The Only Sustainable Edge: Why Business Strategy Depends On Productive Friction And Dynamic Specialization

by John Seely Brown and John Hagel III

Book Overview

Outlines a different approach to strategy development. Written in non technical language and focuses on the implications new technologies will have on how organizations of all kinds design strategy... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 1591397200
• Release Date: May 2005
• Publisher: Harvard Business Review Press
• Length: 218 Pages
• Weight: 1.20 lbs.
• Dimensions: 9.5" x 0.9" x 6.5"

Customer Reviews

Sharing a Macro Vision with Micro Precision...and Passion

Previously, I read and then reviewed three books co-authored by Hagel which I greatly admire. Specifically, Net Worth, Net Gain, and Out of the Box. In this most recently published volume, Hagel and Brown assert that effective business strategy "depends on productive friction and dynamic specialization." As I began to read this book, I was curious to observe how Hagel and Brown formulate and then present what they call a "compelling case [for reshaping] the business landscape -- where and how value and profit get created -- to create a scalable catalyst for broader institutional and policy changes." For them, "edge" has several dimensions. "First, we mean the edge of the enterprise, where one company interfaces or interacts with another economic entity and where it currently generates marginal revenues rather than the core of its profits. Second, the edge refers to the boundaries of mature markets as well as industries, where they may overlap, collapse, or converge...[Third], geographic edges, especially those of such emerging economies as China and India, where consumers of all kinds crave Western goods and services that will ease their burdens and improve their lives. Finally, we refer to the edges between generations, where younger consumers and employees, shaped by pervasive information technology, are learning, consuming, and collaborating with each other and where baby boomers are preparing to retire or switch careers over the next decade." Hagel and Brown explain how to build a sustainable competitive advantage by focusing on three broad strategic imperatives: dynamic specialization, connectivity and coordination, and leveraged capability building. Of special interest to me is what they have to say about process outsourcing and offshoring, loose coupling of extended business processes, and what they call "productive friction." Many of those who reads this book will derive substantial benefit from completing three "quick audits" (pages 26-29) because they will help those who comprise a senior management team to build a shared view of where their organization is. Only then can an appropriate strategy (or strategies) be formulated and then implemented to get that organization where it needs to be. By the way, according to research which Robert S. Kaplan and David P. Norton provide in The Strategy-Focused Organization, only 5% of the workforce understand their company's strategy, only 25% of managers have incentives linked to strategy, 60% of organizations don't link budgets to strategy, and 85% of executive teams spend less than one hour per month discussing strategy. If true, these are chilling statistics which suggest that few decision-makers in any organization (regardless of its size or nature) would be able to answer, clearly and realistically, questions such as these when completing a migration path audit: What have been the five most important operating initiatives -- based on resource commitments -- during the past twelve months?

I Think Therefore I Zooooom.

Full disclosure: I don't have an MBA. I've never been to business school. When I hear the word "metrics", my eyes tend to glaze over like those of the rabbits that hang upside down outside butcher shops in certain parts of New York City. But business books are where forward-looking thinkers are incorporating key insights from Chaos Theory and complexity to create new models - that's why I read them. And John Hagel and John Seely Brown are the most forward-looking - and up-, down- and side-ways looking - of all those I've read. The authors also demonstrate unusual depth. On the surface, "The Only Sustainable Edge" is your passport to a globalized world: the authors take you to China, India and other locales normally seen as far-off places to which we off-shore and/or out-source (the authors nicely distinguish between those two practices) and show us, instead, the specific conditions and cultural traits in those countries that create innovative practices we could learn from. But what gives this book such deep resonance is its underlying vision of a globalized world and the shift in theory and practice its operating principles demand. Because the tropes the authors use are brilliantly complex - they encode so much information - you can't help but grasp the implications. Take just these three examples: "DYNAMIC SPECIALIZATION": The pre-globalized world world was divided into what Isaiah Berlin called "hedgehogs" - generalists, who know a little about a lot of things; and "foxes" - specialists, who know a lot about one thing. In a globalized world, the specialist is neither fox nor hedgehog: the specialist must know a lot about one thing...and how it works in many, many different contexts. To (I can't believe I'm using this word) grok the specialist as a boundary-crosser, moving laterally across a broad spectrum, is also to understand the shift from a vertical to a horizontal focus (what Thomas Friedman calls "flattening"). Likewise, the transcendence of the fox/hedgehog paradigm suggests that oppositional constructs themselves may be passé. Indeed, throughout the book, the authors look to maintain the tension between opposites rather than resolve the tension either one way or the other. (Thus, unlike the early enthusiasts of chaos theory, who replaced "things" with "flow", Hagel and JSB have a healthy respect for both.) 2) "PERFORMANCE FABRIC": Pre-globalization, growth was measured size and/or efficiency. In a globalized world, growth is measured by complexity. You grow by deepening and broadening your connections, forming new partnerships, entering into new collaborations, growing one's skills across many more contexts. That tapestry of connections is what Hagel and JSB call "a performance fabric". I'd be tempted to say that the richer the tapestry, the richer the company and its shareholders, but now I'm thinking "tapestry" doesn't do justice to the elasticity of the performance fabric. Perhaps "trampol

An attempt to discern the current business trends. Guide to the future?

This book is a must read, because the thoughts and ideas are provocative. The target audience, I believe, is the strategic decision maker for the enterprise. For example, the assertion that offshoring is here to stay and that as a business trend, it is the first of a 4-phase phenomenon. The book logically outlines the concept that enterprises initially offshore for cost advantage, but could end up bringing back value-added goods and services to the host market. This is not obvious to many first time offshoring firms. Strategy that does not support the 4-phase phenomenon might end up being more expensive. Or the idea that Service Oriented Architecture can be enabled technologically, today; but needs cultural change within the enterprise to be effective. The book includes some real treasures if you take the time to take a careful read. That Wipro and Infosys use different software methodologies for different industries is a fact that aspiring offshore firms might want to consider while reviewing their strategic investment options. Even some of the concepts that are not entirely new, such as 'dynamic specialization' have been presented in an effective blend of conventional corporate wisdom and new insight. This makes it worth one's while reviewing these chapters, even if one does not entirely agree with the conclusions. If nothing else, these are as good an explanation as any of some of the startling business results we see, such as the success of the Chinese motorcycle or the Indian software industry. There are also plenty of other useful nuggets, for example the clarification of the difference between 'offshoring' and 'outsourcing', two terms very commonly used synonymously. I like the fact that each chapter concludes with a 'bottom line' section - the one on offshoring recommends that the executive team do site visits to to the offshore location before making any long term decisions. As a pointer, I believe this is invaluable and follows directly from the arguments (on cultural differences) in that chapter. On the whole I strongly recommend this book to anyone who appreciates a different point of view that stimulates thought.

Reimagining the Purpose of the Firm

At a time when U.S. businesses are still pondering the "if" and "when" of globalization, Hagel and Brown have written a compelling blueprint on the "how." Already the book has been positioned as a companion piece to Thomas Friedman's "The World is Flat (2205)." But heart and soul, the Hagel/Brown book is about collaboration -- the subject of the 6/20/2005 cover story in Business Week -- and how innovators are outsmarting the competition with new tools and processes for getting the most from the new networked marketplace. At the foundation of this book is one of the most interesting conceptions of the firm since Ronald Coase's transaction theory (1937). According to Hagel and Brown, the purpose of the new firm -- at a time when IT and market-liberalizing public-policy shifts have leveled the playing field in so many markets -- the purpose of the firm is to build new capabilities that make businesses more nimble, more competitive in their markets. As the authors demonstrate, there's no better way to develop new capabilities than to learn from best practices in collaboration.

Sustaining Business Innovation

Hagel and Brown have written an amazing book - it is hard to capture its full richness because it covers so many themes in interesting and thought-provoking ways. It's a book about offshoring, globalization, business strategy, innovation, the role of IT in enabling new business capabilities and public policy. What really intrigued me is their perspective on business innovation. We tend to view innovation as something that occurs within a company and usually associate it with breakthrough product innovation. Hagel and Brown urge us to reconsider what innovation is and where and how it occurs. Rather than emphasizing breakthrough product innovation, they urge us to think more about rapid incremental innovation of business processes and practices - as well as products. They make a strong case that the most powerful spawning grounds for this kind of innovation are at the edge - the edge of business processes, the edge of the enterprise and the geographic edge as represented in large emerging economies like China and India. Particularly provocative is their view that China and India are becoming catalysts for exactly this kind of rapid incremental innovation - and that Western companies are thinking much too narrowly about these economies as just sources of revenue growth. They suggest that new management techniques are required to harness this potential for innovation. In particular, they focus on the role of "productive friction" as a way to drive innovation across enterprises. To illustrate the concept of productive friction, they give fascinating examples from industries as diverse as motorcycles and flat panel displays. When most companies think about innovation across enterprises, they typically focus on "deals" or specific innovation projects. Hagel and Brown push us to build long-term, trust-based relationships across multiple enterprises to support sustained innovation. It is a much more ambitious undertaking, but they make a convincing case that this really is the only sustainable edge as we face more competition on a global scale. Rather than seeing competitive advantage erode, Hagel and Brown believe that companies can actually build even more substantial forms of advantage through learning how to get better faster by working with others. This is a "must read" book for anyone interested in business or the world we live in.