Why A Great Work Culture May Be The Only Sustainable Business Advantage
In a rapidly changing world, is it possible for a company to create a sustainable competitive advantage? For well over a century, the pursuit of this managerial “brass ring” has been the commonly accepted foundational strategy for most business enterprises. Accordingly, the secret to corporate growth and longevity has been about finding a way to differentiate your products from those of your competitors and exploiting that difference to sustain the advantage. This exploitation is accomplished by rigorously safeguarding proprietary knowledge stocks, maximizing cost efficiencies, and constructing barriers to entry to hold off current and potential competitors. This strategy has become the unquestioned conventional wisdom for achieving market success because corporate leaders assume the world of business is governed by the dynamics of scarcity and the axioms of competition.
Chris Anderson, however, doesn’t agree with the conventional wisdom. Anderson, the former editor of Wired magazine, is a highly successful entrepreneur who in addition to his well-known publishing interests, has also dabbled in open source ventures. One such venture is ArduPilot, an open source platform, able to control autonomous multicopters, fixed-wing aircraft, traditional helicopters, and ground rovers. In his book, Makers: The New Industrial Revolution, Anderson relates the story of what happened when, in late 2010, several members of the ArduPilot design community noticed that Chinese clones of their products were for sale in various online marketplaces, and how, when asked by the community members what he was going to do about this blatant “piracy,” Anderson stunned them when he responded that he was inclined to do nothing.
Knowledge Is an Abundant Resource
Anderson’s unconventional response reflects his understanding that the digital revolution has radically shifted the core dynamics and axioms of business. The most dramatic consequence of this shift is that technological advances over the past two decades have made knowledge an increasingly important—if not the most important—economic asset. This is significant because knowledge is uniquely different from other types of economic assets.
Unlike other natural resources, knowledge is not a scarce resource. Knowledge is an abundant resource and is most valuable when it is comingled with other knowledge. The only way it grows is by giving it away. Thus, holding knowledge as proprietary is counterproductive because it diminishes its value over time. Although it may seem counterintuitive, when knowledge is shared, everyone’s intelligence is increased and all the contributors get far more back than they give away.
From Competitor to Collaborator
With this understanding in mind, when Anderson discovered the clones were the work of a single individual who went by the name of “Hazy,” he gave the supposed “pirate” edit permission to the community’s wiki. He was impressed with the quality of Hazy’s Chinese translation of the instruction manual and, given that the operating license of open source communities meant that any work performed by any member was available to all the members, Anderson saw no harm in adding the “pirate’s” voice to the ArduPilot community.
With his new credentials, Hazy proceeded to enhance the product by integrating a seamless Chinese translation of the manual onto the official site. Once that was complete, he surprised Anderson by making quality corrections to the English manual and working through the Issues list, fixing bugs that others were too busy to handle themselves. Hazy quickly became one of ArduPilot’s best development team members. By fully including an apparent competitor into the open source community as a collaborator, both the Chinese and the English versions of the product were substantially enhanced.
Knowledge Flows Over Knowledge Stocks
Anderson’s unusual approach to an apparent piracy provides two important lessons on how the emergence of abundant economic assets is transforming many of the traditional tenets of business. The first lesson is a new understanding about the deeply held conviction that knowledge is power. In the past, this power was maintained by safeguarding proprietary information and being in a position of having knowledge that no else has. However, a natural consequence of proprietary power is, while one company gains an advantage over others by hording and exploiting its knowledge, the development of that knowledge is stunted because it remains in the hands of a few people.
Prior to the digital revolution, hording knowledge was a workable business strategy for cornering markets and preserving steady profits because business leaders had the wherewithal to do so. However, that’s all changed thanks to the digital revolution, which has dramatically increased the velocity of the exchange of information. Today knowledge flows are far more valuable than knowledge stocks for the simple reason that, in a post-digital world, the return on assets is far greater on knowledge flows.
This new understanding of knowledge assets is the foundation behind Apple’s remarkable success. The iPhone is a platform designed for knowledge flows, which are popularly known as apps. Anyone is free to build an app, and when an app succeeds, both Apple and the app developer win. Innovative companies like Apple are making it very difficult for traditionally minded companies to build sustainable competitive advantage because the innovators’ products have radically reduced the barriers to entry. Today, all an entrepreneur needs to disrupt a market is a good idea, an iPhone, and a credit card, as we’ve seen recently with the rapid rise of Uber.
The Power of a Great Work Culture
The second and perhaps most important lesson we learn from Anderson is the power of a great work culture. A defining characteristic of great work cultures is that they are places where all voices matter. Anderson’s story is a powerful demonstration of this premise. By focusing on knowledge flows rather than knowledge stocks and welcoming the voice of a competitor, Anderson highlights the value of collaboration in building a better business. He also shows that market advantage today has more to do with building a sustainable collaborative advantage than a sustainable competitive advantage, which explains why, in a rapidly changing world, a great work culture just may be the only sustainable business advantage.