Reading is fun. But not every book is really worth reading it – especially when it comes to business books. Therefore I already started the “Book of the Week” Series, where I share comprehensive abstracts on my favourite books.
Now I want to start another series called: “Business Books” – featuring information on books in a more compact way. Today I would like to present you “The New Age of Innovation: Driving Co-Created Value Through Global Networks”, by C.K. Prahalad and M.S. Krishnan (2008).
In The New Age of Innovation, authors C.K. Prahalad and M.S. Krishnan focus on the nature of innovation. Traditionally, it was assumed that companies create value and exchange it with customers. This firm- and product-centric view is being replaced, however, by consumers’ personalized experience with a product or service, leading, therefore, to a co-creation view of value. This focus on personal experience extends to industries as diverse as toys, financial services, travel and hospitality, retailing, and entertainment.
Even if a company is dealing with a hundred million customers, each manager must focus on one customer experience at a time, with the company providing the platform around which customers co-create their experiences. Prahalad and Krishnan call this phenomenon N=1. While in the past most large firms were vertically integrated, now most have moved to global supply chains to access specialty and low-cost suppliers. This trend toward access to resources is increasingly becoming multi-vendor and, in many cases, global. It is a trend the authors designate as R=G. Companies should, therefore, build capacities to access the global network of resources to co-create unique experiences with customers.
No industry is immune to this trend—traditional industries as well as emerging industries. The connection between strategy, business models, and business processes must be carefully understood, and the broad understanding of the basic business model must be translated into business processes. Business processes affect and are affected by the technical architecture (information and communication technology systems, or ICT) and the social architecture (organizational structure, decision-making processes, and performance management systems).
Privileged access to talent, not ownership of talent, will be the defining characteristic of this transformation. The move toward N=1 and R=G is an evolution. Future sources of competitive advantage will rest on how systematically firms shape these capabilities to the demands of N=1 and R=G, and how business processes can seamlessly connect consumers and resources and manage simultaneously the needs for efficiency and flexibility.