Question

What is the relationship between innovation and competitive advantage? What role can top management play in helping a company achieve superior efficiency, quality, innovation, and responsiveness to customers?

Answer 1

The relationship between innovation and competitive advantage is that innovation builds competitive advantage. Competitive advantage is where a company is ahead of its competition- be it in terms of products, services, operational efficiency or customer satisfaction. But where does the advantage come from? In simpler terms, it will come with nothing but remaining one step ahead of the competition- and the precise word for remaining one step ahead of the competition is innovation. The innovation can be on the product side- where a company introduces a product that satisfies the needs of the customers in more or better ways. It can be in terms of internal systems and people- where a company uses policies or systems or people in such a way that it makes the company more efficient, agile and lean. There are many different fields in which a company can innovate, and all will lead to some degree of competitive advantage.

Top management can help the company achieve superior efficiency, quality, innovation, and responsiveness to customers in the following ways-

A. Superior efficiency: This requires various steps from the upper management, such as making sure that the company has economies of scale, implementing various frameworks such as Just In Time, lean manufacturing, adaptable processes etc. A continuous monitoring and improvement of the turn around time (TAT) in each department will drive efficiency up.

B. Quality: This will mostly be driven by 3 things- inputs, employees and processes. The management must make sure that the inputs, be it from partners or internal, are of the best possible standard. The employees must be motivated and efficient and the processes in place be optimized for quality control.

C. Innovation: This need not be a radical change. If continuous incremental improvements are being sought- that is innovation in itself. The management should listen to ideas from the staff and implement incremental improvements through them. The management should also keep an eye on the industry, even unrelated industry, for best practices that can be implemented.

D. Responsiveness to customers: The mantra for the top management here should be- product the way the customer requires it, when the customer requires it. This will fulfill the product side. Then the top management should also focus on pre-sale and post-sale responsiveness. The whole customer journey from consideration till product life-cycle end should be seamless and responsive.