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We think about business competition all wrong

Business Competition

Business competition is a huge deal. To some guys who come to run companies (women too), beating others and making more revenue is the closest thing they have to fun. In the course of all this, we’ve essentially created two problems:

That second idea — about corporate values and enemies — basically handed us Donald Trump. A lot of people felt alienated and scared by new economic realities, from immigration to automation. He tapped into that fear and beat a much-more qualified candidate. Obviously many other things played into all this — including the good ol’ “high achiever myth” — but defining an enemy helped a lot. This has been a political staple for decades.

It’s been a business staple for decades too. Business competition really gets some dudes fired up, perhaps more than porn or some other lewd thing. “I’m gonna steal market share from those jerks,” an executive purrs, “and dominate this business competition.” 

What if we’re thinking about it all wrong, though?

Business competition and the Domino’s example

Good article here from Darden (UVA) on shifting competitive dynamics. Ultimately they propose moving from “winner take all” to “a rising tide lifts all boats” — more on that in one second — and they get there with a few interesting examples.

Consider this: in old-school business competition methodology, let’s say you go talk to the CEO of Domino’s. What would he want to do in an old-school sense? Probably buy Papa John’s. Shutter that rival! Business competition!

But now it’s almost 2017. You go talk to this guy. What’s a smarter play for him? Well, what if he could buy Uber or Lyft.

Huh? What? That’s not a rival! We gotta crush the rivals! That’s how business works!

Nope. Landscape is shifting. You could argue Apple will be a health care company by 2020. Google might be a car company. Rolls Royce makes most of its money now from jet engines. As we learned in Varsity Blues: “Things change, Mox.”

… and a geopolitical Trump quote

From that article:

Chen says the rapid ascent of new global players has likewise laid bare the need for new ways of understanding competition. “Americans tend to think of an economically powerful China as a competitor whom the U.S. must ‘defeat,’” he says, by way of example. “But the situation isn’t nearly so clear-cut: China is one of America’s top trading partners — so does it really make sense to think of them simply as a traditionally defined “competitor”? Beyond that, do China’s economic gains really necessitate America’s economic losses?” Indeed, Chen says, “the complex realities of contemporary business make it imperative that we move beyond simple notions of ‘winning,’ and toward a much more expansive conceptualization of value creation.”

Let that one sink in.

But a rising tide lifts all boats? I want to crush those rivals!

See, this right here is the problem. Most guys currently running companies only know one way to get what they want: they gotta take it from others. That involves both in-office politics and creating a strategy that appropriates value from rivals in the industry. It would be very hard for people who have come up “learning” business in this way to switch to a model where it’s less about beating someone and more about getting value from them. It’s happening in some cases — platform thinking is a real thing now — but I doubt I’d call it “normative” at many companies.

Most hard-chargers are chasing a fat bonus, plain and simple. They may couch it in other things — like “core values” or “first-mover advantage” or whatever else — but in reality, it’s about scratch for themselves (and maybe a few of their lieutenants, but not always even that). The only path a lot of these people have is to show their own growth, and the only way they conceptualize that is through a metric like “market share.” Since market share is finite (a market would be 100 percent), market share is a direct form of business competition. If someone goes from 10 percent to 15 percent, that five percent comes from someone else.




 

The other aspect here is that a lot of business competition moves are made with short-term value in mind. Why? Because the guys chasing the bonuses get fatter ones via quarterly returns (short-term gain). If you shifted to an ecosystem whereby even rivals were viewed as potential collaborators, you’d (likely) create more long-term value. That’s better for the industry, and probably better for your checking account too — it’s just that (at least American) business has been now now now for so long, I’m not sure if we can shift the model.

Another quote to let sink in

From the article:

More, Chen says, a relational outlook may well prove critical to success in the global business arena. “Eastern firms — and to some extent, European firms — tend to operate far more relationally than their American counterparts,” Chen says. “In the long term, the success of American business — and America itself — may well depend on the ability to build strong, sustainable, mutually beneficial relationships with global partners.”

Future of America itself. A lot of people have been speculating on that recently, right? Well, maybe we need to find ways to redefine enemies and business competition, or risk swallowing ourselves whole.

But isn’t business moving so fast? Disruption?!?! We can’t let a rival disrupt us!

A lot of this is bullshit. Business is more global, yes. It’s not necessarily faster than ever. A 40-hour work week in 1955 could be accomplished in 11 hours today. Thank you, technology!

As for disruption: people get this wrong a lot. Companies don’t often get disrupted on product or price. They get disrupted because their internal processes, including how they treat people, are archaic. Remember: per Bain research, 94 percent of business challenges are internal. 15-20 years ago, 80 percent were external. Most companies, for example, have horrible decision-making processes rooted in people needing approval after approval so that some ridiculous idiot middle manager can justify his/her job. Those kinds of companies get disrupted. It’s not about your product. It’s about your internal awfulness.

If you fix up some of those things — and you should, because it’s hitting you in the wallet too — then maybe we can have a more rational discussion about the future of business competition.

Ted Bauer

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