Surpetition is about creating value monopolies. We have three phases of business:
- First was production driven – making products.
- Second was based on competition – lot of companies providing same products or service.
- The third and current phase is based on integrated values.
The two ages of expansion have now passed and the present mood is consolidation. As part of looking-inward, there is an emphasis on cost-cutting and cost control. There is an emphasis on quality management. The purpose of consolidation, contraction, quality and all the rest are to provide a firm baseline for venture. There is a serious danger that current emphasis on “housekeeping” may divert attention from the very essence of a business, which is to provide saleable value. You have to get the housekeeping right, and brilliant concepts are no substitute for good housekeeping. But housekeeping is not enough.
The four essence of business – four C:
There is really only one serious disease in business thinking. This is the disease of arrogance and complacency, the feeling that: “We are fine, we are doing well, we know it all.”
The fundamentals of traditional business thinking are:
- Problem solving
- Analysis of information
Efficiency and problem solving are maintenance procedures. If the direction is good or if the economic baseline is rising, the maintenance is sufficient. Efficiency is the ration between input and output. Efficiency means productivity, it means no waste, it means getting the best out of our efforts, energy and resources. But when future doesn’t turn out as we planned, efficiency can cause us problems, since there is no room for cutting. Efficiency is often the enemy of flexibility.
Almost all executives are thoroughly conditioned to look only at problems. This is a huge waste of their thinking capacity. The most dangerous saying in business is: if it is not broken, don’t fix it.
The third fundamental of traditional business thinking is to collect information and then make decisions by analyzing and reacting to that information. More information leads to better decision, but after a while more and more information has less and less effect.
The traditional view of competitors is that they are enemies. But sometimes working with them can be beneficial. Competition at its basic level is necessary for survival, as is cost control and production efficiency. But this is not enough, there is also need to move forward and this is where surpetition comes in.
Some of the fashionable concepts in business today are:
- Cost-Cutting: Cost-cutting is always attractive to management. Organizations do grow fat because of good times. And cost-cutting can bring big benefits in the beginning. Danger here is to forget the future.
- Restructuring: Sometimes it makes more sense to buy up market share then build it up. Building is competitive, expensive and risky. To be a financial wizard, you need a rising market, a short memory and a friendly bank.
- Quality Management: Quality management can bring more motivated and more interested in whatever they are doing. But we have to be aware about two questions: quality for what and quality of what?
- People Care: Participation management, flattening hierarchies, motivation and leadership are all part of this »people religion«. Author is actually saying that in Japan management hierarchy is responsible for more creativity, since senior management does not feel threaten by ideas of their people. Another assumption that creative people work better in groups is also false. But it is good to have ideas discussed in latter phases.
- Environmental Concerns: It is closely connected with rise of quality-of-life values.
Complacency is when things seem normal to you because you are used to them. One of the challenges is already use of word management. The word implies that the energy, the ideas, the resources and the people and markets are all there – and all that is needed is someone to manage these various things. At lower end people still need to provide housekeeping excellence, but at senior level there is need for conceptual, creative and strategic thinking.
There are four types of complacency:
- Comfortable Complacency
- Arrogant Complacency
- Cozy Complacency
- Lack-of-vision Complacency
Dangers of complacency are slow drift and decline and unused potential and opportunities.
Strategic thinking was buzz word for some time. When future didn’t develop as planned, strategic planning has some challenges. To adopt to this, new concepts like lean, agile, being fit came in the play. If market conditions changed, you could change with them.
Quality has to be the baseline, but when others can also provide quality, innovation is important. Japanese have both quality and innovation.
Human thinking is based on four pillars:
- Procedures and Routines
The brain is designed to be routine. The brain is not designed to be creative, and we should be immensely grateful for its wonderful design. The mind can only see what it is ready to see. That is why the analysis of data cannot yield new ideas. Organizations behave rather like the brain. The brain works as self-organizing system in which incoming information organizes itself into patterns and sequences.
Information is the oxygen of business. Without information, business is dead or dying. Question around ideas and information is does ideas come from information or information creates idea? Analysis can show correlations, we can actually check out possible ideas that we already have in mind. But analysis of data by itself does not generate ideas. To perceive a new idea we have to speculate, imagine or hypothesize it first. Raw information is nothing without the background concepts that allow us to make use of that information.
- Analysis and Logic
Analysis and logic are the traditional tools of conscious thinking. Analysis is simplifying, breaking down things into parts, picking out strands and elements. Analysis is comparing unknown things with things that are known. Logic on other hand is putting things together in order to get a result.
There is an absolute need for creativity in all thinking that involves perceptions and concepts, and there is very little thinking that does not involve perceptions and concepts.
An idea is something specific that you can carry out. A concept is a more general, abstract notion that has to be carried out by means of a specific idea. On the other hand, there is little distinction between a concept and a perception. A perception is a grouping of things realized when we look out at the world. A concept is a grouping of things realized when we look inwardly at our available experience. Forming concepts has many possibilities. One is provocation. Another one is modification or improvement of existing concepts or revival of older concepts.
Competition is about survival, surpetition is for success. In today’s value economics, surpetition and value monopoly are very much in the general economic interest. Value economics is concerned with creating opportunities for spending money as you wish.
Value monopolies are establish based on:
- Physical Uniqueness
- Technological Uniqueness – patents are an obvious example of value monopoly. In the future application concepts are going to be far more valuable than pure technology.
- Name Recognition
- Dominance – sometimes a corporation gets into a position that is so dominant that it provides surpetition.
- Cost of entry – where cost of entry is high, there is protection for newcomers.
- Brand image
Some of the reasons are protection based, some are unassailable, others are plus. Surpetition is looking for plus reasons. And companies should look for them too. One of the worst reasons for not doing something is that it might hurt existing business. Surpetition is not so much concerned with differentiating changes in the product being offered as it is by uniqueness in the value being provided. For the plus aspect of surpetition there are three broad sources:
- Integrated values
- Serious creativity
- Concepts R&D
In future every successful organization is going to have three-part strategy:
- Get the housekeeping right
- Develop the concepts for surpetition
- Have an energetic follow-through.
We often forget that the words we develop for the convenience of communication can become dangerous traps which force us to look at the world in a particular way. Critical thinking is based on searching for the truth and asking students to point our errors in what has been placed before them. But it is only part of thinking. The extremely important generative, constructive, productive and creative side of thinking is completely left out. In business you have to produce. Just describing and criticizing is inadequate.
Science has been built up by lumpers and splitters. Lumpers look at things that seem very different and show that they actually have certain things in common. Splitters look at things that seem very similar, and are often classed together, and show that they are much more different than had been assumed.
A lot of good idea are dismissed by using phrase …the same as…The person making the remark acknowledges the value of the idea, but says that the idea is not worth further attention or discussion because it is already being used.
With integrated values, we seek to integrate a product into complex value systems of the buyer. The values are based on the relationship between the customer, the product and, most importantly, the world around them. Integrated values do not always lead to surpetition, but surpetition is always based on value monopolies. When we look at different industries, we can see that stage of integrated values is taking place more rapidly in the computer industry than in many others. Many successful examples of integrated values happened by chance. Swiss watch industry realized that selling watches as jewelry, was a move from commodity to higher value ground.
Western manufactures have traditionally seen suppliers as being on the other side. They were pushing them for better quality and lower price. But this is changing, they are becoming more and more partners in the process. Companies that are trying to move into integrated values zone, need to find entrance into not only customer value system, but their whole life value experience. Sometimes integrated values seek to integrate in existing values of integration. Sometimes others copy our integrated values model and so we cannot achieve value monopolies. If we want to move into integrated values zone, we should be careful about looking at the customers from average point perspective.
Businesses are quite bad at predicting markets and needs. This is because they are trained only to do analysis and looking backwards. Author created a word valufacture to describe deliberate process of creating values. American business tends to be more opportunistic than opportunity seeking. They tend to jump on existing opportunities with me-too product.
There are four powerful value drivers:
- Quality of life
Quality of life is getting more and more important. People opt for more elements of quality of life instead of bigger paycheck. New “me-generation” is putting self-importance and self-image in the driving seat of value creation. If Karl Marx were alive today, he would say that television is the opiate of the people.
When we talk about values, it is important to understand type of them, to have good basis for deliberate valufacture:
- Perceived value – it is the most important value of all, because it is the main driver. There is perceived value that has no real substance, since it is the perception that is being sold. There is perceived value that reflects true value. There is perceived value that reflect true value, but one that is irrelevant to the purchaser.
- Real value – you can only discover it, if you can look for it for some time.
- Gateway value – timekeeping in a watch is only a gateway value to selling jewelry to men.
- Context value – can be very profitable. Can overlap with rarity value.
- Synergy value – the whole is greater than the sum of all parts.
- Security value – it can be important if threshold of price is not exceeded.
- Appeal value – it overlaps greatly with perceived value.
- Fashion value – involve the artificial values of excitement and change.
- Function value – they quickly become commodity values.
- Convenience value
Values are always connected with people; they are bound to them. The trick is to recognize individuality as a source of value, but not to end up with a market that is so small that it is of no interest to retailers.
Nature of values can be different, some are intended, some just happen:
- Multiple values
- Focused values
- By-product values
Author creates value notation concept, to introduce how to put value creation into visual process. You can read more about it in the book.
Creativity is one of the most important human resources of all. Creativity is a logical process, but it is the logic of self-organizing systems not the traditional logic of passive systems. Author like to use term “serious creativity”, to distinguish creativity based on understanding of self-organizing information systems from creativity based on inspiration. Inside organizations serious creativity can be used as essential part of general thinking of everybody or focused creativity in special areas like marketing, strategy, R&D,…
Being busy is not the same as having good ideas. Serious creativity requires four things:
Motivation is connected with belief, belief in the possibilities of creativity. With attitude, we have attitude of challenge, possibility, provocation or focus. If we focus, we can create creative-hit list with a specific problem, a direction of improvement and general area need.
To create a provocation, sometimes you can just bring out existing patterns and move from them to lateral thinking. You can use it to escape from something we have for granted.
A concept is a way of doing something which achieves a purpose and provides values. We have different levels of concepts and they move from general to specific. Important point in concept design is to point our differences. Steps in concept design can be:
- Define needs
- The asset base – they can be people and communication channels not only money or financial know-how.
- Concept extraction – from ideas already in use or from creative process itself.
- Improving concepts
In the future, concept development is going to be every bit as important as technical development. I might even go further to say that concept development is going to be more important. You can copy or license technology, but you need to have concepts. They are organizers of information and action.
The concept R&D group should have four main functions:
With cataloguing we can have:
- Traditional concepts
- Existing concepts
- Historic concepts
- Dying concepts
- Emerging concepts
- Competitor concepts
- Indirect competitor concepts
- Other industry concepts
The purpose of cataloguing is to give an acute awareness of what is happening. It can also suggest new concepts that are already in use elsewhere.
Generating new concepts can come from three areas: pinpointing specific need areas, perceiving needed changes and developments, a fresh look at existing concepts.
In developing, it is important to know that benefits are much more important than novelty. Novelty is for originator fame, benefits helps company.
Six main points from a book are: housekeeping, surpetition, integrated values, serious creativity, importance of concepts and concept R&D.