With the advent of tools such as ChatGPT and the power of open source platforms, many traditional barriers to competition are increasingly falling. Tasks that previously took years of experience, required privileged access to data, and had to be implemented over long periods can now be done almost instantly by anyone with Internet access. These market changes raise the issue of what will determine competitive advantage in a world of flattening knowledge where many factors that separate competitors are rapidly disappearing. This article discusses the currently shifting market paradigm and steps companies can take to compete in it effectively.
Stages of Economic Evolution
Global economic history has been defined by stages where different assets and capabilities and their distribution become sources of economic power. These assets and capabilities have historically included:
- natural resources
- the size and qualifications of the labor force
- the ability to transport goods
- technology
- industrial capability
- services capability; and
- capital.
Access to these assets and capabilities and how they are used have shaped key stages of economic history, including:
- the Agricultural Revolution
- the establishment of early trade routes and the expansion of markets
- the Age of Exploration
- colonialism
- the Industrial Revolution; and
- globalization.
One of the most important modern economic phenomena has been the rise of the knowledge economy.
One of the most significant modern economic developments has been the rise of the knowledge economy. The knowledge economy is characterized by several factors:
- increasing access to knowledge
- increased importance of intangible assets
- the existence of a highly skilled workforce
- increased focus on R&D and innovation; and
- focus on knowledge-intensive activities that create new products and services, solve problems, or generate different types of efficiencies.
The New World of Flattening Knowledge
Due to the combination of several forces, the knowledge economy playing field has increasingly flattened.
Knowledge availability. The amount of knowledge stored on the Internet is growing at an incredible rate. According to one estimate, 328.77 terabytes of data are created every day. Apart from the amount of data, it is increasingly becoming more accessible. Over 5 billion people currently have access to the Internet, and this number will grow significantly as Internet penetration rates increase, particularly in markets where Internet penetration rates have significant growth capability. For example, the Internet penetration rate in India is approximately 50%. Since India has a population of approximately 1.3 billion, if the Internet penetration rates jumps 20%, over 250 million additional people will come online.
Additionally, given free translation applications, information on the Internet in languages that previously took many years of specialized training to understand can be instantly translated.
Given these factors, the competitive advantage of having or knowing how to interpret many types of knowledge has rapidly declined and in some cases is negligible. This means that people with little or no experience in a field can very quickly acquire information it has taken other people years or even decades to acquire.
Knowledge conversion. Not only has knowledge become far more freely accessible, but it also has become easier and easier to convert that knowledge into products and services. This facility has risen in tandem with the exponential growth of the digital marketplace.
GPTChat, for example, can almost instantly:
- generate different types of content that can be converted into many products
- answer complicated questions
- engage in complex conversations
- carry out sentiment analysis, which can be used to adjust marketing strategy
- support computer programming
- generate different types of scenarios.
This conversion occurs at the same speed for people regardless of their background and experience, flattening the knowledge base.
Problems solving transparency. Another important change affecting knowledge economy competitive dynamics is rapidly increasing problem-solving transparency. Historically, many problems were identified and solved in relative isolation, which gave significant competitive advantages to persons or companies that were able to solve problems and convert them into business products and services.
Today, due to the Internet and also open source business paradigms, a large amount of problem identification and work to solve problems occurs in a very transparent manner that all people can see and participate in in real time. This flattens the competition curve significantly for people who previously remained unaware of coming roadblocks in the business or product development cycle or who could not solve them on their own. The economic significance of this is that it effectively significantly extends the business runway because companies can compete with fewer resources for longer periods.
Business Dynamics in Flattening Knowledge World
The nature of competitive advantage evolves as markets go through cycles of blue ocean to red ocean to blue ocean spaces. In this cycle, there have historically been several areas of competitive focus.
- The What
- The How; and
- The Why.
The What. The first area of competitive focus in a blue ocean market is the What. The What refers to the economic activity people choose to develop, such as telecommunications services or running a parking lot. In a thinly competitive market where there is unmet demand, simply matching a type of business activity with demand leads to a competitive advantage.
The How. As the What begins to generate significant profits, competitors enter the market and pursue the same activity. In this phase of market growth, the What is no longer sufficient to create a competitive advantage. This leads to a new competitive dynamic involving focus on the How.
The How can affect every element of a business model, including:
- a company’s organizational structure
- a company’s strategy
- how a company develops and markets its products and services
- company financing structure
- customer relationships; and
- the nature of a company’s relationship with other market actors.
In each of these areas, the How can generate strategic, operational, and financial competitive advantages.
The Why. As competition increases further, another stage of competitive focus in on the Why, meaning what are the core reasons for what a company does and how it transmits those reasons inside and outside an organization.
The Why can lead companies to:
- refocus a company’s business activities
- motivate existing employees and attract new employees
- refocus customer relationships; and
- strengthen the company’s brand and help the company differentiate itself from competitors.
As competition in markets continues to increase, several things tend to happen that define competitive dynamics:
- a significant amount of competition stabilizes
- stronger competitors acquire weaker competitors
- market demand for different types of products and services shifts;
- innovation causes market disruption; and
- blue ocean spaces are identified which reshape competitive market position.
The How of the How. In the flattening competitive world, a new type of competitive dynamic is focusing on the How of the How, meaning the use of tools that can improve business performance. To illustrate this with an example, assume that a person wants to create a sales platform. After conducting research, the person discovers three applications that can be used to create a customer interface. In reality, however, there are hundreds of tools that can be used to create and run a sales platform. The strength of a sales platform is, in significant part, a function of the tools that were used to create it. The more a person is familiar with different types of sales creation platform methods and tools (the How of the How), the greater the competitive advantage they will have.
This competitive dynamic shift means that people will need to spend an increasing amount of time:
- becoming familiar with different types of tools that are available to generate business advantages;
- understanding their advantages and disadvantages
- analyzing how well they drive a company’s business objectives
- how well they fit with a company’s DNA; and
- cost.
A second element of competing in this new market paradigm will be focusing on the tool dimensionality and distance. Rather than only text, tools will increasingly be a combination of text, video and sound. Additionally, VR tools will allow people to be completely immersed in learning experiences all over the world.
A third element of competing in this new market paradigm will be taking advantage of tools and process modification possibilities. As knowledge barriers fall, it will become increasingly possible to access different types of tools but also personalize them, modify them, and combine them to create new tools. Importantly, this process of tool modification will be possible for people without technical backgrounds. With the emergence of natural language programming, people of all disciplines will be able to propose tool-related innovations.
A fourth element of competing in this new market paradigm will be emphasizing personalized service elements and experiences that are harder to replicate. While tools such as ChatGPT are very good are rapidly extracting information, given how algorithms function that information is likely to represent an average of existing knowledge rather than unique perspectives and experiences. Uniqueness of perspective and approach will likely become an increasingly important competitive factor.
Conclusion
The growth of the Internet and the emergence of new technologies are dramatically impacting competitive dynamics. In a world where competitive advantages based on access to information are rapidly falling, knowledge of tools to obtain knowledge and convert it into better products and services will become an increasingly important competitive imperative.
The image for this article was taken from here.
