In spite of their size, small and medium companies can beat the biggies. The need is to implement certain unconventional ‘opening’ strategies
CHESS is composed of three distinct phases: an ‘opening’, a ‘middle game’, and an ‘end game’. Successful players learn early that while logical methods help them win ‘end games’, these are entirely inappropriate during earlier stages of the game. Across every field studied – from chess to sport to music – scientists have confirmed again and again this fundamental dilemma: ‘What helps you win in the end is not what helps you start winning at the beginning’.
Yet in the field of business we seem to have missed this lesson. Like novice chess players, we tend to cling to logical methods. The business best seller list is stocked with books that deal only with ‘end games’. They show big companies how to play in mature industries with established players following accepted rules. You can summaries the lessons to the three-move playbook. To sustain their advantages, large companies can choose from essentially three non-exclusive choices.
1. Lock up customers: Microsoft, for example, leverages its large base of committed users to sell new offerings.
2. Lock up resources: Reliance Industries leverages preferential access to significant share of regional oil to maintain its competitive advantage.
3. Lock out competitors: Nearly all large global companies (Intel, Sony, Wal-Mart, etc.) seek economies of scale to achieve cost advantages that smaller competitors cannot match.
Small companies rarely enjoy large captive customer bases. Neither can they afford access to proprietary resources, nor match the scale of larger competitors. So how do small companies compete if the three most important sources of competitive advantage elude them? We know it is possible. Ten years ago, Nokia was 1/10 th the size of Motorola. Today it outsells the one-time leader. Hero was a bicycle company that knew nothing about motors. Now it is the world’s largest motorcycle producer.
Traditional strategy tools cannot explain how small companies overtake large ones; these tools nearly always give the odds to incumbent. The reason for this can be explained by any good Chess player: while incumbents are playing ‘end games’, attackers should be playing ‘openings’ and how you win ‘end games’ is fundamentally different from how you win ‘openings’. For example, Reliance Industries chose a creative ‘opening’ that put the establishment off-guard. It is through creative ‘openings’, not rigorous logic, that small companies can transform themselves into large ones.
A studied conducted to calculate the 100 most competitive companies of the decade: 100 publicly-traded companies from markets across the globe that triggered a decade-long period of abnormally strong growth, profitability and value creation. The list contains several breakthrough Indian firms including Infosys, Wipro, Reliance Industries and Hero Honda. It is found that size plays no meaningful role in your ability to overtake competition. What matters more is the size of your growth ‘playbook’. Using a well-tested set of thirty-six competitive plays, It is classified how each of the 100 most competitive companies of the decade accounts for its success. Through this exercise seven ‘openings’ emerged as most important for strategists seeking new growth. By studying these ‘openings’, you may begin to see new ways of unlocking disruptive growth and profitability.
1. Ally with a partner outside your market:
By partnering with a player your competitors classify as outside your market, you can catch your competition off guard. For example, the largest motorcycle company in the world – Hero Honda – was born out of such a partnership. 21% of the hundred companies I studied sited using this move.
2. Move early to the next battle ground:
By identifying when and how your market will evolve, you can establish a defensive position and wait for your competition to realize the future has changed. This ‘opening’ has established many of the world’s most dominant companies including Wal-Mart and Frontline Ltd, the world’s largest owner of oil tanker freighters. Another 21% of the companies sited using this move.
3. Lock up resources:
By identifying critical pinch points in supply, you can restrict your competitor’s access to resources thereby pre-empting their ability to resist your expansion. When Apple launches new products, it also depends heavily on this tactic. 17% of companies studied sited using this move.
4. Attack from two fronts:
By using one business to provide cover for another, you utilize a well-established principle of conflict; by forcing your competitor into a two-front battle you can win with greater ease. Virgin Airway’s success against British Airways and Starbucks’ dominance over coffee shops across the US are examples of this scheme at work. 16% of companies studied sited using this move.
5. Introduce a new piece to the game board:
By creating a new entity you can disrupt competitive dynamics in your favour. Because your competition is often thinking only about current industry players, ignoring possible new ones, you may take your competition by surprise. Reliance Industries grew from a one-man fabric trading company to India’s largest conglomerate by repeated application of this strategy. 13% of companies studied, grew by applying this move.
6. Coordinate the uncoordinated:
Your strength is less a function of the assets you own than that of the elements can call into formation. By organizing independent players into a coordinated front, you can simulate greater power with less investment. Wikipedia and open source software are good examples. 13% of companies analyzed have applied this move.
7. Embrace what others abandon:
When your market abandons something – an old business model, technology, etc. – you can take advantage by adopting it. As the market has moved on to something more ‘new’, they may hesitate to return thereby affording you an advantage. RIM’s Blackberry was born from this counter-intuitive tactic. 13% of companies analysed sited using this move to some degree.
CHESS is composed of three distinct phases: an ‘opening’, a ‘middle game’, and an ‘end game’. Successful players learn early that while logical methods help them win ‘end games’, these are entirely inappropriate during earlier stages of the game. Across every field studied – from chess to sport to music – scientists have confirmed again and again this fundamental dilemma: ‘What helps you win in the end is not what helps you start winning at the beginning’.
Yet in the field of business we seem to have missed this lesson. Like novice chess players, we tend to cling to logical methods. The business best seller list is stocked with books that deal only with ‘end games’. They show big companies how to play in mature industries with established players following accepted rules. You can summaries the lessons to the three-move playbook. To sustain their advantages, large companies can choose from essentially three non-exclusive choices.
1. Lock up customers: Microsoft, for example, leverages its large base of committed users to sell new offerings.
2. Lock up resources: Reliance Industries leverages preferential access to significant share of regional oil to maintain its competitive advantage.
3. Lock out competitors: Nearly all large global companies (Intel, Sony, Wal-Mart, etc.) seek economies of scale to achieve cost advantages that smaller competitors cannot match.
Small companies rarely enjoy large captive customer bases. Neither can they afford access to proprietary resources, nor match the scale of larger competitors. So how do small companies compete if the three most important sources of competitive advantage elude them? We know it is possible. Ten years ago, Nokia was 1/10 th the size of Motorola. Today it outsells the one-time leader. Hero was a bicycle company that knew nothing about motors. Now it is the world’s largest motorcycle producer.
Traditional strategy tools cannot explain how small companies overtake large ones; these tools nearly always give the odds to incumbent. The reason for this can be explained by any good Chess player: while incumbents are playing ‘end games’, attackers should be playing ‘openings’ and how you win ‘end games’ is fundamentally different from how you win ‘openings’. For example, Reliance Industries chose a creative ‘opening’ that put the establishment off-guard. It is through creative ‘openings’, not rigorous logic, that small companies can transform themselves into large ones.
A studied conducted to calculate the 100 most competitive companies of the decade: 100 publicly-traded companies from markets across the globe that triggered a decade-long period of abnormally strong growth, profitability and value creation. The list contains several breakthrough Indian firms including Infosys, Wipro, Reliance Industries and Hero Honda. It is found that size plays no meaningful role in your ability to overtake competition. What matters more is the size of your growth ‘playbook’. Using a well-tested set of thirty-six competitive plays, It is classified how each of the 100 most competitive companies of the decade accounts for its success. Through this exercise seven ‘openings’ emerged as most important for strategists seeking new growth. By studying these ‘openings’, you may begin to see new ways of unlocking disruptive growth and profitability.
1. Ally with a partner outside your market:
By partnering with a player your competitors classify as outside your market, you can catch your competition off guard. For example, the largest motorcycle company in the world – Hero Honda – was born out of such a partnership. 21% of the hundred companies I studied sited using this move.
2. Move early to the next battle ground:
By identifying when and how your market will evolve, you can establish a defensive position and wait for your competition to realize the future has changed. This ‘opening’ has established many of the world’s most dominant companies including Wal-Mart and Frontline Ltd, the world’s largest owner of oil tanker freighters. Another 21% of the companies sited using this move.
3. Lock up resources:
By identifying critical pinch points in supply, you can restrict your competitor’s access to resources thereby pre-empting their ability to resist your expansion. When Apple launches new products, it also depends heavily on this tactic. 17% of companies studied sited using this move.
4. Attack from two fronts:
By using one business to provide cover for another, you utilize a well-established principle of conflict; by forcing your competitor into a two-front battle you can win with greater ease. Virgin Airway’s success against British Airways and Starbucks’ dominance over coffee shops across the US are examples of this scheme at work. 16% of companies studied sited using this move.
5. Introduce a new piece to the game board:
By creating a new entity you can disrupt competitive dynamics in your favour. Because your competition is often thinking only about current industry players, ignoring possible new ones, you may take your competition by surprise. Reliance Industries grew from a one-man fabric trading company to India’s largest conglomerate by repeated application of this strategy. 13% of companies studied, grew by applying this move.
6. Coordinate the uncoordinated:
Your strength is less a function of the assets you own than that of the elements can call into formation. By organizing independent players into a coordinated front, you can simulate greater power with less investment. Wikipedia and open source software are good examples. 13% of companies analyzed have applied this move.
7. Embrace what others abandon:
When your market abandons something – an old business model, technology, etc. – you can take advantage by adopting it. As the market has moved on to something more ‘new’, they may hesitate to return thereby affording you an advantage. RIM’s Blackberry was born from this counter-intuitive tactic. 13% of companies analysed sited using this move to some degree.
