In a period where there is hyper-competition, meaning the business that succeeds today may be broke and bankrupt next year, how can businesses adapt to hyper-competition and remain successful?
HYPER-COMPETITION
How prepared are you for hyper-competition? Are you even aware it is a thing?
A Forbes article listed changing business trends and hyper-competition as the first in a list of ten challenges business leaders need to be prepared for in 2022 and beyond.
We often struggle to stay current with existing threats arising from the current competition. Hyper-competition can sound daunting, anxiety-provoking and overwhelming. So what is it, and how do we manage it?
WHAT IS HYPER-COMPETITION?
The term was first coined by Richard D’Aveni, a professor of business strategy at Dartmouth College, who, in his consulting work, found that businesses that were succeeding were those who were willing to disrupt existing markets [1]. According to D’Aveni, the traditional method of defining an industry, reducing the level of competition, and then avoiding competition altogether actually makes companies weaker rather than stronger. [2]
Hyper-competition is the condition or state where competition is so intense that it creates market instability.
WHAT IS DRIVING THE CURRENT HYPER-COMPETITION?
From a more traditional perspective, market instability is something to be avoided. However, in today’s climate, the ability of a business to capitalise on market instability and create new opportunities gives them a competitive advantage.
Three factors are driving hyper-competition.
- Technology and innovations.
- Customer Changes; &
- The decline of boundaries. [3]
TECHNOLOGY AND INNOVATIONS
The changes that are occurring in technology play a significant role in hyper-competition. One of the major advances in technology that will impact businesses in the next few years is the arrival of the metaverse. Companies are already beginning to think about and plan for the metaverse, which will accelerate competition as they work out how to maintain, secure, and grow their market share in a metaverse.
CUSTOMER CHANGES
COVID has brought about changes in customer buying habits. The customer’s bargaining power is now stronger than ever. People are no longer restricted to purchasing in store but can purchase online. With greater customer awareness, customers are more likely to shop for businesses aligned with their ethics rather than buy according to price.
Customer satisfaction is no longer defined just by the price and quality of a product. There are more complex, intangible qualities that we need to consider when creating an experience that provides customer satisfaction.
DECLINE OF BOUNDARIES
The phrase “boundaries to entry” refers to two aspects. Firstly, how easy or difficult it is for a new business to enter a specific market [4]. Traditionally, entry into a specific market was often difficult for newcomers because existing businesses kept the majority market share protected from newcomers. Now, the emphasis is on newcomers disrupting the market leaders. For example, Uber was a prime example of a disrupter to traditional taxi companies initially, and now they have expanded into Uber-eats.
The second aspect of the decline of boundaries is the impact of globalisation. Technologies have reduced the effect of distance, which means geography is not the barrier it once was.
Consequently, newcomers often have the flexibility and the ability to utilise new technologies in ways that leave traditional businesses behind.
The ability of a business to capitalise on market instability and create new opportunities gives them a competitive advantage.
IS HYPER-COMPETITION ALL BAD?
Because of the disruption to markets caused by hyper-competition, it is easy to view it as a negative, particularly if, as a business, you have been used to a stable market where there has been little competition.
Yet, change and disruption also bring new opportunities and possibilities that didn’t exist previously. The question is,
HOW DO WE SUSTAIN SUCCESS?
In a period where there is hyper-competition, meaning the business that succeeds today may be broke and bankrupt next year, how can businesses adapt to hyper-competition and remain successful?
MAINTAINING SUCCESS IN HYPER-COMPETITION
D’Aveni provides some suggestions as to how we can maintain successful businesses.
- STRATEGIC SOOTHSAYING
Soothsaying is the ability to foresee the future. While this is by no means an absolute science, successful businesses actively seek new knowledge that will assist them in forecasting or predicting what customers may want in the future. This ability to make accurate guesstimates enables businesses to stay ahead of the curve.
- CENTRALITY OF CUSTOMERS
Whether a business is facing hyper-competition or not, the centrality of customers remains paramount. Companies can never take customers for granted. To be effective in our strategic soothsaying is to provide great experiences for our customers, experiences that enhance their satisfaction.
In providing better experiences for customers, employees who engage with clients and customers regularly become essential sources of knowledge and information. Businesses that know how to include and empower employees will generally manage hyper-competition more effectively because empowered employees can quickly adapt processes to enhance customer satisfaction.
- THE IMPORTANCE OF SPEED.
Speed can be a challenge for risk-averse businesses. While new ideas may be welcome, the length of time taken to implement the idea results in missed opportunities, and agile competitors can move in and take advantage of the opportunity. An example of this is IMB, which tried to dominate the personal computing space with its brand name and sales force. IBM was outmanoeuvred by Dell, which was able to grab the market share and leave IBM flat-footed [5].
Speed cannot be at the expense of due diligence or taking precautions; however, to manage hyper-competition, businesses must streamline their due diligence processes to enable them to take advantage of opportunities.
- HOW DO WE MANAGE CHANGE?
If we are to succeed in hyper-competitive environments, we need to consider how we manage change as individuals and as business leaders.
Does change make us anxious and apprehensive?
Do we accept the reality of change, or do we resist it and fight against it?
Often how we view and manage change as individuals is reflected in our businesses and how we handle the change bought by hyper-competition.
In the following article, we will consider how we manage change personally and how that can impact our role as business leaders.
