This chapter has described how each of the New 7-S’s contributes to the disruption of competitors. It has described how the strategies of sustaining advantage used in static environments have been replaced by strategies of disruption in hypercompetition. The “three circles” diagram (see Figure 8-1) suggests how the New 7-S’s work together toward the goal of disruption by contributing to vision, capabilities, and tactics. But actually all the New 7-S’s are related to one another, though there are sometimes tradeoffs among them, as will be considered in the next chapter.
The relationship among the three circles in Figure 8-1 is not a linear relationship. Companies don’t necessarily move from vision to capabilities to tactics. It is much more fluid. The tactics contribute to the company’s vision of customer satisfaction and suggest opportunities through strategic soothsaying. Capabilities for speed and surprise contribute to the success of tactics, but practicing the tactics helps to build capabilities for speed and surprise.
The formulation of strategy is not a linear process. It is a process of triangulation. Just as ships can navigate through the alignment of three points on the deck and shoreline, so companies use these three circles as guides in setting the course of their strategy and making constant corrections to that course. New disruptions are invented every day. The New 7-S’s destroy the advantage of opponents by creating and recreating new temporary advantages for their users.
1. The Point of Disruption: Seizing the Initiative
THE WILL TO DOMINATE
Disruption is not an end in itself. There is no great virtue in churning the marketplace for its own sake. Disruption is only useful if it destroys the advantage of an opponent and moves the firm up the escalation ladders faster than anyone else. In hypercompetition the rule is to disrupt or be disrupted. This is not a matter of macho destructiveness, but rather an issue of survival. As discussed in Part I, companies have no choice but to move from temporary advantage to temporary advantage or be routed out of their secure position by their competitors. It is change or be changed.
The point of disruption is not to create trouble. It is to create opportunity. Companies disrupt the market so they can seize the initiative from their competitors. The company that is disrupting, providing that it serves customers’ needs, will seize the initiative from its opponent, force the opponent into a reactive mode, and ultimately exhaust the opponent’s ability to resist or reseize the initiative. In sum, hypercompetitive firms have the will to dominate their competitors, and they do so by using the New 7-S’s to seize the initiative away from them.
A RADICAL DEPARTURE FROM THE PAST
The New 7-S’s may seem obvious. After all, they are a framework for understanding why current management fads have appeared. What is new, however, is that these fads are actually pieces of a larger system designed to create disruption and cope with the dynamism and uncertainty of hypercompetition. Thus, the New 7-S’s are more than a list of seven fads. They are part of a new theory about temporary advantage. They encompass cutting edge practices that managers and the popular press have developed by intuition. The New 7-S’s place these fads in the context of a larger theory—the theory of hypercompetition.
Moreover, the New 7-S’s are a radical departure from the past. Traditional views of strategy, based on sustaining advantage and protecting turf with entry barriers, are about defending what a firm has gained control over. Whether a geographic region or a unique advantage, the traditional view says defend it and make it persist. Traditionalists say to use clear, consistent, long-term strategies. They also suggest that firms should stake out turf by using inflexible commitments (like investing in plants with specific assets or developing brand images that are difficult to change) so that a firm can deter competitors and reduce rivalry by differentiating itself from competitors.
While these traditional methods are still useful in some circumstances, the view of strategic behavior and purpose in hypercompetition is quite different. The New 7-S’s stress flexibility, change, inconsistency, unpredictability, and seizing the offensive. The New 7-S’s are about empowering managers to be proactive and to seize the initiative with innovation, change, and aggressive movement into new markets, new products, new business and manufacturing methods, and new paradigms about the nature of competitive interaction between rivals.
COOPERATIVE STRATEGIES AND PERPETUAL DISADVANTAGE
Before hypercompetitive firms were engaged in competitive maneuvers, it was possible to find cooperative arrangements that worked to everyone’s benefit. Traditional views suggested that profits were created by reducing rivalry. For example, profits are said to be generated when rivalry is reduced via
- barriers to entry that keep down the number of competitors in an industry, making it easier to encourage and manage cooperative behavior among competitors
- segmentation of the market into niches by using generic strategies that focus firms on the high-end, the low-end, or specialized niches, allowing the firms to avoid direct competition with each other
- use of signals to tacitly agree to raise prices, divide up a market into undisputed territory, or restrict output, essentially creating an informal cartel
- formation of strategic alliances that co-opt competitors into being less aggressive
- retreating to safe, non-price-sensitive, hard-to-replicate niches (e.g., high technology industries and luxury items), where price competition is not a major competitive dimension
However, Part I demonstrated that these are not stable solutions, especially if a hypercompetitive foreign firm enters the market. Part I also showed how all of the traditional competitive advantages evaporate quickly. Moreover, Part II showed that it was impossible to avoid the de- terioration of unstable cooperative arrangements into hypercompetitive rivalry.
Hypercompetitive firms, many of whom are seeking dominance, force others to follow them up the escalation ladders in each of the four arenas of competition. In the process, the leading firm generates profits while the laggards lose out.
So the New 7-S’s are not about winning by cooperating or avoiding competition. They are about winning by competing harder than others. Of course, some firms would prefer to cooperate and allow every one of its competitors to survive and prosper, but this is becoming less and less possible in a world where nations are now fighting economic battles instead of military ones.
Not surprisingly, the traditional compete-by-not-competing approach has left many American firms noncompetitive in a world of global multinationals that subscribe to the winning-by-competing-hard philosophy. Any use of the old cooperative rules is doomed in a world of aggressive competitors using the New 7-S’s. Like sheep exposed to a wolf among the flock, the meek do not inherit the earth. If one steps back for a moment, it may even seem ridiculous to believe that competing by not competing is a way to become competitive. It can only slow a firm’s movement up the escalation ladders and force it into perpetual disadvantage.
COMPETING BY COMPETING HARDER
When firms adopt the New 7-S’s, they learn to compete by competing harder. They disrupt by creatively destroying competitors’ advantages, making them obsolete, or neutralizing their effectiveness by generating new advantages. However, this aggressiveness can be uncomfortable for many managers. The implicit goal is the defeat of competitors, which, if done improperly, could constitute a violation of U.S. antitrust laws (a subject of the conclusion to this book).
It is possible, however, to win by competing harder and to do so legally and ethically. After all, the consumer benefits from such activity, and the nation benefits from the jobs that are created (or saved) by hypercompetitive firms.
Thus, the New 7-S’s are a radical departure from old views of how to win. They are about offensive, aggressive, noncooperative behaviors. While the fads encompassed by the New 7-S’s are well-known, the change in underlying goals that these fads imply were not obvious until now. The theory of hypercompetition makes it clear that firms win by outmaneuver- ing competitors, not by trying to cooperate in a way that freezes the players into fixed positions. The latter cannot be sustained for very long in a dynamic, uncertain environment, especially if one firm or potential entrant intends to win by competing hard. This is the core insight that a dynamic view of strategy provides and a static view does not.
The New 7-S’s are the difference between winning by defeating an opponent versus winning by not playing. In today’s world, firms who don’t play the game can’t win.
2. Using the New 7-S’s to Win
The process of analyzing how to use the New 7-S’s to seize the initiative will be the focus of the next chapter. As discussed above, each of the New 7-S’s contributes to disruption. But the choice of S’s to seize the initiative is determined by the strategic context of the organization. Which of the S’s is stressed in any given competitive situation will depend on the situation of the company and its competitors. The following chapter examines techniques for using the New 7-S framework to analyze companies and competitors and to determine which of the New 7-S’s are needed to seize the initiative in a given competitive situation.
Source: D’aveni Richard A. (1994), Hypercompetition, Free Press.