Innovation is the new source of competitive advantage. Innovation was always a source of competitive advantage. However, the concept of innovation was tied to product and process innovations. Reducing cycle time, increasing modularity, tracking sales from new products introduced during the last two years as a percentage of total sales, and global product launches were the hallmarks of an innovative company. Increasingly the focus of innovation has to shift towards innovation in business models.
Business innovations are crucial in a competitive landscape subject to disruptive changes.
Given the dramatic changes taking place in the competitive landscape, I believe that both the concept of strategy and the process of strategy making will change. Older approaches will not suffice. Firstly, that they can influence the competitive environment. Strategy is not about positioning the company in a given industry space but increasingly one of influencing, shaping and creating it. What managers do matters in how industries evolve.