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People are critical to a company’s ability to innovate, to create new ideas and new products and services, to develop better ways to do things, and to reduce costs. Competition limits the ability of companies to raise prices, requiring them to continually improve efficiency and reduce costs. Improving process efficiencies through technology is necessary to stay competitive but not sufficient to outperform other companies, who can easily duplicate or replicate any software-based improvements. People, then, become critical to improving efficiency as they devise ways to increase the capacity of existing machinery, re-engineer processes for optimal performance, and identify ways to eliminate waste. Their increased productivity from these efficiencies is critical to reducing costs.

Intense competition requires companies to continually innovate—to create new products and services for new markets. Blu-Ray will replace DVD’s, digital cameras replace film, handheld computers replace day planners, LCD Projectors replace slide films and the ever famous Manila Paper and pocket calculators replace slide rules. The marketplace rewards companies that are successful at developing new products and markets. In fact, the pace at which a company develops new products compared to that of its rivals matters more in global competition than the absolute pace of learning and innovation. Competition intensifies as firms innovate in response to each other, requiring an endless stream of new ideas. It is easy to fall behind, even when a firm looks like it is undergoing rapid change and innovation. High-tech companies once felt this pressure more intensely than other industries; today even traditional manufacturing companies are feeling the pressure to innovate rapidly. And it’s worth repeating: Innovation can only come from the minds and hearts of people—their ability to produce novel ideas, their knowledge of the domain that enables them to adapt the idea to a problem or opportunity, and their determination and perseverance when it comes to implementing novel but appropriate ideas.