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The Strategy Variable: Identify the Source of Competitive Advantage

Strategy is not only unique to every business, but is also time sensitive in the life of that business. There are general strategic thrusts or focuses that are relatively stable (not time sensitive) as they stem from the organization's identification of the source of its competitive advantage. Strategic planning depends increasingly on the organization's ability to create and sustain a competitive advantage. The growth of IC value in the knowledge economy makes IC an inexhaustible source of competitive advantage when properly understood and managed. Each of the ICM management stages is based on managing one form of IC (i.e., knowledge, innovation, or intellectual property) as the main source of competitive advantage. The organization's strategic identification of the main source of its competitive advantage will therefore affect the design of its ICM model, by defining which of the stages will be of strategic importance and which will have the supporting role. For example, an organization that sees itself as a knowledge organization or a big brain, like British Petroleum, recognizes knowledge as the main source of its competitive advantage and thus has its strategic focus set on KM. An organization that sees innovation as the source of its competitive advantage, and not a mere business process, like 3M and Hewlett-Packard, is strate­gically set on IM. And if it sees itself as a patent factory like IBM, then its IPM stage will be of strategic importance while the other two ICM stages will be supporting programs/systems.

Exhibit 14.2 presents a guide for an organization or business unit to determine which stage of ICM to develop robustly, based on identifying its main source of competitive advantage. Choosing a specific IC (i.e., knowledge, innovation, or IP) as the main source of the competitive advantage affects the unit's strategic focus, strategic obj ectives, and thus the stage of ICM that should be devel­oped robustly to sustain the source of the competitive advantage. To elaborate, identifying tacit and explicit knowledge resources as the main source of competitive advantage by an organization or a business unit shifts the strategic focus of management to identifying the knowledge resources required to attain the desired competitive position—hence the KM stage. That strategic focus shifts to identifying the level of incremental versus radical innovation required to attain the desired com­petitive position when innovation is recognized as the main source of competitive advantage. In con­trast, if IP is that source, then the strategic focus shifts to identifying ways of using IP to enable competitive positioning in target and analogous markets where the IP assets can be leveraged.

The strategic objectives relating to each of these sources of competitive advantage are differ­ent and correspond to the different stages of ICM. Thus an organization or business unit should develop the corresponding ICM stage robustly to sustain its main source of competitive advan­tage, while at the same time developing the other two stages at least to a basic level. Developing the other two ICM stages is of utmost importance as it supports the main ICM stage (related to the main source of competitive advantage), as well as enabling the organization/business unit to be flexible in responding to change—whenever its strategic focus needs to shift to another type of IC as the main source of competitive advantage.

In addition the character of the organization, its culture, identity, and overall business strategy are significant factors to be considered in the choice of the main source of competitive advantage. Exhibit 14.2 indicates the form of IC that is most suitable as the main source of competitive advan­tage based on the character of the organization; it also provides examples of such organizations.

In addition to industry and strategy considerations, the organization should also consider its unique situation in customizing the CICM model.

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