“All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.” — Sun Tzu
If it feels like strategy cycles are shrinking, they are.
If it feels like competition is even more intense, it is.
If it feels like you are balancing between competing in the world and collaborating with the world, you are.
In the book, The Future of Management, Gary Hamel and Bill Breen share a great depiction of this new world of competition and the emerging business landscape.
Strategy Cycles are Shrinking
Strategy cycles are shrinking and innovation is the only effective response.
“In a world where strategy life cycles are shrinking, innovation is the only way a company can renew its lease on success. It’s also the only way it can survive in a world of bare-knuckle competition.”
Fortifications are Collapsing
What previously kept people out of the game, no longer works.
“In decades past, many companies were insulated from the fierce winds of Schumpeterian competition. Regulatory barriers, patent protection, distribution monopolies, disempowered customers, proprietary standards, scale advantages, import protection, and capital hurdles were bulwarks that protected industry incumbents from the margin-crushing impact of Darwinian competition. Today, many of the fortifications are collapsing.”
Upstarts No Longer Have to Build a Global Infrastructure to Reach a Worldwide Market
Any startup can reach the world, without having to build their own massive data center to do so.
“Deregulation and trade liberalization are reducing the barriers to entry in industries as diverse as banking, air transport, and telecommunications. The power of the Web means upstarts no longer have to build a global infrastructure to reach a worldwide market. This has allowed companies like Google, eBay, and My Space to scale their businesses freakishly fast.”
The Disintegration of Large Companies and New Entrants Start Strong
There are global resource pools of top talent available to startups.
“The disintegration of large companies, via deverticalization and outsourcing has also helped new entrants. In turning out more and more of their activities to third-party contractors, incumbents have created thousands of ‘arms suppliers’ that are willing to sell their services to anyone. By tapping into this global supplier base of designers, brand consultants, and contract manufacturers, new entrants can emerge from the womb nearly full-grown.”
Ultra-Low-Cost Competition and Less Ignorant Consumers
With smarter consumers and ultra-low-cost competition, it’s tough to compete.
“Incumbents must also contend with a growing horde of ultra-low-cost competitors – companies like Huawei, the Chinese telecom equipment maker that pays its engineers a starting salary of just $8,500 per year. Not all cut-price competition comes from China and India. Ikea, Zara, Ryanair, and AirAsia are just a few of the companies that have radically reinvented industry cost structures. Web-empowered customers are also hammering down margins. Before the Internet, most consumers couldn’t be sure whether they were getting the best deal on their home mortgage, credit card debt, or auto laon. This lack of enlightenment buttressed margins. But consumers are becoming less ignorant by the day. One U.K. Web site encourages customers to enter the details of their most-used credit cards, including current balances, and then shows them exactly how much they will save by switching to a card with better payment terms. In addition, the Internet is zeroing-out transaction costs. The commissions earned by market makers of all kinds — dealers, brokers, and agents — are falling off a cliff, or soon will be.”
Distribution Monopolies are Under Attack
You can build your own fan base and reach the world.
“Distribution monopolies — another source of friction — are under attack. Unlike the publishers of newspapers and magazines, bloggers don’t need a physical distribution network to reach their readers. Similarly, new bands don’t have to kiss up to record company reps when they can build a fan base via social networking sites like MySpace.”
Collapsing Entry Barriers and Customer Power Squeeze Margins
Customers have a lot more choice and power now.
“Collapsing entry barriers, hyper efficient competitors, customer power — these forces will be squeezing margins for years to come. In this harsh new world, every company will be faced with a stark choice: either set the fires of innovation ablaze, or be ready to scrape out a mean existence in a world where seabed labor costs are the only difference between making money and going bust.”
What’s the solution?
Innovation is the way to play, and it’s the way to stay in the game.
Innovation is how you reinvent your success, reimagine a new future, and change what your capable of, to compete more effectively in today’s ever-changing world.