms of empowering consumers, to predict how companies will compete tomorrow. Their conclusion, now expanded into a book: companies can no longer unilaterally decide what value is, instead must seek to co-create it with their customers. The book is due for launch in India on February 16. Meanwhile, here's an exclusive extract, besides an interview with the authors.
A profound, but silent transformation of our society is afoot. Our industrial system is generating more goods and services than at any point in history, delivered through an ever-growing number of channels. Superstores, boutiques, online retailers, and discount stores proliferate, offering thousands of distinct products and services. This product variety is overwhelming to consumers. Am I buying the right digital camera? Am I getting the best treatment for my chronic ulcer? Am I signing up for the right service? Simultaneously, thanks to the propagation of cell phones, Web sites, and media channels, consumers have increased access to more information, at greater speed and lower cost, than ever before. But who has the leisure and the proficiency needed to sort through and evaluate all these products and services? The burgeoning complexity of offerings, as well as the associated risks and rewards, confounds and frustrates most time-starved consumers. Product variety has not necessarily resulted in better consumer experiences.
For senior management, the situation is no better. Advances in digitisation, biotechnology, and smart materials are increasing opportunities to create fundamentally new products and services and transform businesses. Major discontinuities in the competitive landscape-ubiquitous connectivity, globalization, industry deregulation, and technology convergence-are blurring industry boundaries and product definitions. These discontinuities are releasing worldwide flows of information, capital products, and ideas, allowing non-traditional competitors to upend the status quo. At the same time, competition is intensifying and profit margins are shrinking. Managers can no longer focus solely on costs, product and process quality, speed, and efficiency. For profitable growth managers must also strive for new sources of innovation and creativity.
Thus, the paradox of the twenty-first-century economy: Consumers have more choices that yield less satisfaction. Top management has more strategic options that yield less value. Are we on the cusp of a new industrial system with characteristics different from those we now take for granted? This question lies at the heart of this book.
The emerging reality is forcing us to reexamine the traditional system of company-centric value creation that has served us so well over the past hundred years. …