Mark McDonald

Competitive instability happens when one player in a market releases a series of capabilities that constantly change the terms of competition. In geo-politics, Ronald Reagan creates competitive instability via US defense policy in relationship to the Soviet Union.  Creating competitive instability involves creating a stream of discontinuities that exploit near term market opportunities and then drain the potential profit pool just as competitors are catching up and have made investments.

Markets are ripe for those that are willing to create competitive instability, according to the CIOs responding to this year’s Gartner CIO Survey.  The survey asked CIOs to describe their business strategies and then indicate the degree to which these strategies:

• Made the organization Unique in its industry
• Differentiated the organization in their industry
• Represented General Practice in their industry
• Reflected General Practice across all industries
• Was Common Knowledge and a Commodity

The results, shown in the figure below are staggering.  Only one of the top three strategies CIOs mentioned was deemed to create a source of competitive advantage either through making the company unique or differentiating it in the industry.  These are results from the 2011 CIO Survey shown below.

While its true that “Differentiating” strategies are the most prominent, fully 65% of the business strategies reported represented general practice or a commodity.

Standardization, consolidation, and reengineering sit at the operational core of enterprise strategies and business models. The drive for standard enterprise wide processes and systems are a foundational to modern corporate strategies.  The drive for efficiency has driven significant investments in technology, process reengineering and global re-organization.   The result, based on the CIOs assessment of business strategy has been to level the playing field to the degree that we are all basically the same.

Grey Goo

Many markets have become ‘grey goo’ where the same strategies turn everything to the same level of mush.  Organizations create this goo when they choose to implement what others have done.  IT becomes the instrument of the ‘goo’ as IT is the embodiment of such strategies.  It is important to note that IT is a means rather than the cause of the current competitive situation.

So What?

This sets the stage for those willing to create competitive instability, as the time to wreck a market is just as these organization are realizing success based on a common business process, technical and communications infrastructures the salience of which diminishes as:

• Standard markets are reaching saturation, particularly in the industrial world where growth rates are declining for the simple reason of — how many clothes washers do you need?  An industry that follows a ‘replacement cycle’ is a characteristic of this type of market.  Examples include:  High Technology, Software, Automobiles and other durable goods markets.

• Standard markets are reaching boredom — another reality show? another flavor of beer? When markets predominately respond to incentives, then the market has become saturated from an attention and attractiveness perspective.  Consumer products, consumer electronics, and retail are examples. When you have to pay/subsidize people to engage then its time to change the rules.

• Strategies reflect a dominant design where the mental models in an industry predefine strategic choices and options.  When this happens strategies from company to company and even industry to industry all become the same.  Remove the cover sheet, do a search and replace on your strategy and if the strategy could apply to anyone, then its time to create competitive instability.

• Stability is valued either in terms of an organization following the same recipe for success, ‘doubling down’ on what has worked in the past.  Seeing every issue in the same mental model.  This is a sign of a senile senior executive team and a sign of weak management and one that just screams for a new idea, even slightly new.

Any of these conditions creates a market that is full and constantly cannibalizing trading market share without any real growth.

Companies need real growth and this is leading companies to look at adjacent markets and markets outside their home country.  However this creates a dilemma as success in these markets involves doing things differently in opposition to standardization.

Or does it?

Firms that create competitive instability take advantage of the scale efficiencies of a global supply chain while delivering those products and services to every fracturing markets emerging from ever-finer segmentation or the actions of consumers themselves via tools like social media.

• Proctor and Gamble is doing this as it tailors products, packaging and promotion to local market needs via its open innovation and other go to market strategies.
• Ford Motor Company is looking to do this through their use of social media and Synch capabilities to personalize the driving experience.
• Apple has become a master of this as they change products at just about the same time that the competition looks to catch-up consider the iPhone 4 in light of the Android or the iPad 2 just as companies are ready to launch their tablet entries.
• Nissan is attempting this with the introduction of their all-electric LEAF.

CIOs indicate that its time to take a look at creating more than a little competitive instability to re-imagine and reconnect IT with the things that make the organization unique.

Fortunately for the CIO, much of that competitive instability will come from new ways of using information, technology, channel, product/service and customer to create new offerings.  More on that latter, but ask yourself …

Is it time to shake things up around here?

Or do you and your company look really good in gray?

Related post:  Markets are ‘Fracking’ one of the things to think about when planning for 2011

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Category: Leadership Management marketing Re-imagine IT Strategic planning Strategy Uncategorized     Tags: Business Strategy, competition, Economic Recovery, Marketing

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