A broader definition of strategy: Managing the escalation ladders

Hypercompetition demands a broader approach to strategy. The focus on disruption and the creation of a series of temporary advantages demand a strategic theory with the breadth to support a long series of actions and interactions and to do so with the flexibility to accommodate shifts in direction.

In hypercompetition the ability to manage one’s dynamic strategic in­teractions requires (1) the ability to envision the next series of disruptions in the market, which results in a superior level of stakeholder satisfactions, (2) some general capabilities that allow the company to carry out any market-envisioned disruptions with greater impact, no matter which type of disruption has been envisioned, and (3) specific tactics that are used to deliver the disruptions to the market with greater effectiveness. Thus, hypercompetitive firms must compete to get better on all three levels if they are to win in hypercompetitive markets. Over the long run, winners are those who are best able to manage the dynamic strategic interactions and win each one one at a time. The ability to win each interaction can be used again and again, providing a long-term advantage to those who are good at envisioning potential disruptions, creating capabilities to carry them out, and using tactics to deliver them.

Many strategic plans—no matter how long-term they purport to be— focus only on the last level of competition and tactics. Most five-year plans are a list of actions launching new product or market positions. They may include defensive moves to protect or sustain the firm’s core product or market position. This focus on actions without adequate vision or capa­bilities necessary for disruption leaves most firms without the long-term ability or understanding necessary for managing the escalation ladders.

Hypercompetition demands a broader view of strategy. From our con­sideration of the four arenas, we can see that strategy must be both dy­namic (to cope with each strategic interaction) and long-term (to cope with movement on the overall escalation ladders). It has to address each of the dynamic strategic interactions by companies and responses by com­petitors and still look to the long-run trajectory of these interactions as they move up or across the escalation ladders. Success in hypercompeti­tion depends on managing the escalation ladders with the vision, capabil­ities, and tactics to overwhelm competitors engaged in a war made up of many battles and skirmishes for the hearts and minds of customers. The war is won not by a single enduring advantage but rather a series of tempo­rary advantages. Strategy must extend beyond planning for the present configuration of the firm and the industry to planning for a continuous evolution of advantages, which are won and lost over time.

This long-term and flexible aspect of strategy is concerned with core competencies and capabilities. While these issues have been explored in recent literature, they have yet to be organized into a strategic framework. It is not enough to know that competencies and capabilities are important. Strategic theory also has to focus on how they are created and destroyed and why. Moreover, strategic theory must give us some guidance as to which competencies and capabilities are crucial. These broader goals of strategic theory are addressed by the New 7-S’s, introduced below and pre­sented in more detail in Part III.

Forging Fads into Frameworks

How do companies create disruption to compete effectively in hyper­competition? The business magazines and management journals are filled with strategy after strategy, each of which seems to offer the elusive goal of success in the intense and fast-paced competitive environment of the fu­ture. Some of the fads sweeping across the popular press include organiza­tional reengineering, outsourcing to create virtual corporations, increasing speed and engaging in time-based competition, building flexibility, creat­ing learning organizations, building on core competencies, entrepreneur- ship, alliances, empowerment, developing self-managed teams, and many other approaches.

Are these just fads or do they offer the keys to the strategy of the future? Which ones are snake oil and which are effective medicines? How do they fit together, and what is their goal? Certainly each of these approaches and techniques has been effective in certain instances. So each of these new business techniques can’t be ignored.

But looking at them independently only shows a part of the picture. For example, a company that outsources at a time when all its competitors are vertically integrated may be very effective at creating disruption. A com­pany that shifts to a quality maneuver when its competitors are focusing on price can catch them off guard, but this does not mean that a quality move will always be best. The best move is the one that creates disruption.

As discussed in Part I, disruption of the status quo takes the form of moving up to the next rung on the escalation ladders in the four arenas of competition, restarting the cycles in the arenas, or switching the locus of competition to a new, previously dormant arena of competition. In each case the disruption neutralizes, destroys, obsoletes, sidesteps, or oth­erwise makes irrelevant the competitive advantage of the opponent.

The recognition that disruption is the key to strategic success leads to the question of what characteristics and approaches enhance an organization’s ability to create effective disruptions. All market disrup­tions are not equal in effect, and many are more difficult to execute than others. Examination of the demands of hypercompetition and companies that have competed effectively identifies a series of interrelated capabili­ties and approaches that enhance an organization’s ability to create effec­tive disruption. These are the New 7-S’s.

The best companies already practice some or many of the New 7-S’s. Many of them have turned up on the pages of business magazines in recent years. Qualities such as stakeholder satisfaction or speed are not new in­ventions. But as in the early days of describing any new environment, these qualities have been diluted with the clutter of many other fads. They have not been organized into a coherent system nor been focused toward a specific goal.

Until now, capabilities such as speed or surprise actually seemed at odds with traditional strategic theory. Speed and surprise tend to work against sustaining traditional advantages, which involve a slow and steady com­mitment to a long-term strategy or course of action. Theory has not kept up with the pages of the business press. It has moved in many different directions. It has focused on sustaining, when the environment had turned toward disruption.

The New 7-S’s provide a framework for organizing and tying together what appears to be just a list of faddish capabilities and approaches pre­sented in isolation in the business press. The New 7-S framework provides a means of analyzing and developing strategy, as will be examined in the next chapter. Most of all, it recognizes how each of these New 7-S’s con­tribute to the goal of disruption.

Source: D’aveni Richard A. (1994), Hypercompetition, Free Press.

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