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Management Consultants. A group of senior-level management
consultants, offering strategic planning and marketing services
to a wide range of public and private sector clients.
The
Death of Competition - Leadership and Strategy in the Age
of Business Ecosystems
by James F. Moore
HarperBusiness,
New York, 1996
"Every
day in my work I observe companies that are drastically
affected by the changing ecology of business competition
and that seek ways to understand and shape the transformations
engulfing them. I tell them about the death of competition.
Not
that competition is vanishing. In fact it is intensifying.
But competition as most of us have routinely thought of
it is dead - and any business manager who doesn't realize
this is threatened. Let me explain. The traditional way
to think about competition is in terms of offers and markets.
Your product or service goes up against that of your competitor,
and one wins. You improve your product by listening to customers,
and by investing in the processes that create it.
The
problem with this point of view is that it ignores the context
- the environment - within which the business lies, and
it ignores the need for coevolution with others in that
environment, a process that involves cooperation as well
as conflict. Even excellent businesses can be destroyed
by the conditions around them. They are like species in
Hawaii. Through no fault of their own, they find themselves
facing extinction because the ecosystem around them is itself
imploding. A good restaurant in a failing neighborhood is
likely to die. A first-rate supplier to a collapsing retail
chain - a Bradlees, Caldor or Kmart - had better watch out."
(p. 3)
So what
Moore is saying, in fact, is that competition is not really
dead, it just must be viewed within a larger context. Or,
rather, that the traditional view of competition no longer
holds; the new approach sees competition as one perspective
on how business works, with cooperation between businesses
and their suppliers and customers being another equally
important perspective. (This is the thesis of another recent
and influential book - Co-Opetition by Nalebuff and Brandenburger.)
Central
to this new perspective is the notion of a business ecosystem,
which Moore defines as:
"An
economic community supported by a foundation of interacting
organizations and individuals - the organisms of the business
world. This economic community produces goods and services
of value to customer, who themselves are members of the
ecosystem. The member organisms also include suppliers,
lead producers, competitors and other stakeholders. Over
time, they coevolve their capabilities and roles, and tend
to align themselves with the directions set by one or more
central companies. Those companies holding leadership roles
may change over time, but the function of ecosystem leader
is valued by the community because it enables members to
move toward shared visions to align their investments and
to find mutually supportive roles." (p.26)
Examples
of business ecosystems which Moore discusses extensively
in the book include:
Wal-Mart
IBM
AT&T
Intel
Microsoft
the automobile industry
Moore maintains that there are four stages to the development
of a business ecosystem:
1. the 'pioneering' stage, where the key leadership and
strategic challenge is to create superior value through
a new product or service - this new value must be a dramatically
superior way of doing business (such as Wal-Mart inventing
a new system of retailing or Intel inventing a new form
of microchip)
2. the
'expansion' stage - in time, more players are lured into
the network to be suppliers, customers, or competitors as
it becomes apparent that the new product or service being
offered in going to become the standard, replacing the previous
product or service - the key leadership and strategic challenge
in this stage is to ensure that the ecosystem reaches the
sort of critical mass that is required in order to become
the new paradigm - this requires enlisting the support of
many other players
3. the
'authority' stage - after 'critical mass' is achieved, and
there are many players in the game, there will inevitably
be a 'shakeout period', where the roles and dominance of
players in the ecosystem become established, depending upon
the capabilities of the players, the relationships established,
the luck of the draw, and many other factors - "A central
challenge facing business strategists in maturing ecosystems
is how to maintain their authority and the uniqueness of
their contribution to the community while also encouraging
communitywide innovation and coevolution." (p.77)
4. the
'renewal' stage - over time, new business ecosystems will
develop that are related to (possibly directly competitive
with) the established paradigm - these will offer superior
value in their own areas and will eventually challenge the
dominance of the established ecosystem - the leadership
challenge in the established ecosystem is to ensure that
continuous improvement processes are established and that
the system continues to deliver value, rather than become
obsolete
The
leadership and strategic challenges can be summarized as
shown below:
| Stage
of development of the business ecosystem
| Overall
leadership challenges
|
CO-OPERATIVE CHALLENGES
|
COMPETITIVE CHALLENGES
|
|
Pioneering
|
Value
| Work
with customers and suppliers to define the new value
proposition and a paradigm for providing it that is
dramatically more effective than what is available
| Protect
your ideas from others who might be working toward defining
similar offers
|
|
Expansion
|
Critical mass
| Bring
the new offer to a large market by working with suppliers
and partners to increase supply, and to achieve maximum
market coverage and critical mass
| Defeat
alternative implementations of similar ideas; ensure
that your approach is the market standard in its class
through dominating key market segments; tie up critical
lead customers, key suppliers and important channels
|
|
Authority
|
Lead coevolution
| Provide
a compelling vision for the future that encourages suppliers
and customers to work together to continue to improve
the ecosystem
| Maintain
strong bargaining power in relation to other players
in the ecosystem - including key customers and valued
suppliers
|
|
Renewal
|
Continuous performance improvement
| Work
with innovators to bring new ideas into the existing
ecosystem
| Maintain
high barriers to entry to prevent innovators from building
alternative ecosystems. Maintain high customer switching
costs in order to buy time to incorporate new ideas
into your own products and services
|
(from
p. 83 of the book)
The
bulk of the book is devoted to an in-depth exploration of
this framework, examining the strategic challenges faced
by a business ecosystem (and more particularly a leader
in a that business ecosystem) in each of the four stages.
Moore examines these according to what he calls the 'seven
dimensions of competitive advantage' which are:
customers
markets
products
processes
organizations
stakeholders
government and society
These seven areas thus present a comprehensive framework
for the discussion of how an ecosystem grows and develops
at each stage.
The Death of Competition is an interesting example of a
series of business books that have emerged in the nineties
that postulate this concept of a 'business ecosystem', drawing
upon examples from nature and ecology of an interacting
web of producers, consumers, and influencers (see for example,
in addition to the aforementioned Co-Opetition, Rothschild's
Bionomics.) It is a very interesting perspective with much
to commend it, insofar as it looks well beyond the traditional
perspective of business existing to merely clobber the competition,
and addresses more the question of the role of business
in society overall.
The
above summary has been provided to you compliments of TCI
Management Consultants
