'Hypercompetition' Is New Business Game
Today's losers could be next winners by shifting rules
THROW out the old rule books of corporate strategy that teach managers to seek certainty in their markets, attack competitors at their weak points, and adapt their organizations to succeed in the current market environment.
In a word, the new business environment is "hypercompetition," says Richard D'Aveni associate professor of business administration at Dartmouth College's Amos Tuck School of Business in Hanover, N.H. The term, he says, refers to a business environment where rival companies "strike quickly with unexpected, unconventional means of competing."
At the annual conference of the Academy of Management here last week, Mr. D'Aveni, author of "Hypercompetition: The Dynamics of Strategic Maneuvering" (Free Press, 1994), told fellow business-school professors that a fundamental shift in the economy has taken place. As a result, business schools, he says, must teach future managers how to adapt to this environment.
"The game is now about disruption," says D'Aveni, whose talk was one of the best attended at the two-day conference.
For example, the most successful firms - from the newly competitive telecommunications industry to Southwest Airlines - find ways to reshape the playing field in their favor and challenge opponents' strengths, making them obsolete.
He contrasts the innovations needed to succeed in hypercompetition with the current trend of reengineering, which he describes as learning to do "the same old things" faster.
But has such a revolution actually occurred?
"There is always some exaggeration" when such dramatic claims are made, asserts Rosabeth Moss Kanter, a professor at the Harvard Business School in Cambridge, Mass. But her own words echo D'Aveni's concerning a more uncertain economy, in which innovation is rapid.
The increasingly global economy, Ms. Kanter says, includes a work force that is more and more mobile. People who develop marketable skills can have successful careers spanning several companies and industries.
But the turmoil is wrenching, she says. Many people, especially the less skilled - who are most at risk - "are very angry about these changes."
To hear D'Aveni tell it, however, going back to more static models of industry is not an option.
The forces at work
While his colleagues might not label them "forces of hypercompetition," as D'Aveni does, few experts dispute that these four "forces" are at work:
*Rising consumer expectations, meaning customers want low prices, high quality, customization.
*Rapid technological change affecting almost all industries, not just high-tech ones.
*Falling entry barriers in many industries, fed by globalization and deregulation of markets.
*Deep-pocketed corporations, in addition to small start-ups, driving change. Expanding strategic alliances often turns "big money" into "really big money."
Companies now struggle for temporary advantage over one another. Successful firms will try to shift the rules yet again before rivals catch up. Today's losers, meanwhile, can become tomorrow's winners if they can create the new field of competition, D'Aveni says.
In the auto industry, for example, a key to the comeback of America's Big Three has been their redefining quality as safety, with antilock brakes, air bags, and stronger body designs, D'Aveni contends. Foreign rivals, meanwhile, were focusing on reliability "beyond the point of diminishing returns for consumers."
Another case in point: Swiss watchmakers. When confronted with Japanese digital and quartz technology, the Swiss began competing with fashion, not technology.
D'Aveni's ideas follow those of Joseph Schumpeter, an economist earlier this century who was overshadowed by others of his day. Mr. Schumpeter's concept of "creative destruction" as a pattern in the economy now appears to be coming into its own.
Something of a gadfly, D'Aveni chides those in his profession for failing to come to grips with these changes. This is part of the reason executives have criticized business schools lately, he says.
"We're in danger of misleading a lot of our students," by teaching case studies based on outmoded rules, D'Aveni warns his colleagues. But D'Aveni also says corporate America shares much of the blame.
"The business community has made [business schools] irrelevant," he says, by failing to fund enough research and by funneling too much of its money into just one institution - Harvard.
"Business schools are trying very hard," he maintains.
They have long taught that oligopoly - in which a few key players dominate an industry and play by similar rules - is the most profitable competitive situation. But for as long as D'Aveni says he can foresee, none of the four forces driving hypercompetition is likely to go away.
Even the aluminum business, a basic old-line industry with a handful of leading players, he says, feels vulnerable to hypercompetition. Among the threats companies in the industry worry about: new technology within the business or competition from plastics.