STAYING AHEAD OF THE CURVE

WHAT IS THE BASIS of competitive advantage in today's business landscape? Many observers say it is the power to harness information. Best-selling authors Erik Brynjolfsson and Andrew McAfee have argued we are entering the "Second Machine Age," with information technology as the engine of human progress. The McKinsey Global Institute has called big data the "next frontier for innovation, competition and productivity." Academic research points to the importance of knowledge sharing, intellectual property, and R&D as the drivers of competitiveness. Firms such as IBM, American Express, and Caesar's Entertainment have emphasized business analytics and big data as key to their success.

In this book, we offer a different perspective. We believe the case for information technology, big data, and advanced analytics is overstated. These will of course continue to be important resources for staying in the race, but as information becomes ever more ubiquitous and search costs trend to zero, their capacity to provide any modern organization with a leading edge is diminishing.

That's not the only problem. Information overload at the individual level leads to distractedness, confusion, and poor decision making. At a corporate level, we end up with analysis paralysis, endless debate, and a bias toward rational, scientific evidence at the expense of intuition or gut feel. These pathologies have a deleterious effect on our companies. They lessen the quality and speed of decision making, delay action, and engender a sterile operating environment in which insightful thinking is quashed unless it is quantifiable. As a result, many companies end up standing still, even as the world around them is speeding up.

So what is the alternative to "Slow-Motion Inc."? Smart executives understand both the potential and the pitfalls of information. They recognize that the notion of competitive advantage is more fleeting than it used to be. They adopt what we call a fast/forward approach to business: they emphasize decisive action ahead of detailed analysis, and they are comfortable relying on emotional conviction alongside rational judgments.

Consider a few examples.

Amazon's phenomenal growth, from online bookseller to new economy powerhouse, defies all the established rules about firms focusing on their core competencies. Its success is built on deep insight into the needs of its customers, and an assumption that if you create value for customers, growth and profits will follow. Jeff Bezos, the company's cerebral founder, started his career developing mathematical models for a hedge fund and is a great believer in systematic analysis. But at the same time, he is known for his "harrowing leaps of faith." His most important decisions are not based on studies or spreadsheets, they are "nervy gambles on ideas that are just too big to try out reliably in small-scale tests."

Or look at WPP, which has transformed itself over the last decade from a stable of old-school ad agencies, such as JWT and Ogilvy & Mather, to the world's biggest new media communications company, with 40 percent of its revenues coming from its digital businesses, such as Internet and mobile advertising. For an industry built on fresh thinking, creative talent, and client responsiveness, bigger is not always better. So CEO Martin Sorrell allows the operating businesses to retain autonomy and to compete head-on with one another, while also encouraging collaboration when required — what one observer has called the "kiss and punch" model. Sorrell is famous for his attention to detail, his micro-managing style of leadership, yet like Jeff Bezos he is also decisive, with many of his largest acquisitions based more on gut instinct than due diligence. WPP's "weirdly effective mix of order and chaos" has enabled it to steer through the digital revolution more capably than its big rivals, and yet Sorrell feels there is more to do: "We don't believe that our existing businesses can move fast enough."

Or consider Oracle, the world's leading provider of database management software. Back in 2005, CEO Larry Ellison initiated a major project to rework the company's products as software-as-service applications. Back then, the term cloud computing hadn't even been invented, and there were many competing views about the future of computing. But Ellison made it a top priority, putting his very best developers onto a project with an uncertain future and a ten-year time horizon. In doing so, he enabled Oracle to develop one of the most comprehensive "cloud" offerings, spanning software, platform, and infrastructure elements. As observed by Thomas Kurian, Oracle president, "the heart of innovation is to decide early — in the middle of the period of ambiguity."

You might think this is a tech-sector phenomenon, but increasingly executives in large, mature industries are also embracing the fast/forward mind-set. For example, Swiss drug giant Roche is seeking to give greater decision-making freedom to its R&D scientists. As CEO Severin Schwan says, "We need a culture where people take risks because if you don't take risks, you won't have breakthrough innovation." Air Liquide, the Paris-based world leader in industrial gases, has undertaken a major shift in strategy toward innovation and retention, driven by what CEO Benoit Poitier calls the "expertise, audacity and intuition" of its sixty-eight thousand employees. Air Liquide, like Roche, is achieving impressive levels of growth in an otherwise stagnant industry.

Or look at Lloyds Banking Group in the United Kingdom. It has put digital working at the heart of its new strategy, following its post-financial-crisis turnaround. In the words of CEO António Horta-Osório, the intention is to "get closer to customers and make the decision cycle happen more quickly." A thousand-person digital team now reports in directly at board level, with a mandate to make the whole bank more agile. "This is a strategy adapting to the new world," says Horta-Osório, "We want to create a high-performing organization ... to be quicker than others to have a competitive advantage."

These brief company examples illustrate some important themes. Success in a fast-changing business world is a subtle blend of art and science. Rather than getting bogged down in analysis and introspection, fast/forward companies are open-minded, and they have operating cultures that promote action and experimentation. Their leaders know when to listen to the data and when to be decisive. As Jeff Bezos says, "There are decisions that can be made by analysis. ... These are the best kinds of decisions! They're fact-based decisions. Unfortunately, there's this whole other set of decisions that you can't ultimately boil down to a math problem," namely the big bets on new businesses like the Kindle or Amazon Web...