Innovation: The only competitive advantage

Reading this brilliant article about Snap’s pre-IPO documents, one thing is particularly striking. When asked to describe Snap’s future strategy, the company states that:

In a world where anyone can distribute products instantly and provide them for free, the best way to compete is by innovating to create the most engaging products. That’s because it’s difficult to use distribution or cost as a competitive advantage—new software is available to users immediately, and for free. We believe this means that our industry favors companies that innovate, because people will use their products.  

Whereas in the past businesses could build up competitive advantages through specific know how or protected IP, today technology is breaking down these barriers and forcing companies to constantly evolve their offerings.

The only way to have a true competitive advantage, then, is to innovate more quickly and more successfully than other entrants to the market. To turn innovation from a fluffy strategy into action, companies need to adopt an experimental and tech focussed culture and mindset. In essence, this is what Snap’s strategy is hinting at: much like how the value of an ad agency rests in the ingenuity and creativity of its people, Snap’s value is not in its products (they can be easily copied), it’s in their people’s ability to respond to and flourish in a changing world.

Looking at companies that truly embrace this “innovation as competitive advantage” approach, you start to see that the only sacred strategy is: keep experimenting. When AirBnb started it seemed like a core tenant of their strategy was not to actually own any hotel rooms. Recently, though, they’ve started buying houses. Amazon started because of the limitations of book stores but recently they’ve started opening book stores.

The ability to change a strategy to accommodate changing technologies and opportunity is the foundation of an innovation strategy that will actually achieve results. Why so few companies do it is because persuading stake holders that these aren’t U turns but small scale experiments can be very difficult. The whole point of a strategy is that it takes into account changing environmental factors: but when the world is moving so quickly it’s impossible to account for everything. As Snap describes, the best way to deal with this is to have an innovative mindset at your core (though this is easier said than done).