Copyright © 2008 by C. K. Prahalad and M. S. Krishnan. Click here for terms of use.
competitive advantage? What are the enablers of innovation in
my firm?
Historically, access to capital and raw materials has
been a source of competitive advantage. In some indus-
tries, it still is; access to low-cost ore and electricity is an
advantage to firms in the aluminum and steel industries,
and access to oil and gas is an advantage for an oil com-
pany. But access to raw materials is not a unique source of
advantage in most industries. Although access to venture
capital is not yet universal, capital is quickly finding its way
to new opportunities. For example, technology venture
capital firms in the United States and Europe are increas-
ing their presence in China and India. Specialized manu-
facturers, such as Flextronics in high-volume electronics
manufacturing, provide firms with world-class expertise
in design and manufacturing. So do Infosys and Tata Con-
sultancy Services (TCS) in IT services. If access to raw
s firms transition to a world of N = 1 and R = G, the na-
ture and sources of competitive advantage will change.
So will the nature of managerial capabilities required
to effectively compete in that market. Managers will have
to ask themselves a set of questions that are the natural re-
sult of this transition: How do we think about new sources of
materials, capital, technology, and talent are rapidly becoming table
stakes, what is the unique source of competitive advantage in an N
= 1 and R = G world?
In this chapter, we will identify business processes as the key
enablers of an innovation culture. Second, we will focus on the
twin dimensions of business processes—the technical and social
architectures. We will demonstrate how some firms have leveraged
this insight—the centrality of business processes—in building
their unique innovation culture. Finally, we will illustrate how a
firm can migrate to an N = 1 and R = G world systematically by fol-
lowing the journey of one firm—the ICICI corporation.
The global corporation can be visualized as a logical thread of rela-
tionships between a multitude of moving parts—ideas, information,
knowledge, capital, and physical products. These relationships de-
fine an organization and its extended network of collaborators, in-
cluding suppliers and consumers. The capacity of an organization
to articulate the relationships selectively between these moving
parts is at the core of an organization’s ability to respond, in real
time and cost effectively, to the demands of the N = 1 and R = G
world. The more explicit these relationships are, the greater the
ability of managers to use them. We outline here the core elements
of a framework that enables firms to enhance their innovative ca-
pacity and build their next source of competitive advantage.
The new logic of innovation and value creation forces us to focus
on the core principles. For example, ING, Bridgestone, Starbucks,
and Google are all in different industries. But all of them, implic-
itly, subscribe to the core principles of N = 1 and R = G. We need to

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