A new ecology of competition

"For most companies today, the only truly sustainable advantage comes from out-innovating the competition" 

-- James F. Moore

Moore (1993) suggests to perceive a firm as part of a business ecosystem that crosses a variety of industries.

Successful businesses are those that are innovating heavily. Yet this innovation is not created in a vacuum. Firms co-evolve capabilities around an innovation. They work cooperatively and competitively.

Every business ecosystem develops in four distinct stages:

1. Birth of Business Ecosystem 
2. Expansion 
3. Leadership 
4. Self-renewal or death 

How do firms achieve and sustain competitive advantage?

That was and still is the fundamental question of strategic management. It is even more important in the times of rapid technological change.

Dynamic capabilities approach
Teece, Pisano & Shuen (1997) have created a framework that explains how companies can achieve and sustain their competitive advantage. According to this framework - a dynamic capabilities approach - the wealth creation in regimes of rapid technological change depends on improving internal technological, organizational and managerial processes inside the firm. 

Firms can improve that by: 

• identifying new opportunities and organizing effectively and efficiently to embrace them
• exploiting firm specific competences to address changing environments

Knowledge of the firm

According to Kogut and Zander (1992) firms exist because they create conditions under which individuals integrate their specialized knowledge. These conditions allow the mechanisms for both transferring and creating knowledge to work and to create social communities that can transform individual and social expertise into economically useful products and services. What firms do better than markets is sharing and transferring of the knowledge of individuals and groups within an organization.