Phoenix metaphor. From competitive advantage to cognitive advantages

Phoenix metaphor. From competitive advantage to cognitive advantages

Background

International trade benefits to the countries involved; although there may be discrepancies or reviews for losses and damages to some economic agents, generally is better for all. Theories have explained the dynamics of international trade with different theories such as David Ricardo, referring to comparative advantage, then with theories that focus on the nature and distribution of the factors, or the efficient use of factors with theory of competitive advantage from Michael Porter.

Although nations are mentioned as entities participating, it is possible to adapt the concepts to companies or organizations. Two companies with access to natural resources, located in the same country or in different countries may find that by comparative advantage, is more profitable to specialize and transact with each other. Similarly, when taking into account productivity and through it, competitiveness, they may be competing transactions or anyway one of them will have fewer opportunities or benefits.

Currently, if we focus on business, competitiveness is not an attribute that explains or fully determines success, exist evidences from the world of business showing that success and market dominance no longer lies in having the best production factors , the highest level of efficiency or productivity, but in the ability to respond to the demand and requirements of a changing, volatile, interconnected market, where are produce rapid and unpredictable changes in habits and requirements of consumers. The responsiveness is reflected in the speed, timing and location to give the consumers goods and services demanded.

Earlier, data and information to make decisions about the goods or services were in the business, could get regularly and easily, through surveys, report record sales in subsidiaries. Of course, surveys and other means of data collection were limited, partial and only contained what was significant for the purpose of the survey. Today the data are real, timely, or what they really think consumers want and are constantly updated, spontaneously generated by the clients and are widely disseminated through the network of social media.

In the past, if the survey applied to 200 people, it sought to know the opinion about goods or service. Responses could be sincere or false, now what think or really want thousands or millions of consumers of a good or service is broadcast on the network instantly, the data is in the cloud, and is winner who has access to it, having the technological tools and appropriate analytical skills. It is the knowledge of the truth of the market that determines the gain market dominance or the exclusion.

The paradigm of big data, technology and nature of information has changed the way of making decisions, evaluating the market, to know and understand consumers.

We propose the model of the cognitive advantages, because in relation to data and information, and there are no limits on the amount, no structures or patterns, or time or origin, everything is open, ambiguous, information is structured or unstructured knowledge alone can overcome the limitation of the structure and other fixed characteristics.

In this model we show two interesting things: First, the predominance of material factors production and hand labor, capital, natural resources is assumed by intangible factors that can be created and are ubiquitous in indefinite existence and location. Second, data, facts, information, knowledge and all related event happened that had business regarding the market are irrelevant, attention should be fixed in the future where exist the action and actual and necessary information, where everything must be built.

In this regard, we propose the metaphor of the phoenix, a mythological spice capable of rebirth, which should disappear before rise from the ashes. Only the enterprise phoenix tribute takes place in the future, others will be left behind, unable to action or opportunities.


1 The basic models

  The comparative advantages of nations (David Ricardo) defined trade and international relations at the time when the first theories of economics were laid down. Trade benefits to countries or companies, the product increases when each country specializes in producing the good in which it has comparative advantage. For Krugman (2003, p. 11) "A country have a comparative advantage in producing a good if the opportunity cost of producing that good in terms of other goods is lower in that country than it is in other countries ... Trade between two countries can benefit both countries country benefit if each country exports the goods in which it has a comparative advantage` ".

It is presented an illustrative example: South America produces roses while the USA produces computers, specialization benefits both, but if they decided they could produce both in their own territories; the result would not be optimal; Americans have little chance of sending bouquets of roses as the South Americans would know just computers. Trade is good because South America has a comparative advantage in the roses, EUU has them in computers.

Paul Samuelson and Ronald James developed the specific factors model. Krugman (2003, p. 39) states that

"Like the simplest Ricardian model, it assumes that an economy produces two goods and that can allocate its labor supply between the two the industries. Unlike the Ricardian model, however, the specific factors model allows for the existence of factors of production besides work. Whereas labor is a mobile factor that can move between the industries, other factors are assumed to be specific. That is, they 'can only be used in the direct production of goods "

In relation to this model, Krugman (2000, p. 52) identifies two key concepts, the production function that determines the amount of product obtained from a combination of capital and labor, as well as the relevance of concepts such as marginal productivity factors and the production possibility frontier.

A country with a large amount of capital and few natural resources, tend to produce goods with a high proportion of articles about food, while a country with many natural resources will do the reverse.

The concept of international trade was improved range and accuracy as the theory evolves. To overcome some rigid assumptions in the theory of comparative advantage, there is the theory of factor proportions, which soon proved insufficient to explain the dynamics of trade.

In the Heckscher-Ohlin emphasis is on how the factors in each country and the proportions in which they will be used for the production of goods interact. For Krugman (2003, p. 67)

"Because the theory emphasizes the interplay between the different proportions in which factors of production are available in different countries and the proportions in which they are used in producing different goods, it is also referred to as the factor-proportions theory ... That shows comparative advantage is Influenced by the interaction between nations' resources (the relative abundance of factors of production) and the technology of production (Which influences the relative intensity with different which factors of production are used in the production of different goods).

 
There are other contemporary models incorporate random elements, but those along the lines of the previous models are based on what exists materially (productive factors) but data or information in a way are static and therefore its scope in a highly dynamic world is limited and does not contribute to the understanding of current market phenomena.

Michael Porter (1990) in a new model in which talk about the competitive advantages of nations, states an important fact: The prosperity of nations is created, not inherited, does not flourish in a gifted resource-rich country, hand labor, and other factors also plentiful, why, says

"A nation's competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world best’s competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers and demanding local customers ... As the basis of competition has shifted more and more to knowledge creation and assimilation of, the role of the nation has grown. Competitive advantage is created and sustained trough a highly localized process (Porter, 1990, p.73)

Porter's competitive advantages are defined in the context of globalization where borders become blurred but the unity of nations as actors interacting on the big stage, each plays a role according to their capabilities must be maintained,

We agree on the idea that prosperity must be built and that the concept of competitive advantage is applicable to the company and nations; also in the privileged role of knowledge as a basis for innovation and upgrading. But Porter did not apply yet the dynamism that information and knowledge should then with the advent of phenomena such as cloud computing, the concept of "big data" and dynamism that have incorporated social networking market.

An important fact is that the base or supports of each type of advantages increasingly less material, less concrete, less defined

 

Table 1 Traditional Models

Theory	Principle	Suport
Comparative advantage (David Ricardo)	The country is specializing in producing good with less cost, using more abundant and disposable resources	Tangible, no growth (territory) or slow as state of technology. Without factor mobility. Few data, internal data source or external
Factor proportions (Heckscher-Ohlin)	Country specializes in producing at a lower cost,	Tangible, slower growth in production. Increased mobility of factors. Facts internal or external source
Specific factors model (Samuelson-James)	Factors have specific use. Production function, marginal productivity and frontier production	Tangible. Limitations of marginal productivity. Data from internal or external source
Competitive advantages (Porter)	The country specializes in what it produces at lower cost and with the best combinations of factors. Concept of productivity	Tangible, depends on factors, but less and less material, the skill with which resources are used. Freedom and movement of factors (other than fixed assets), as borders diluted by globalization. More data, internal and external sources, even strong structuring

Source: Author development, C.Rivas, August 2014

In all the above models, market data are accessories and often assumptions and projections are not necessarily reliable, but were enough to make reasonable decisions. Currently this is not possible. (1)

  
2 Model of cognitive advantages

The above models are applicable to countries and companies, also the model presented is applicable in these levels; the difference is only of magnitude or how the operations are specified and decisions are made. In essence, now sells more and earn more who have the most current data and the ability to process and to extract the signals that determine decisions,

The data varied little in the past, had a low and predictable rate of growth, therefore, the decisions of production of goods or services were well adjusted to what the market expected. In the era of "big data", data growth is explosive not only in volume but in variety, value (Big data attributes), therefore decisions must be approached differently. The data are the determinants that make decisions and adjust to them; the company does not understand the dynamics into the market loses and must inexorably retire. Figure 1 illustrates this idea.

No decision on the production of goods or provision of services is taken if is not supported by facts and figures that show the characteristics of consumers (preferences, income, expectations and related facts), but while traditional schemes are based on the past , and outdated data or information for a world calm, predictable and unchanging;  in today's world, market information is not privileged or ownership of a business, the information is not static, rapidly changing nature, context and time only those who have the ability to penetrate the dense cloud of data and extract with an intelligent process, the desired information, they can act and make appropriate decisions.

The intelligent process, consider the ability to enter cloud and extract information, generating knowledge from the mass of data available in this technological scheme. For the National Observatory for Telecommunications and Information Systems, ONTSI (2012, p.12), the processes of relocation and internationalization of large firms, the explosion in the use of information technology and data processing, have led to a growing of computing needs at a higher rate of growth in computing power of personal computers. This disparity requires an evolution of computing architectures, which rely on processes to run simultaneously on multiple computers.

The ONTSI (2012, p 14) has two definitions: "The definition given by the NIST (National Institute of Standards and Technology), cloud computing is a technology model that enables ubiquitous, adapted and on-demand network access to a shared set of configurable computing resources shared (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with reduced management effort or minimal interaction with the service provider. ... For the RAD Lab at UC Berkeley .. cloud computing refers to both the applications delivered as a service over the Internet, such as hardware and software for data centers that provide those services ".

In Analytics (http://en.wikipedia.org/wiki/Analytics, par. 1-2) indicates that

" Analytics is the discovery and communication of meaningful patterns in data. Especially valuable in areas rich with recorded information, analytics relies on the simultaneous application of statistics, computer programming and operations research to quantify performance. Often favors Analytics data visualization to communicate insight. Commonly, firms may apply analytics to business data, to describe, predict, and improve increase business performance. Specifically, within arenas include enterprise decision management analytics, retail analytics, store assortment and stock-keeping unit optimization, marketing mix modeling optimization and marketing, web analytics, sales force sizing and optimization, price and promotion modeling, predictive science, credit risk analysis, and fraud analytics. Since analytics can require extensive computation (see big data), the algorithms and software used for analytics harness the most current methods in computer science, statistics, and mathematics.

 

Forsyth (2013, p.5) in relation to the concept of big data, originating from the explosive growth of data on the network, indicates that there are two kinds: "structured" (standard), organized by codes, classifications or practices common in how computers understand (e.g.  documentation that identifies the real assets' owner, address, mortgages, taxes, fees and the like); which application programs can control and collect payments services and the NAIC code (North American Industry Classification System Standard for Classifying businesses). "Structured data is identified in a fixed field within a record in the file”.

 
The remaining data, as Forsyth (2012, p 5.) says, are "" unstructured, semi-structured or non-standard. These include blogs in the social networks, geo location devices, barcode, vehicle telematics, X-ray, discussions, videos, images, advertising, spreadsheets, addresses for shipping, hearing screenings, emails ". In summary data do not have an identifiable structure and therefore cannot be easily used (page 5.)

Forsyth proposes a definition in terms of trends:

"Since the work of software scientists is to join together all things and people they call it big data. Big data is the result of a convergence of trends. Technology to collect, manage and store data today is way cheaper (1/6th the cost of six years ago, according to IDC), and dramatically quicker than ever; data is viewed as really valuable - specially understanding customer behavior, or Improving customer satisfaction, or increase increasing traffic flow - and a third trend is understanding that gut feel alone in today's complicated world is simply not the way to run Organizations, big or small. (Forsyth, 2013, p 5.)

It also notes that "data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process the data within a tolerable elapsed time. Big data sizes are a constantly moving target currently ranging from a few dozen terabytes to many petabytes of data in a single data set ... Big data is all about being reliable data through to see more and finer grain context and understand your customers and your operating environment in that context (Forsyth, 2013, p 5.)

The comparative, competitive advantages or any other reference to the ability of the company or country to position itself in the market are inefficient or inadequate for understanding how these entities should address the problem of data available. And they cannot escape attention, because the data, information and knowledge derived from them allow and justify decisions.

That means that companies must continually reinvent itself, should forget the past and adopt new methods by making use of resources or factors of production more sophisticated, and in the case of human resources professionals with a different qualitative and quantitative training that was needed in the past.

The phoenix (Ancient Greek: φοῖνιξ, Romanization: Phoinix) for the Egyptian Bennu, is a mythological bird the size of an eagle, red, orange and yellow glow, strong beak and talons plumage. It was a fabulous bird that was consumed by fire action every 500 years, then rise from the ashes. When it was time to die, it made a nest of spices and herbs, put a single egg, which hatched for three days, and the third day was burning. The Phoenix completely burned and reduced to ashes when, resurgent egg the same phoenix, always unique and eternal. This happened five hundred years but companies must continually renewed although the challenge is greater so they may not experience the renewal every 500 years but more continuous, because the change in the business environment is accelerated.

How do companies manage to acquire skills phoenix reborn continuously and have the ability to stay in the market ?. With cognitive advantages, which are the means you are always on stage. He who knows, can; he knows not how, out of the market and languishes.

The following table shows some characteristics associated with the model of cognitive advantages.

Table 2: Characteristics of the cognitive advantages

Theory	Principles	Support
Theory of cognitive advantages	Three VVV (Big data, plus the fourth V (Value). Data volume, variety (formats, fonts), rate at which they are generated. Knowledge and use of sophisticated analytical techniques is essential	Resources and basic sustenance (place, plant, raw materials are tangible) but the way in which decisions for the efficient and effective use is made ​​is different, it is backed with big data. Data, essential raw shift in importance to material inputs (fixed, immutable, finite, privately owned.) Data are "infinite", changing, unstable, no presence or definite existence, have no single owner but the best uses with opportunity and creativity is the "best owner"
		Infinite data, with or without structure, multiple media collection. Internal sources are insufficient, the necessary external sources are required (big data)

Source: Authors processing/CRivasR, 2014

Past data, history, no longer serve; the company holding on to them, you lose. The future is made​​, the data allow this process are available for those with the ability to explore and use whatever is appropriate for your situation. The information is not enough, the simple data transformations to generate this information are outdated and irrelevant; knowledge is what makes the difference, for that companies should have qualified human resources, prepared to understand market dynamics differently. Decisions must be better, faster and timely delays are fatal. (2)

Companies who want a place in the universe, in the market should set aside past data, which are also partial, restricted, sometimes false, i.e. pointless and think about the present and future. Give up all this is how disappear, so must take the nature of the phoenix that must die to rise from the ashes. And it must be continuous, because as it is expected that professionals have the capacity for continuous learning, continuous learning and unlearning, the same should require companies to develop the ability to continually reinvent itself.

Figure 2 is self-explanatory; should be noted that the company has a level of knowledge indicated in the K point is the loser in front of the one having the K'level. In this case, more knowledge is not only better, but is strictly required and necessary.

 

3 Conclusions

International trade models explain why the exchange favors countries participating, despite criticism about the disparity of opportunity and other aspects. The worst situation is autarky.

The models have evolved from the comparative advantages (Ricardo), which dominates the existence and use of factors to models of competitive advantage (Porter), in which is emphasized as the shape as these factors are used. Advanced models incorporate the random component, essentially by the high volatility of world events. The market changes rapidly, information is created, distributed and rapidly changing, decisions regarding the production of goods or services have less shelf life, they are more dynamic.

 
Transcendent facts occur in the field of the factors that determine the capacity and nature of processes. Not enough to have the best resources, or factors of lower cost, but to know what, how and when consumers demand a good or service.

The critical factor now is the knowledge, which can add the time factor. The faster certainty about what the market has expected, all right; but at the same time should be available other resources, especially human, able to propose appropriate responses. Innovation and creativity, timely and focused are the characteristics of dominant firms having the source of its advantages in knowledge.

The model of the cognitive advantages in the market is proposed , assuming that companies or countries that have them, increase the chance of a better market positioning. This implies a paradigm shift from the tangible and concrete (production factors, facilities, large manufacturing centers, high productivity) to the intangible (knowledge, innovation, adaptability, managing "big data")

Notes.

(1) The government of the United States three decades ago, had agents in every country in the world, regularly reporting on political, social, economic events, using means that now seem primitive (phone, fax, by mail, a few pictures) . It was enough for the government to act according to its objectives in relation to a country. Now, the agents monitored every second the facts, data and information sent different in nature and content and use the latest processing techniques and the volume is infinitely superior. Some minutes without monitor and report can be decisive for the purpose of foreign policy.

(2) Forsyth (2012) notes that companies who make data-driven decisions, raise their productivity by at least 6%; also will, be found very personal details of consumers who were not previously considered because it was impossible to know (the nano data)

References

 

Analytics

Tomado 20/8/2014 de http://en.wikipedia.org/wiki/Analytics

 

Fénix

Tomado el 20/8/2014 de http://es.wikipedia.org/wiki/F%C3%A9nix

 

Forsyth , Chris ( 2012)  For Big Data Analytics There’s No Such Thing as Too Big

The Compelling Economics and Technology of Big Data Computing
March 2012 , White paper
Tomado de 4syth.com . Emerging big data thought leaders

Krugman, Paul R.; Obstfeld, Maurice (2003) International Economics Theory and Policy. Addison Wesley, Sixth Edition, NY (Paul R. Krugman, Princeton University; Maurice Obstfeld, University of California, Berkeley)

 

Observatorio Nacional de las Telecomunicaciones y la SI (2012), Cloud Computing
Gobierno de España, Ministerio de Industria, Energía y Turismo, Mayo 2012

Porter, Michael (1990)  The competitive advantage of Nations,

Harvard Business Review, March-April 1990,