Is Concentration the New Competitive Advantage?

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Technology has been a double edged sword for business. On the one hand, it allows companies to do all kinds of things they could never do before. On the flip side, it has slowly eroded many forms of competitive advantage by making many corporate tactics easy to imitate.

ZenPundit got me thinking this morning when he picked up on a Nicholas Carr post about the downside of our massive exposure to information.

"Like me, you've probably sensed the same thing, in yourself and in others – the way the constant collection of information becomes an easy substitute for trying to achieve any kind of true understanding. It seems a form of laziness as much as anything else, a laziness that the internet both encourages and justifies. The web is "a hall of mirrors" that provides the illusion of thinking, Michael Gorman, the president of the American Library Association, tells Orlowski. "No one would tell you a student using Google today is producing work as good as they were 20 years ago using printed sources. Despite these amazing technical breakthroughs, these technologies haven't added to human wellbeing."

Is Carr on to something? One year ago I would have said he was nuts. Now I find myself nodding in agreement with his statements.

The human brain uses a lot of energy. One way that evolution has minimized this impact is by providing us a brain that can automate things. The more times we perform a task, the easier it becomes. We save energy by putting less thought into things we have done before. This is a blessing and a curse. I read somewhere that Warren Buffett reads 6000 annual reports a year. The reason he is so damn good at understanding the health of a company is because much of his understanding of financial statements has become automated. He has calculated so many financial ratios so many times, he just has a *feel* for what they are when he looks at an income statement. The bad thing about our brain's tendency towards energy conservation is that we naturally prefer easy things to hard things. But you don't become Warren Buffett by doing easy things.

So the question arises – will the successful companies (and employees) of the future be the ones that can do the hard things? Will concentration be a major source of competitive advantage in the coming years? When everyone is focusing on strategy, leadership, and technology as their sources of competitive advantage, will you be able to win by building a workforce that can execute because they can block out the mass of digital distraction and get things done? If thinking is the primary skill of knowledge workers, will the depth of your thinking determine your success? And if so, is it better to spend your time reading financial statements (for example) than scanning Digg for the latest Web2.0 app? I have cut back on blog reading the last 6 months, trying to search for quality over quantity. I've changed most of my RSS subscriptions to not display full posts anymore. That way, if I want to read something all the way through, I have to click to the site, which means I am much more discerning about the content I consume.

The development of sustainable competitive advantage often requires that you be a contrarian. You go where other people aren't. You don't follow the masses. You let other companies move on from fad to fad while you question each "new thing" and focus on boring ideas like execution. Don't get distracted. Build a culture of concentration. While everyone else is searching for a long tail and a blue ocean, you can keep focusing on niche markets and differentiation, just as you always have. Concentration, focus, execution, the ability to tune out the fluff – that will be the competitive advantage of the future.

UPDATE: Don't expect to see any business books to help you with this. Titles like Become a Great Investor By Spending All Your Free Time Studying Annual Reports would be about as popular as Lose Weight With A Balanced Diet and Exercise or Automatic Millionaire: Work Really Hard and Live Below Your Means.

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  1. SportsLizard's Gravatar Comment by SportsLizard on April 22nd, 2006 at 3:01 pm

    You raise a very interesting point. One of the biggest distractions I face is email – if I leave Outlook open all day I am constantly distracted by new emails popping up and my mind is all over the place. But if I close it and only check a few times a day, I risk not being able to reply to people in a timely fashion (especially customers). Right now I do sort of a hybrid – I keep it open most of the time, but when I really need to focus for an hour or two I close it…not perfect but it’s a start.

    Over the next few years with the increasing use of cell phones for all things entertainment and business, we are going to have to add that to the list of things that distracts us all day long, if it already isn’t there now.

  2. David Foster's Gravatar Comment by David Foster on April 22nd, 2006 at 4:18 pm

    E-mail really can be harmful to concentration. For a wide range of intracompany work, it could usefully replaced with blogs or wikis. That way, you have already established the context for what you’re looking at. If you’re looking at the gerbilator project wiki, you’re already thinking about gerbilators. If you’re looking a the salary planning wiki, you’re already thinking about salary planning. (Obviousy, triggers need to be built in so you don’t completely forget about something important)

    There are very few things in business (outside of the factory floor or the retail sales floor) where a delay of a few minutes or even hours is all that critical. Somehow, we have converted vast numbers of knowledge workers to the belief that they are like air traffic controllers, who need to react instantly when the “confict alert” shows up on their scope.

  3. Mark's Gravatar Comment by Mark on April 22nd, 2006 at 6:14 pm

    “Will you be able to win by building a workforce that can execute because they can **blog** out the mass of digital distraction and get things done?”

    Sorry, Rob, I couldn’t resist the irony. :)

  4. Rob's Gravatar Comment by Rob on April 22nd, 2006 at 6:50 pm

    Mark,
    That’s funny. I actually caught that when I read through it the first time. I could have sworn I changed it but, perhaps, in keeping with the spirit of the post, I lost concentration and was distracted by something else, only to think I changed blog to block. Sheesh.

  5. mark safranski's Gravatar Comment by mark safranski on April 23rd, 2006 at 12:40 am

    Thank you very much for the link ! Rob wrote:

    “The reason he is so damn good at understanding the health of a company is because much of his understanding of financial statements has become automated”

    Automaticity in action. Experts who seem to make unerring snap or intuitive judgments are often working with a very large cognitive map. New data tends to be sorted at a very high rate of speed.

  6. Kyle's Gravatar Comment by Kyle on April 23rd, 2006 at 12:28 pm

    Your absolutely right. Concentration is most important thing right now, both in the business world. But don’t overlook the academic world.

    I’m a student at a private school. I can tell you from firsthand experience that the use of Ritalin, Adderall, and other ADD/ADHD drugs has exploded, simply because one of their side-effects is increased concentration. (Some peers smoke marijuana for this reason, although I find it to be counterproductive… concentration w/o memory retention is inneffecient.) Other peers use drugs such as Modafinil (narcoleptic meds) to get the competitive edge, as it allows the user to stay up for days at a time w/o rest.

    Just wait, this new “stimulant-generation” will be migrating into the workforce soon. If you thought those young wippersnappers were snatching up your jobs before… well just wait… because now you’ll be competing against teams of 20-something, uber-concentrated, hyper-energized, know-it-all’s.

  7. Razib Ahmed's Gravatar Comment by Razib Ahmed on April 23rd, 2006 at 6:18 pm

    Yes, concentration is becoming a very improtant thing. Everyday, a busy man receives 30-40 emails (minus spams) and some times more than 100. So, even going through all the emails consume a lot of time.

  8. Gary Bourgeault's Gravatar Comment by Gary Bourgeault on April 24th, 2006 at 10:38 pm

    You said that:

    “Concentration, focus, execution, the ability to tune out the fluff – that will be the competitive advantage of the future.”

    The discipline to concentrate and focus will result in the most important thing – execution.

    I have found it harder and harder to convince some of those I consult with to believe this. They want to endlessly know what the next big thing is; the answer will come from their competitors that execute.

  9. Tolmet's Gravatar Comment by Tolmet on October 29th, 2006 at 12:56 pm

    If you’re looking at the gerbilator project wiki, you’re already thinking about gerbilators. If you’re looking a the salary planning wiki, you’re already thinking about salary planning. If you thought those young wippersnappers were snatching up your jobs before.

  10. Narconon's Gravatar Comment by Narconon on June 2nd, 2007 at 2:58 pm

    I think this is throwing out the baby with the bathwater: “Despite these amazing technical breakthroughs, these technologies haven’t added to human wellbeing.”

  11. Ed's Gravatar Comment by Ed on July 25th, 2010 at 1:10 am

    It’s silly and who do not require the treatment of the child!

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