This is the second in a three-part posting on the changing rules of global business competition and a summary of my discussions with Professor Richard D’Aveni, of the Tuck School of Business at Dartmouth, winner of the prestigious A. T. Kearney Award for research, and a recognized leading worldwide strategy consultant. D’Aveni is often ranked in the top 20 management thinkers, and top five strategists, by the Thinkers50. The first of this three-part posting can be found here.
In part 1 we were introduced to Richard D’Aveni, who has written extensively on how globalization and technology have resulted in a hypercompetitive world and disrupted traditional business strategy. In this installment, we’ll see how D’Aveni uses an analogy to convey why the traditional strategies no longer work, and make some observations about effective strategies in today’s world.
Sustainable Competitive Advantage is No Longer a Viable Strategy
As a simple means of describing to a large group of business executives why and how business strategy needs to evolve as a result of the new hypercompetitive world, Richard D’Aveni uses a simple thought experiment involving a tennis match.
He describes a hypothetical scenario in which two competing tennis players are equally matched. For the sake of example, he wants you to assume they’re of identical skills and fitness levels; and that they both have strong forearms (same competitive advantage) and similarly weaker backhands. They’re perfectly-matched competitors, and being equal, would each win an equal number of games.
Traditional Strategy
The only difference D’Aveni inserts into the above scenario, is that competitor “A” was taught the basic strategy of using a strength against an opponent’s weakness – as per traditional business SWOT analysis. So, putting that strategy into practice, player A would use her forearm to hit the ball to player B’s backhand whenever possible. And using that strategy, we could correctly assume that player A would win the first game in this matchup. Furthermore, player A would probably win the next several matches using the same strategy.
But, D’Aveni explains that because we’re now competing in a hypercompetitive world with new rules, competitive landscape and a greater number of “games played” – that consistently applying the old business strategy no longer works – at least not for long.
As an example of how the world has changed, he mentions Sony and Panasonic. “In the consumer electronics industry, product life cycles used to be 5 years, now new products are introduced in 5 months. And while in the 1980’s each a company had a few thousand products, today they have between 60,000 and 70,000 products”. So concerning the analogy of the tennis match, one game, or even a dozen games, doesn’t reflect the real world today. A more apt analogy would be competing hundreds of times, and perhaps on different courses and with evolving rules.
Going back to the tennis scenario, after 100 games…. player A has likely still won more games. But at this point, player B’s backhand has gotten much better due to all the usage. In fact, D’Aveni argues that player B has likely by now probably developed her backhand into a 2nd competitive advantage – in that her backhand is now better than player A’s backhand. And that, he points out, is one of the problems in today’s world when companies focus primarily on “leveraging their core competency”. It’s a formula for victory in the short term, but in this new world it will likely lead to defeat in the long-term. Focusing on using strengths often defocuses companies from developing their weaknesses. Yet old business habits are hard to break, and D’Aveni’s lament is that business theory has become religion in the face of new world facts.
“People are taking old rules and continuing to apply them without adaptation to a new world”, D’Aveni says.
More Competition Requires New Strategy
Returning to his thought experiment, D’Aveni asks the business execs, “Now, if you were player B after the first 100 matches, what would you do during the next 100 games?” He gets good participation from the group, “Mix it up”, “Run player A around”, and “Continually change the pace.” The professor smiles and nods his head positively. D’Aveni explains, “Exactly! If you were player B, rather than simply use your competitive advantages against the competition, which would be using your forehand and now your backhand to hit to to player A’s backhand, you’d change things up and be unpredictable.” This is the point D’Aveni has wanted them to make, and indeed has been espousing for decades.
He makes a point that historically, business strategy was to be clear and permanent, but in today’s dynamic and ever-evolving world it should be flexible.
Increased Competition Requires a Multitude of Varying Strategies
Observations From the Example
D’Aveni explains this scenario is what has similarly happened within numerous industries over the past 30 years in the United States.He asks the audience of senior business executives for their general thoughts on the discussion and the hypothetical tennis match. Their responses include:
- The rules of competition have changed significantly over the past few decades.
- Rote focus on the traditional strategy of “using your strength against an opponents weakness” will eventually lead to trouble.
- Through repeated usage, player B’s weakness becomes a strength. Player B now has essentially two competitive advantages.
- Player A should have developed their weakness, rather than solely focus on using their strength against player B’s weakness.
- In an environment of rapid change, a better long-term strategy would be to play unpredictably and “mix things up”.
- Timing and speed of maneuvering become increasingly important.
- Once unpredictability and constant change is happening, the fierceness of competition goes way up.
- Unpredictability and constant change equate to competing and winning with temporary advantages.
The old business strategies involving finding a competitive advantage and attacking your opponents weakness with your strengths are no longer effective in today’s world. Rather, competing strategically by establishing dynamic temporary competitive advantages is increasingly required to establish and maintain business success.
In the third and final installment on this topic, we’ll present Ten Strategies for a Hypercompetitive World. Additionally, I’ll share what Richard D’Aveni says is the strategy companies must use to deliver the “Knock-Out Punch” in a couple days.
NOTE TO THE READER: I know this is a fairly long article in comparison to the typical content posted on LinkedIn (and it’s the second of a three part article). However, given the scope of Richard D’Aveni’s work (and the importance) – it required a few parts to adequately summarize. In any event, I hope you enjoy. Absolutely welcome your thoughts and comments.
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Tom loves building meaningful businesses and technology (with people who care). Reach him on Twitter @thomastriumph or tomtriumph.com.
