Sunday, April 10, 2011

On Individual Competitive Advantage, Part 2

In part one I said that for a business, or organization, the only true source of long term sustainable competitive advantage in highly competitive markets is organizational culture, or stated otherwise, the personality of the organization.

I defined organizational culture as the “personality” of the organization. Organizational culture is the “chemistry” that arises between the interactions of the individuals' and the organizational processes that comprise the operating framework of the firm, all in light of its leadership. Through interaction and circular feedback, this chemistry influences how individuals in the organization act and make decisions. This chemistry is difficult, if not impossible, to copy, and is the only true source of long term sustainable competitive advantage in highly competitive markets.

Culture at the individual level:

For an individual person, the integration of their personality, unique individual traits & characteristics (idiosyncrasies), values, likes, dislikes, passions, talents, knowledge, etc, and anything else that makes them unique constitutes their “individual culture”. So we will understand an individual’s culture as that which makes them unique. Can your individual culture change over time? Of course it can…. The nature of human beings is that we are constantly learning and changing.

Good researchers understand that because of this, it is very difficult to apply the research methods of the natural sciences to the social sciences. There are no constants when studying human action, in the strict sense of the word. Yes, people do have tendencies to act in certain ways, but human beings are not like a piece of rock in a laboratory setting that can be studied under the exact same test conditions each successive time. Humans continually learn and constantly adjust their Mental Frameworks.

The Importance Of Mental Frameworks:

Human beings have within their consciousness a multitude of Mental Frameworks through which they view the world and
make decisions. These mental frameworks are composed of values which are matters of importance that 1. determine what we strive towards (objectives), 2. guide how we make decisions, and 3. take action in the objective world. Values are continually in flux, yet can still be organized into a means-ends structure using qualitative and interpretive research methods. By brainstorming and using creative probing questions, we can uncover and manipulate the values that lie within our mental frameworks.

A mental framework is not what is commonly known as a “mind map.” A mental framework consists of objectives (goals) that are driven by values. Values are matters of importance that determine how we make decisions and take action. The objectives within a mental framework are arranged into a means – ends relationship.

The human mind is goal seeking in nature and the values that guide our decisionmaking and actions are an important part of our individual culture. Obviously, your individual culture can change positively or negatively depending on what you are focusing on and learning, but more on that later….

Understanding your own individual culture is an important part of life in general. The ramifications are many, but in the context of this article, not understanding who you are as a person means that you will not be able to develop a competitive advantage for anything in life, and this can dramatically limit your success and happiness, or at a minimum make it relatively more difficult to achieve your goals.

In mainstream economics, an industry is considered perfectly competitive if no single firm’s actions have an effect on the market price. This definition is focused on the structure of the industry. The idea of perfect competition is perhaps more applicable to the level of the individual. No one may want to admit it, but on an individual level life is even more competitive than on the organizational and business level, just in a different way.

The extent to which we succeed at any task, whether it be a simple everyday social situation or a more complex task such as leading a company as its CEO, depends on the ability to apply ones unique talents and abilities to whatever situation one is in.

As we know, every individual person is different. Even physically identical twins will not have the exact same mental tendencies and skills. We are all unique in our own way and have our own individual culture that is composed of our individual idiosyncrasies, as explained earlier. It is only when that individual culture is synchronized properly with a context that success results.

Competitive Advantage Within A Context

The word “context” is usually defined as “the interrelated conditions in which something exists or occurs.” Here I am using this term to refer to any field, set of skills, or body of knowledge that the individual is trying to apply herself to and be successful at. It is something that you are trying to achieve a goal in. The context could be a sport, a career, a skill, or any body of knowledge that requires learning.

Any context is composed of certain elements or matters of importance. These are the competencies that are universal to the context. These competencies can be broken down and analyzed into a framework. For example, a mixed martial artist needs to know how to punch, kick, wrestle, appropriately apply his aggressiveness, learn how to apply the various martial arts styles, etc. These are all competencies that would lie inside the context of “mixed martial artist.”

In order for a Personal Competitive Advantage to arise, individual culture must be synchronized with the relevant context and leveraged into a proprietary competence. A proprietary competitive advantage is a set of knowledge or skills in a particular context that is exclusive to your individual culture. It is a unique synthesis that arises out of the competencies within a certain context and your individual culture. This is what determines how we act in the objective world. This is what determines success over time and thus, a Personal Competitive Advantage.

The proprietary competitive advantage can be thought of as a “mental framework.” As explained earlier, a mental framework is composed of objectives which are driven by values. The key to competitive advantage lies in becoming aware of the elements that lie inside our mental frameworks. By manipulating these elements in positive ways we improve ourselves in a way that develops competitive advantage. By becoming aware of our mental frameworks, we can understand and improve them.

This means that the unique characteristics of the individual (or organization) need to be utilized in the best way possible in light of the competencies necessary for success. To find the best or optimal way of utilizing one’s abilities requires:

- An understanding of the individual’s innate skills, internal values and all the things that constitute the individual and make them unique. This can be summed up with the phrase “know thyself” and we are referring to this as your “individual culture.”

- An understanding of the knowledge within the context that is being focused on. This refers to the competencies within a certain context that need to be mastered in order to succeed at something. In other words we need to “know thy context.”

- A methodology to combine the above two into a proprietary competitive advantage that will take the form of a mental framework.

A proprietary, or individual competitive advantage arises out of the effort of appropriately combining your individual culture with a knowledge of the contextual competencies. This is the unique skillset that arises when individual talents are synchronized with the knowledge within a context.

What I mean by the appropriate combination lies in the process used to combine individual culture and contextual competencies. Individual culture must be clearly identified, and applied with passion. We all have a unique individual culture, but many people have repressed their identities or have simply ignored who they are as individuals. As a result they have no idea of what they can bring to the table in terms of adding value to the world.

The majority of people have backed themselves into mental prisons of their own making. This is not a surprise when you look at our dogmatic, politically correct, mass media driven society. However, as we know from the discussion earlier, the world is changing and we now must learn to leverage our individual culture to add value to the world.

You must also immerse yourself in the contextual competencies that are necessary for success. When immersion into the contextual competencies that are necessary for success is done properly success comes easier, and a Competitive Advantage is born. You also become better aligned with the world and life in general. The actions you take toward your goals become optimized.

With the proper understanding of your individual culture, you will be able to clearly identify what is important to you. You will not be at the mercy of the obvious limited options in the external objective world. When you become clear on your individual culture, it then becomes possible to align your individual idiosyncrasies to the contextual competencies in an optimal way.

Understanding Individual Culture:

Do you really know yourself? Do you really know who you are as an individual? Do you understand your strengths, your weaknesses, your preferences, your personality, your talents, and all the other things that constitute your individual culture?

Understanding oneself requires effort, sometimes a tremendous amount. It requires asking the right questions and demanding answers. It also requires courage and determination. To truly understand oneself it is necessary to take deep subjective journeys into the mind. Sometimes we don’t like what we find in there. It could be something from our past, or some tendency in our personality that we don’t like, any part of our individual culture that we are unhappy with.

It is important to recognize that just about anything, negative or positive, can be leveraged into an advantage with enough applied creativity. One of the obvious secrets about life is that negatives need to be leveraged into something positive if we are to thrive, develop Competitive Advantage, achieve goals and be happy.

“Events in life are not negative or positive. They are completely neutral. The universe does not care about your fate; it is indifferent to the violence that may hit you or to death itself. Things merely happen to you. It is your mind that chooses to interpret them as negative or positive. And because you have layers of fear that dwell deep within you, your natural tendency is to interpret temporary obstacles in your path as something larger—setbacks and crises.” ~ The 50th Law

Instead of internally resisting who you are as an individual or being mad at the world because of what your life history has brought you, embrace your uniqueness and focus on how you can apply your individual culture to whatever context you have decided to focus your attention and passion on.

Developing Competitive Advantage:

If someone wants to achieve success, what they normally do is learn as much as they can about a context or skill and then practice. I do in fact believe that learning and practice are vital to becoming competent. But to achieve a good degree of success requires something beyond this—there is a good degree of truth to the old saying that “if you do what everyone else is doing, you will get the same result as everyone else.”

Remember Muhammad Ali? He developed a fighting style that was in alignment with all the things that constituted his individual culture. His personality, his physical skills, his determination, his internal values, etc… all the elements of his internal culture were combined with the competencies in the context of boxing in an optimal way. This created a competitive advantage that only reached its end after a great career.

He believed he was the greatest fighter in the world, as well as one of the most entertaining people in sports. He combined boxing competencies with his unique individual culture into a proprietary competence. This proprietary competence flowed into everything he did. The result was a sustained Personal Competitive Advantage. Whether they are aware of it or not, every person who has achieved consistent success has done this, usually unconsciously.

There are many people who are determined and believe in themselves very strongly, but the vast majority usually wind up disappointed with life. Yes, in certain cases such as sports there can be only one winner, but if more people were to discover their competitive advantages they would be living a life that is at a minimum much happier. This is because their true desires would be more likely to manifest in the external objective world.

Again, I am not suggesting that learning the basics of something are not important. It is very important. But once you get to a level of basic proficiency, if you are going to excel and go beyond average, you must do something unique and create a competitive advantage. You move beyond average by creating your own Competitive Advantage. This individual competitive advantage is the synthesis of individual culture and the contextual competencies. The proprietary competitive advantage is the mental framework through which the energy of your action flows.

The Importance of Internal Alignment

Odds are if someone is determined to succeed, they will develop a level of competence through all the trial and error. Yet many people wind up disappointed with the results they see after all of this work. The reason is that the skills they learned were not individualized to who they are as a unique person. As a result, their strategy and tactics are out of alignment with who they are as a unique individual. This creates a competitive disadvantage instead of a sustainable competitive advantage.

Some will say there is a natural learning curve that must be worked through before the real results come. But the learning curve itself is concerned with learning how to properly apply the body of knowledge to individual culture. That is what goes on inside a person’s head through all the trial & error. When they have finally gotten down that learning curve, what level are they at? Have they just attained an average level of competence or have they really developed a unique sustainable competitive advantage? With the proper methodology we can actually shift the entire learning curve in a favorable direction.

The execution of strategy and tactics need to be aligned to individual culture in order for a Personal Competitive Advantage to arise. The best and most effective teachers understand this. The best coach or mentor is not usually the person that had the most success, has the most gold medals, won the most races, or made the most money. It is usually the person that struggled a lot and understands how to bring out the best in someone as an individual by helping to apply their understanding of a context to the the individual culture. (to be discussed further in part 3)

John T. Bardacino, CAIA

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