Living with Hypercompetition: The source of profits

While neoclassical microeconomic theory and industrial organization the-ory suggest that companies earn profits by gaining a unique advantage and avoiding perfect competition,15 the Austrian school of econgjoates identi-result of a dynamic proceSSWTreative destruction,” or disequilibrium.17 In other words, entrepreneurial discovery creates profits by finding new ways to better serve customers. It is in essence the disruption of the status quo that the New 7-S’s are designed to pursue.

This suggests that “empirically modeling business performance to find sys-tematic strategies (regularities) that firms can implement to earn supra-normal returns, as is widely done in strategy research, will be largely unsuc­cessful.”18 Today’s cause of high performance will not work tomorrow, making it difficult to find generic or sustainable strategies that are associ-ated with high performance. Only entrepreneurial discovery of new oppor­tunities and creative destruction of opponents’ advantages create profits.

Exploring the New 7’S’s

Part III examines each of the New 7’S’s in greater detail. Its chapters look at how companies build and develop each S and how each S impacts the competitive success of the firm. Part III also explores how companies use these New 7-S’s to control and direct competitive escalation in the four arenas described in Part I. The implication of these approaches for the future of competition, regulation, and public policy is explored in greater detail in the conclusion and appendix to the book.

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

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