Hypercompetition– The world is changing very fast… big will not beat small anymore… it will be the fast beating the slow. ~Rupert Murdoch
Hypercompetition is a key feature of the new global digital economy. Not only is there more competition, there is also tougher and smarter competition. Hypercompetition is a state in which the rate of change in the competitive rules of the game are in such flux that only the most adaptive, fleet, and nimble organizations will survive. Customers want it quicker, cheaper, and they want it their way. The fundamental quantitative, qualitative shift in competition requires organizational change on an unprecedented scale, and the competitive advantages must constantly be reinvented.
Hypercompetition results from the strategic maneuvering and rapid escalation of competition based on changing dynamics of: price quality positioning, protect or invade established markets, deep pockets (financial capital), and creation of even deeper pocketed alliances. In order to compete, and irrespective of the size and scope of your competitive advantage, companies must implement their strategies based on finding and building temporary advantages through market disruption, rather than trying to sustain an unsustainable advantage.
The term hypercompetition was originated by Richard D’Aveni in his book ‘Waking up to New Era of Hypercompetition’, in 1997. The hypercompetitiveness concept was originated by Karen Horney, psychoanalyst, in theories on neurosis, specifically; highly aggressive personality type who needs to compete and win at any cost as a means of maintaining their self-worth.
According to Ms. Horney’s theories, these individuals are likely to turn any activity into a competition, and feel threatened if they find themselves losing. Hypercompetitive individuals generally believe that ‘winning isn’t everything; it’s the only thing’…
In the article The Art of Hypercompetition by Glenn Rifkin writes: Is the idea of sustained competitive advantage dead? Richard D’Aveni, Dartmouth College, believes it is; and he says; business has entered a new era of hypercompetition, shifting dramatically from slow-moving stable oligopolies to an environment characterized by a quick-strike mentality on the part of companies aimed specifically at disrupting the competitive advantage of market leaders. Also, he says; traditional strategic concepts are making companies weaker, not stronger, and argues that the old competitive advantages are no longer sustainable over the long haul.
Instead, advantages are continually being created, eroded, destroyed and recreated through strategic maneuvering. The old goal, Mr. D’Aveni says, was to increase profitability by legally restraining the level of competition in an industry, segmenting the market, avoiding head-to-head competition, and raise the barriers of entry around their markets. Today, he points out, this strategy is literally impossible. He says driving forces are contributing to new era of hypercompetition: customer changes, including fragmenting tastes; rapid technological change; falling geographic and industry boundaries as markets globalize, and deep pockets among competitors due to the rise of giant global alliances in a raft of industries.
The way to win in today’s market is to obsolete the advantages of the market leaders. The barriers for entry to most markets are weak, and the unconventional player can attack suddenly from outside the market with unexpected methods, often with devastating effect. Despite these new parameters, Mr. D’Aveni suggests that long-term dominance of an industry is still possible; It is possible to win in hypercompetition by mastering the art of dynamically repositioning oneself in four key arenas: price/quality, know-how/timing, stronghold creation/ invasion, and deep pockets.
For a company to sustain its success in the hypercompetitive era, Mr. D’Aveni says, it must be willing to take more risks than ever before. The old business model that focused on, such issues as; culture, human resources, structure and infrastructure, objectives, and strategy may now be outmoded, he says. Instead, what is needed is a new set of guidelines that provides a vision for generating the next market disruption. Mr. D’Aveni labels these as; stakeholder satisfaction, strategic soothsaying, speed, surprise, signals, shifting the rules, and simultaneous or sequential strategic thrusts.
In the article Winner Takes It All: Why We’re Competitive by Kathryn Williams and Divine Caroline write: We’re all hardwired to compete. Evolutionarily speaking, that’s why we’re here– because we’ve competed over resources and mates, and we’ve won. At least our genes have. It’s a dog-eat-dog world, kill or be killed, survival of the fittest, the fight in ‘fight or flight’. But the fact that you have to run faster than the person on the treadmill next to you is not all inborn.
As is becoming increasingly clear in the nature-nurture debate, most personality traits are an organic product of both genetic inheritance and learned behavior. Perhaps our genes are telling us to earn more and produce faster, but competitiveness is also instilled by our individual upbringings and society as a whole.
Competition is healthy when it’s an incentive for improvement. We see this in business all the time. Competition for customers creates healthier, more efficient, more responsive, and more innovative companies. In evolution, competition for resources creates stronger, more robust and smarter species. When winning ‘is at all costs’; it’s hypercompetitiveness.
Karen Horney, psychoanalyst, theorized hypercompetitiveness as a form of neurosis in 1937 and linked the trait to self-worth. Today we see it played out by professional athletes who run their bodies into the ground in the name of the game, or in girls or boys who suffer from eating disorders. The repercussions of hypercompetitiveness are not only economic or emotional, but also social.
Hypercompetitiveness can be interpreted by others as aggression or uncooperativeness, resulting in a loss in trust. Sometimes there are reputation benefits to ‘taking one for the team’. By opting out of competition in the short run, you may benefit in the long. Roughly speaking, you lose the battle to win the war. The next time the inner voice urges you to ‘go, fight, win’; consider what you stand to win and lose.
In the article Winning at All Costs by Rob Spiegel writes: ‘Winning at all costs’ may sound like good business advice, but it’s not. Maybe your business idea just isn’t going to fly and you’d be better off trying something else. Or, maybe lower your prices to beat competition will cut into your profits more than your business can stand. Vince Lombardi, football coach, famously said, ‘winning is the only thing that matters in sport’. Like many sports clichés, the quote gets applied in business as well.
Business is competitive like sports, so clichés about winning transfer naturally to cutthroat entrepreneurialism. Similar quotes about competition take Lombardi’s thoughts even further: ‘Do whatever it takes to win’, and the horrifying; ‘If you’re not willing to cheat, than you don’t want to win bad enough’. While Lombardi’s quote is morally challenging– it may be offensive to the new breed of education experts who shy from playground competition on the grounds that some kids have to lose– when it comes to sports, Lombardi is indeed correct.
But the idea that ‘winning is everything’ is not correct in business. ‘Win at all costs’ is not good business advice. There are some products and services in business that deserve a quick and tidy death, and the ‘win at all costs’ mentality can keep a hearty entrepreneur hanging on to an idea that isn’t worth the dogged determination implicit in the clichés about winning. Sometimes the entrepreneur needs to let go of a bad idea, and instead consider; ‘If at first you don’t succeed, try and try again.’
In the article HyperCompetition and Differentiation by rplant writes: For a company to stay competitive it must innovative: delivering novel and advanced products and services for which there is little or no equal in the marketplace. But is that enough in our global economy? Absolutely not: Innovations can and do get copied, imitated, and downright stolen; if you create something that you consider truly innovative, it would be wise to keep the champagne bottles corked and the cigars unlit because chances are, you’re not the only one and you can bet you life that you won’t be for long, if you happen to be…
So, what is the true differentiator that enables one company to win over another? One very simple word: Agility. Agility simply means; the ability to create and deliver value faster than the competition. Notice I didn’t say– ‘create and deliver innovation faster than competition’, since innovation does not necessarily equal value. There is a lot of focus in companies to do more with less, to lower the cost of development, factor TCO, ROI…
Sometimes the focus on cost is so myopic, regardless of how much less it costs to develop innovation, if competition delivers first and can continually improve and advance faster than you, then cost savings don’t hold as much relevance. The true mission of any player in a competitive environment is agility. It is a basic characteristic of life; the agile of the species survive, the less-than-agile die.
Essence of strategy is building competitive advantage, but in a world of hypercompetition, no competitive advantage is sustainable. Hypercompetition is ‘an environment in which advantages are rapidly created or eroded’, says Richard D’Aveni. If you’re the market leader, then in a few years you could become a ‘has-been’. If you’re a challenger facing an entrenched competitor, then there is hope that you can match and overtake your rival.
While a traditional approach to strategy emphases the creation of competitive advantage: Richard D’Aveni takes an alternative view, he says; strategy is about creative destruction of the opponent’s advantage. The presence of one hypercompetitive business in the market is enough to tip entire industry into hypercompetition because competitors are forced to react to the threats.
According to Paul Simister; much of what Richard D’Aveni proposes can be seen as a direct challenge to the ideas of Michael Porter on competitive strategy. However, there is a place for both strategies, for example; some industries go through periods of radical change in a very short time-scale– think technology products; e.g., laptops, smartphones, iPads… Other industries slowly evolve; e.g., Coca Cola and Pepsi date back to late 19th century but still dominate the soft drinks industry, globally. Clearly, the same theory of strategy and competition will struggle to fit both market conditions:
Hypercompetition challenges conventional strategic thinking and requires a dramatic shift in traditional strategic planning. To develop a hypercompetition business strategy, a company uses counter-intuitive paradoxical logic. There are two basic types of strategic paradox in hypercompetition business situations; ‘coming together of opposites’ and ‘reversal of opposites’.
Hypercompetition changes the traditional strategic thinking paradigm, requiring a company to act in ways that appear to be in opposition to its self-interest. The golden rule of hypercompetition would be; do it unto yourself before the competitors do it to you…
The essence of competitiveness is liberated when we make people believe that what they think and do is important, and then get out of their way while they do it. ~ Jack Welch