Lessons from the Red Queen Chapter 10: The contest for survival

Red Queen Competition “an ongoing process wherein competition triggers adaptive learning among organizations, making them more viable so that they compete more strongly, which in turn triggers adaptive learning in the rivals.”

“an ongoing process wherein competition triggers adaptive learning among organizations, making them more viable so that they compete more strongly, which in turn triggers adaptive learning in the rivals.”

Strategy Creation and exercise of choice based on a preference for a particular future state or condition. Strategy is about how (the way) leadership will use the power (the means or resources) available to it to exercise control over sets of circumstances and geographic locations to achieve specified objectives (the ends, goals or desired outcome).

Creation and exercise of choice based on a preference for a particular future state or condition.

Strategy is about how (the way) leadership will use the power (the means or resources) available to it to exercise control over sets of circumstances and geographic locations to achieve specified objectives (the ends, goals or desired outcome).

Objectives SMART Specific Measurable Achievable Realistic Time-stamped

SMART

Specific

Measurable

Achievable

Realistic

Time-stamped

Three Objectives of Strategy Create value (why) Avert imitation (how) Determine size and scope ambitions (what)

Create value (why)

Avert imitation (how)

Determine size and scope ambitions (what)

Competitive Advantage The ability of a business to derive abnormal profits in a competitive industry based on a value-creating strategy not simultaneously implemented by an current or future competitor.

The ability of a business to derive abnormal profits in a competitive industry based on a value-creating strategy not simultaneously implemented by an current or future competitor.

Resource-based view (RBV) A company is a collection of tangible and intangible resources (assets and capabilities) Physical resources Relational resources Organizational resources Financial resources Intellectual and human resources Technological resources

A company is a collection of tangible and intangible resources (assets and capabilities)

Physical resources

Relational resources

Organizational resources

Financial resources

Intellectual and human resources

Technological resources

Sustainable Competitive Advantage If Resources are (VRINE) Valuable (contributing to SCA) Rare (few others possess this) Inimitable (difficult and costly to copy) Exploitable (organized for exploitation) Then Competitive Advantage is Sustainable

If Resources are (VRINE)

Valuable (contributing to SCA)

Rare (few others possess this)

Inimitable (difficult and costly to copy)

Exploitable (organized for exploitation)

Then Competitive Advantage is Sustainable

Comparison of Strategies for Creating an SCA Traditional Strategies Continued innovation Lowest cost producer Best made product Operational excellent Excellence customer service Enhanced performance More convenient locations Reliable/Durable product Product leadership Entrepreneurial Ways Relentless innovation Flexibility/adaptability/speed Revolution/renewal and resilience Market ownership Customer value co-creation Entrep. mindset and action Opportunity obsession Foresight and topsight

Traditional Strategies

Continued innovation

Lowest cost producer

Best made product

Operational excellent

Excellence customer service

Enhanced performance

More convenient locations

Reliable/Durable product

Product leadership

Entrepreneurial Ways

Relentless innovation

Flexibility/adaptability/speed

Revolution/renewal and resilience

Market ownership

Customer value co-creation

Entrep. mindset and action

Opportunity obsession

Foresight and topsight

Strategic Entrepreneurship Entrepreneurial actions with a strategic perspective and strategic action with an entrepreneurial mindset such that it “is the integration of entrepreneurial (i.e., opportunity-seeking behavior) and strategic (i.e., advantage-seeking) perspectives in developing and taking actions designed to create wealth.

Entrepreneurial actions with a strategic perspective and strategic action with an entrepreneurial mindset such that it “is the integration of entrepreneurial (i.e., opportunity-seeking behavior) and strategic (i.e., advantage-seeking) perspectives in developing and taking actions designed to create wealth.

Escaping the Red Queen Effect: Five Lessons Every Battle is Won Before it is Ever Fought Step backward to go forward Ready! Fire! Aim! It takes two to pass one Don’t play hardball- throw a curveball

Every Battle is Won Before it is Ever Fought

Step backward to go forward

Ready! Fire! Aim!

It takes two to pass one

Don’t play hardball- throw a curveball

Every Battle is Won Before it is Ever Fought (Unconventional Tactics) Know yourself and your enemy so you are able to surprise your opponent and attack when and where it is least expected using unorthodox methods in surgical strikes.

Every Battle is Won Before it is Ever Fought (Unconventional Tactics)

Know yourself and your enemy so you are able to surprise your opponent and attack when and where it is least expected using unorthodox methods in surgical strikes.

2. Step Backward to Go Forward (Speed) Rapid movement: use speed and agility Balance: “Push when pulled” Leverage: understand your opponent’s vulnerabilities and then force your opponent into a position where the choice is between losing valuable resources and responding.

Rapid movement: use speed and agility

Balance: “Push when pulled”

Leverage: understand your opponent’s vulnerabilities and then force your opponent into a position where the choice is between losing valuable resources and responding.

3. Ready! Fire! Aim! (Improvisation) Entrepreneurial Enactment- rational, analytical, causal reasoning is combined with effectual action. Effectual action describes a situation in which known means are used to create innovative alternatives. Strategies emerging from actions rather than plans.

Entrepreneurial Enactment- rational, analytical, causal reasoning is combined with effectual action.

Effectual action describes a situation in which known means are used to create innovative alternatives.

Strategies emerging from actions rather than plans.

Three Strategic Decision-Making Modes Thinking first (Problem is known; way is known) Define problem, diagnose, design options, decide Seeing first (Problem is known) Preparation, incubation, enlightenment, validation Acting first (Problem is unknown; way is unknown Trial and error/

Thinking first (Problem is known; way is known)

Define problem, diagnose, design options, decide

Seeing first (Problem is known)

Preparation, incubation, enlightenment, validation

Acting first (Problem is unknown; way is unknown

Trial and error/

Enlightened Experimentation Enactment (Try out new behaviors) Selection (Retrospectively choose behavior) Retention (Store behaviors that seem desirable)

Enactment (Try out new behaviors)

Selection (Retrospectively choose behavior)

Retention (Store behaviors that seem desirable)

4. It takes two to pass one (compete by cooperating) Co-opetition

Co-opetition

5. Don’t play hardball – throw a curveball A revolutionary business model is more likely source of sustainable competitive advantage.

A revolutionary business model is more likely source of sustainable competitive advantage.

Blue Ocean Strategy Red oceans (bloody competition for the same group of customers using comparable value propositions, low cost or differentiation built around incremental innovation) Blue oceans (uncharted territory filled with untapped market potential)

Red oceans (bloody competition for the same group of customers using comparable value propositions, low cost or differentiation built around incremental innovation)

Blue oceans (uncharted territory filled with untapped market potential)

Blue Ocean Strategy Source: Kim and Mauborgne, Blue Ocean Strategy , 2006 Creating New Markets 1. Eliminate What factors that the industry has taken for granted should be eliminated? 3. Raise What factors should be raised well above the industry standard? 4. Create/Add What factors that the industry has never offered should be created or added? 2. Reduce What factors should be reduced well below the industry standard?

Value Innovation Integrates differentiation and low-cost strategies to create blue oceans that offer quantum-leap increases in value built around buyer utility, price, cost positions and adoption.

Integrates differentiation and low-cost strategies to create blue oceans that offer quantum-leap increases in value built around buyer utility, price, cost positions and adoption.

Summary Today’s strategy game is an emergent process that is being redefined as the game is played. Learn through trial and error Improvisation, insight, intuition and imagination are key skills Requires an entrepreneurial mindset that constantly challenges and rethinks the value proposition and continually questions where people and other resources fit in a picture of the company’s future.

Today’s strategy game is an emergent process that is being redefined as the game is played.

Learn through trial and error

Improvisation, insight, intuition and imagination are key skills

Requires an entrepreneurial mindset that constantly challenges and rethinks the value proposition and continually questions where people and other resources fit in a picture of the company’s future.