NIRAJ DAWAR in his book, Tilt, strongly argues for a shift in strategy for companies, from what he calls upstream focus to downstream proclivity. Simply put, upstream strategies focus on the product. This is what the conventional textbook says and what was pursued by companies to remain ahead of competition. But with the advancement of globalisation, rival companies can catch up easily. For instance, a new flavour of chocolate or coffee can be replicated easily by competitors at a lower cost, thus reducing the novelty value of the product. Clearly, the so-called competitive advantage cannot last for long.
Therefore, CEOs must now look closely at downstream processes, which look at an issue from the point of view of a customer, and answer the question as to why a customer should come to them instead of their competitor. Answering this helps fulfill three objectives of a firm: one, it helps uncover a firm’s advantages in the eyes of a customer. Two, it identifies segments of customers who have a similar response to the question. So by grouping customers, a firm can better target its offerings to different segments. Three, it helps identify the criteria of purchase that a firm can use for positioning and, therefore, differentiating itself from competitors. Dawar presents three thoughts: first, the firm’s locus is no longer in the company per se, but resides increasingly downstream in the marketplace in interactions with customers. Second, firms should aim at not just building ‘sustainable advantage’, but also ‘accumulative competitive advantage’. Last, the skills and resources needed to move stuff can be bought, but those to engage with customers have to be ‘owned and honed’. Dawar builds his story on four themes that firms should address. The first is the identification of a company’s centre of gravity, where they need to sharpen the distinction between upstream and downstream activity. So the question shifts from ‘How much more can we sell?’ to ‘Why do customers buy from us and what more do they need?’ The second is what he calls the perch, where market networks are mapped. Here, businesses can harness and channel information flowing through marketplace networks to reduce customers’ costs and risks, and create lasting advantage. The third is called the ‘deep dive’, where the customer is the focus and the customer’s mind is the one to be leveraged. In the end, he consolidates the strategic implications of a downstream tilt and answers questions such as: are better products the better way to gain competitive advantage? Are innovation and pace of industry dictated by technology? Can you choose your competitors? More importantly, are downstream competitive advantages sustainable? This is where the concept of accumulative advantage comes in, as his belief is that such advantage accrues and hence does not diminish. The author tells companies to move from upstream to downstream, and not just look at the former, which, in essence, is the theme of the book. While Dawar does talk mostly on downstream advantages and the perils of being obsessed with upstream processes, companies must remember that upstream innovation, too, should continue. It is a necessary condition, though not sufficient to get competitive advantage. The so-called cutting-edge comes through the downstream factors. As there are no fixed templates for the latter, there can be innovation here.
Therefore, CEOs must now look closely at downstream processes, which look at an issue from the point of view of a customer, and answer the question as to why a customer should come to them instead of their competitor. Answering this helps fulfill three objectives of a firm: one, it helps uncover a firm’s advantages in the eyes of a customer. Two, it identifies segments of customers who have a similar response to the question. So by grouping customers, a firm can better target its offerings to different segments. Three, it helps identify the criteria of purchase that a firm can use for positioning and, therefore, differentiating itself from competitors. Dawar presents three thoughts: first, the firm’s locus is no longer in the company per se, but resides increasingly downstream in the marketplace in interactions with customers. Second, firms should aim at not just building ‘sustainable advantage’, but also ‘accumulative competitive advantage’. Last, the skills and resources needed to move stuff can be bought, but those to engage with customers have to be ‘owned and honed’. Dawar builds his story on four themes that firms should address. The first is the identification of a company’s centre of gravity, where they need to sharpen the distinction between upstream and downstream activity. So the question shifts from ‘How much more can we sell?’ to ‘Why do customers buy from us and what more do they need?’ The second is what he calls the perch, where market networks are mapped. Here, businesses can harness and channel information flowing through marketplace networks to reduce customers’ costs and risks, and create lasting advantage. The third is called the ‘deep dive’, where the customer is the focus and the customer’s mind is the one to be leveraged. In the end, he consolidates the strategic implications of a downstream tilt and answers questions such as: are better products the better way to gain competitive advantage? Are innovation and pace of industry dictated by technology? Can you choose your competitors? More importantly, are downstream competitive advantages sustainable? This is where the concept of accumulative advantage comes in, as his belief is that such advantage accrues and hence does not diminish. The author tells companies to move from upstream to downstream, and not just look at the former, which, in essence, is the theme of the book. While Dawar does talk mostly on downstream advantages and the perils of being obsessed with upstream processes, companies must remember that upstream innovation, too, should continue. It is a necessary condition, though not sufficient to get competitive advantage. The so-called cutting-edge comes through the downstream factors. As there are no fixed templates for the latter, there can be innovation here.
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