Business leaders have long be preoccupied with competitiveness and until recently, many accepted the zero-sum game nature of business. The game seems to be changing however, as new approaches have taken a hold of strategist’s view and approaches to competition.
Businesses have mostly used Michael Porter’s Five Forces Model to remain competitive in their field of business and persevere in the face of competitive threats. In essence, businesses competed to win and tried to do so by applying Porter’s strategy. Any new product or service, or indeed existing ones, were scrutinised in relation to the five forces and strategic decisions taken on the basis of the answers that emerged from the application of the model.
Over the last fifteen years, we’ve seen a significant shift in how businesses view competition and this view change was initiated by the Blue Ocean Strategy. Suddenly, the zero-sum business concept no longer applied and competition lost its central position in the wide range of strategic areas businesses need to tackle. Christensen further eroded old competition thinking with his disruptive innovation theory and businesses realised that an entirely new approach could be taken.
The change in the way businesses carry out their activities was also greatly enhanced by the global connectivity the internet produced and this new found global connectivity opened new markets and greatly facilitated global trade. The new kid on the block was innovation and competition-thinking gradually gave way to creative innovation.
The internet produced completely new markets and allowed smaller players to get a piece of the action. Chris Anderson identified how the internet became the new marketplace and with his long tail model explained how smaller businesses could obtain market shares by operating at lower costs than the traditionally dominant companies. Products that would never have made it onto shop shelves were now readily and frequently being bought online much to the detriment of large corporations. Furthermore, Andersen illustrated that in these new markets, products and services could be exchanged for free.
The Dawn of Platforms
While the Blue Ocean Strategy, disruptive innovation and long tail interactions in essence turned traditional competition thinking on its head, the most transformative shift may only just have started. The emergence of platforms has meant the creation of new markets as well as the establishment of order in what appear to be chaotic markets. Platforms have been eroding traditional competition thinking further. Platforms shift the focus from mere supply access to access to the entire ecosystem around the supply source and the collection of data thereof. The platform that uses the ecosystem and related data most efficiently will perform best. It is no longer sufficient to just have exclusive access to a supply source. Now only businesses with a strong ecosystem are in a position to provide the best products and services.
Platforms also introduce the concept of collaboration rather than mere competition as businesses jointly create new markets and collaborate in the provision of innovative services and products. Companies no longer simply compete for market shares, but instead collaborate in providing entirely new products and services. Ford, for instance, participates in Google’s ecosystem and both businesses are collaborating in the creation of new markets and making new innovative products available to customers all over the world. Businesses are now recognising each other’s innovative strengths and strategies and participating and collaborating in mutual innovation.