Knowledge and Competitive Advantage: The Fibre of Success

While explaining the development of the industry, the writer attributes the success of German dye firms to their access to quality knowledge centres in organic chemistry and their strong marketing structure. With very little patent protection in the hey-days of German dye industry, the German firms had to face very fierce competition and always strive to find cheaper ways to produce the goods. Like any commodity or consumer product based industry, they had to develop a strong marketing organisation to differentiate themselves from the competition. It is said that what does not kill you makes you stronger. Nothing could be more true about the firms like Bayer and Hoechst that survived this cut-throat environment. The marketing efforts involved activities like localizing packaging graphics, making efforts to educate customers in order to foster customer retention and kickbacks. Even though the writer praises the marketing efforts of Germans, it is noteworthy that such generalist statement are simply not true. As we have read about Deutsche Bank, many famous German institutions made horrendous mistakes with their marketing tactics while most British alcoholic beverages companies did an excellent job of the same. Building on what the writer states and my understanding, I would say that it really depends on a particular organisation, the state of the industry it operates in (both nationally and internationally) and the knowledge centres available to it (depending on the national institutions and culture). National cultures and institutions can combine to give the industry specific advantages and disadvantages, but to predict how they will do so is anybody's guess and it is only with the benefit of hindsight that one is able to attempt to put a structure around it.

As national institutions affected the growth of dye industry, the vice-versa was also true. Dye industry leaders in Germany rallied effectively for the most part to promote education in organic chemistry, creating a virtuous circle. The business-academia-government partnership promoted education. The business leaders also played an important role in the growth of the company. For example, strong entrepreneurial leadership and willingness to bring in professional managers helped Bayer to become a powerhouse. The development also explains the dynamics of first-mover advantage, the mechanics of exploration in a new industry and the institutionalisation of R&D for technology based industries. The writer asserts (and I agree) that chance does indeed favour the prepared mind. The first-mover advantage is a fact, but political changes, wars and complacency are facts as well. The only truth is that one has to keep eyes and ears open without fail, look towards the future with an entrepreneurial spirit, respect and remember history without carrying its burdens and yet remembering its lessons, ethically promote institutions and lobbies that are good for the business and to be able to nurture and reward talent. To cut it short, it was never easy and never will be. But it was always fun and will always be!