Gladiators in the arena
October 21, 2014
"Can anyone name a few competitors of Parker?", I ask the participants in the TIAS classroom. The beamer shows the audience a Parker pen. The suggestions rapidly succeed one another. Montblanc, Waterman, Lamy, Sheaffer, Monteverde. And after twenty seconds, someone remarks: Bic. This last suggestion is always made by a Dutch person. The thriftiness fits the luxury."Who else could you consider to be a competitor? Think outside the box!" Alternatives are once again quickly put forward. A PC, an iPad, a tablet or a phablet. "How many of you have a pen in the Parker or Montblanc category, either with you now or at home? " Twenty people raise their hand. "How many of you bought the pen yourself?" Four hands remain raised.
Nothing is what it seems in the world of marketing. If it walks like a duck and it quacks like a duck, then it probably is a duck, according to common logic. Not true! A Parker pen may look like a pen, but it competes in the world of promotional gifts. A TV-documentary competes with other on-line information that the modern consumer randomly relishes whenever it best suits him or her. For years now we have consumed the issues discussed in current affairs programs like Terzake (Canvas) that may happen to interest us at any given. But what if Terzake were not to make this information available on www.deredactie.be? Then we would most likely find alternatives.
The Powerlessness of Five Strengths
Countless methods and frames of mind have been proposed for the purpose of assessing the environment - they make up the basic ingredients in an MBA Strategy course. Portfolio models, SWOT- and scenario-analyses, etc. The frame of mind that is best known is undoubtedly the five strength model of Michael Porter. This Harvard professor claimed that the profitability in a branch of industry is determined by the combination of the following factors: the internal competition, the power of the suppliers and the customers, the threat of new players on the market and substitutes. Competitive intelligence became an independent discipline. Porter's logic was extremely simple: a good competitor is a dead competitor. Really?
A QualComm-employee answered a question in the hyper-modern corporate museum in San Diego as follows: "Who are our most important competitors, you ask? Difficult to say. Our most important competitors are also our most important partners." And so additions have been made to the Porter-framework. For example, it was expanded to include alliances. All of the methods, however, no matter how sophisticated or substantiated, only provide a limited view of the future. Only the paranoid survive, is how the founder and former CEO of Intel worded his vision on strategy. They were apparently not alert enough at Intel. How could they have missed the market of smart phones and tablets? QualComm filled the void, completely loyal to the "What If"- company principle. And Porter, it stood still.In an article in the Harvard Business Review, 28 years after the publication of the original Competitive Strategy, he drew the conclusion that he had been right all along. The fact that his own consultancy Monitor had meanwhile gone under is perhaps a sign that even prominent Harvard professors are not always right. A Harvard professor's robe may give you status, it does not make you immune to your environment.
"My knowledge of history is somewhat vague, Cassius, but shouldn't the Barbarians have lost the battle of Cartagena?" It is a justifiable question from Emperor Commodus in Ridley Scott's sandal movie Gladiator. It is a fine moment. How could the Romans possibly know that Russell Crowe scarcely ever plays by the rules. Russell's battle plan rewrote history. The gladiators worked together and cut the Romans to ribbons. Markets have become arenas. The participants are sometimes competitors and sometimes partners. They sometimes take part in the battle, they sometimes work together, but they can also just sit and watch, anticipate what is to come or simply leave the arena.
Is Tesla a car manufacturer or does it wish to control the battery market? The planned battery factory in Nevada suggests that, no matter how beautiful the Tesla Model S is, it is merely a part of the phalanx for Elon Musk. The rules of the game in the arena are developed along the way and we never know in advance who will appear at the mark, let alone who will reach the finish line. Could you have imagined ten years ago that you could use your smart phone to order a cab to the Hard Rock Café via Uber? When do you think the watch manufacturers realized that Apple had its eye on the wrist as well? Ironic don't you agree? The many smart phones, starting with iPhone, led to the disappearance of wrist watches. Now that the wrist is watch-free, Apple makes a wrist watch sexy again.
The word 'market' assumes a degree of long-suffering that makes the company sluggish. A 'market' situates itself in the Provence, where you can enjoy a Ricard on a lovely morning with a view of the Mont Ventoux. You meanwhile sample the local herbs, cheeses and other local products. The distribution of roles is strict, including the unfriendly French police officers who sooner obstruct traffic rather than facilitate it. Doe gerust een Porterke and make a SWOT analysis. It would be wrong not to use these ways of thinking. But do always be aware of the decisiveness of the participants in the arena. Yoda, the clever green character in Star Wars, put it sharply into words: "The future is always on the move".
Credit where credit is due: it was colleague Filip Caeldries (TIAS) who first introduced this question.
Porter M.E. Competitive strategy. Techniques for analyzing an industry. New York : Free Press, 1980.