BCG on strategy: Strategic and Natural Competition

In this BCG On Strategy series, I go chapter-by-chapter through the book: The Boston Consulting Group On Strategy: Classic Concepts and New Perspectives (2nd edition). Join me each week for BCG On Strategy at AaronHoos.com.

OVERVIEW: STRATEGIC AND NATURAL COMPETITION
Boston Consulting Group’s Bruce Henderson wrote the chapter “Strategic and Natural Competition” in 1980. In it, he says that natural competition is an evolutionary force that most businesses (and the larger business environment) goes through over time. It is slow yet efficient. On the other hand, strategic competition is blazingly fast and very risky but can compel a considerable shift in the business environment. Strategic competition is a cataclysmic change to some aspect of your business to completely shift the competitive landscape in your favor. It’s a new business model, a massive repositioning, a new suite of services.

HIGHLIGHTS
Henderson outlines the basic elements of strategic competitiveness, and they include:

  • The ability to understand competitive interaction as a complete dynamic system that includes the interaction of competitors, customers, money, people, and resources.
  • The ability to use this understanding to predict the consequences of a given intervention in that system and how that intervention will result in new patterns of stable dynamic equilibrium.
  • The availability of uncommitted resources that can be dedicated to different uses and purposes in the present even though the dedication is permanent and the benefits will be deferred.
  • The willingness to deliberately act to make the commitment.

He goes on to write about the results of strategic competitiveness and how businesses not only create an entirely new dynamic in the business environment, but they have to sustain it against other competitors.

MY THOUGHTS
Natural competition is the easy way for businesses to operate. After all, there are plenty of other things that entrepreneurs need to do without devoting time and effort to strategic competition. But if your small business is going to be noticed — and become a marquee name — you need to stop letting evolution slowly transform your business and, instead, you need to influence the transformation yourself.

In the list above, Henderson gives a very clear step-by-step methodology for entrepreneurs to prepare to perform a strategic competition shift.

First, they must clearly analyze the business environment to see its current state and how all the “moving parts” work together. (Shameless self-promotion: My Business Diamond Framework(TM) is a useful tool for this).

Second, business owners need to carefully (and realistically) predict the outcome of their effort. This isn’t easy but also isn’t impossible. A consideration of the best case scenario, worst case scenario, and realistic scenario will help to give business owners a clear picture.

Third, business owners need to commit resources (money, people, time, effort, etc.) to this shift. If a strategic competition effort is in your future, start putting aside money right now and start thinking about how you can put a few minutes of time in each day to accomplish the shift.

Fourth, business owners need to act. This is probably the most challenging part because natural competition seems so easy while a strategic competition shift is so big and seemingly risky that it can seriously hurt the business if it is done wrong. Yet, as Henderson implies, although the risk is there, the reward is dramatically greater.

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