HR plays a critical role in gaining and sustaining competitive advantage through people, and Wayne Brockbank explains that there are three practices HR must adopt in order to optimise the likelihood of realising sustainable competitive advantage in a VUCA world
As has been clearly and powerfully argued, we live a VUCA (volatility, uncertainty, complexity, and ambiguity) world. It is a world where product and capital markets, demographics, geopolitics, technology, and the competitive landscape are becoming increasingly volatile, uncertain, complex and ambiguous.
In such a context, it will be increasingly difficult for companies to create and sustain fundamental sources of competitive advantage. The obsolescence or exchange of technological insights, operational best practices, and here-to-fore proprietary knowledge across organisational boundaries is becoming the norm.
Within such a world, the likelihood of sustainable competitive advantage drops like rock in a VUCA world. It is unlikely that a company will ever again have 20 years of competitive advantage through the traditional means of patent and other legal constraints. On the other hand, it will be possible to create a 20-year fundamental competitive advantage through alternative means, some of which are directly related to a business-focused HR strategy.
A company can create and sustain a 20-year monopoly but it will have to be earned through a continual series of short-term competitive advantages. For example, if a company can innovate a new product or service, it will enjoy a monopoly position for, say, 6 months. It will take its competitors six months to catch up. During those six months the company will earn monopolistic profits. By the time the competition catches up, it will then innovate again, thereby creating another 6 months of competitive advantage.
“Within such a world, the likelihood of sustainable competitive advantage drops like rock”
If a company continues this cycle, then it can create a 20-year monopoly with its accompanying profitability but in a VUCA world the 20-year monopoly has to be earned in 6-month increments. Kathleen Eisenhardt at Stanford University refers to this phenomenon as a “continuous flow of competitive advantages”. This is exactly what companies such as Apple, 3M, Alphabet, Amazon, and Intel have accomplished.
3 steps for HR
HR plays a major role in making this aspiration a reality in a VUCA world. Within this context, I suggest three actions that HR must undertake.
First and foremost, HR must work with senior management to conceptualise, frame and champion the culture that is required. The culture that creates and sustains micro-competitive advantages will need to be fast-moving, agile, and highly opportunistic. Organisational silos will need to give way to cross-unit synergy to optimise opportunities that are provided by ever morphing markets. Such cultures will encourage improvising and experimenting with new products, services and business models. Improvising will not be entirely random; rather, it will be based on the best judgement of future market opportunities.
Second, HR will need to adjust its collective talent and organisational tools to be consistent with the inconsistencies of change. Workforce configuration will need to be fluid and flexible. People will shift across market opportunities. Individual talent will not be owned by individual businesses; rather, talent will be owned by organisation-wide considerations. Individual talent will reflect the need for deep specialists with the simultaneous need for broad generalists.
Measurements, reward and accountability will need to be continuously reevaluated and redesigned to reflect evolving pockets of short-lived competitive advantage. Finally, as indicated in earlier article in Inside HR, HR will play a strong role in encouraging the total flow of information from the outside in, from the future to the present and from within silos to across silos.
“The culture that creates and sustains micro-competitive advantages will need to be fast-moving, agile, and highly opportunistic”
Third and, perhaps, most challenging, HR itself will need to embody the culture and practices that will be required in a world of micro-competitive advantages in a VUCA world. In some companies, HR claims to be the facilitator of change but concurrently is seen as the source of resistance to change. An honest self-examination of individual HR talent and department capabilities may need to be undertaken to position HR as a role model with the credibility and ability to support and sustain the requisite culture.
Without these HR tools and practices in place, firms will simply be unable to succeed in the VUCA world. With these HR tools and practices, however, firms may optimise their likelihood of sustainable competitive advantages.
Action items for HR to gaining competitive advantage in a VUCA world
- HR professionals must understand the reality of the VUCA environment and the role of sustainable micro competitive advantages as a key to success in such a world.
- They must forge an agreement with senior management about the culture that is required to flourish in a VUCA world.
- HR tools and practices must be reformulated to reflect the business mandates of flexibility, adaptability cross-boundary collaboration and speed.
- HR departments must themselves be evaluated and held to the same cultural standard that is expected of the entire firm.