Strategy, Innovation & Leadership LAB

To be or not to be different?

By Filip Caeldries | May 25, 2021 | 4 min read
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Between May 24th and May 29th (2021), six pianists will compete for the first prize in the prestigious international Queen Elisabeth Competition (Belgium). The strategy literature tells us that in order to win, we need to differentiate ourselves from rivals. Doing what everybody else is doing will get you nowhere. However, when we look at the concertos the six finalists will be playing, we observe that all of them have chosen ‘the same concertos’. This year – and similar to all previous Queen Elisabeth Competitions - they will perform piano concertos by Rachmaninov, Tchaikovsky, Prokofiev and Brahms. None of the finalists will play Mozart, Saint-Saëns, Beethoven, Ravel, Schumann, Bartók, Chopin or any other of the many available piano concertos. Why? Why is there so little differentiation between these competitors?

The question of whether firms (or in our case, the finalists in an international piano competition) should strive to be different or the same has received significant theoretical and empirical attention. On the one hand, ‘doing the same’ prevents firms from falling outside the range of acceptable market positions and avoids facing significant legitimacy challenges (e.g. DiMaggio & Powell, 1983). Doing what everybody else is doing increases a firm’s legitimacy which increases performance. On the other hand, ‘being different’ enables a firm to escape competition by staking out a position with a potential for superior performance (e.g. Porter, 1996). Differentiation reduces the number of rivals that share a firm’s resource space. Combining both arguments leads to the proposition that a moderately distinctive position enables the firm to strike an optimal balance between these countervailing forces. Moderate distinctiveness (as opposed to low or high levels of distinctiveness) leads to high performance. It is therefore recommended that a firm position itself “as different as legitimately possible” (Deephouse, 1999, p. 147). The optimal distinctiveness argument suggests an inverted U-shaped effect of distinctiveness on performance.

However, others have suggested that moderately distinct firms may be unable to sufficiently reduce their exposure to competition while also experiencing the negative effects of a blurred competitive position (e.g. Zott & Amit, 2007). Competitive differentiation may be beneficial only at very high levels. That is, moderate distinctiveness will lead to lower levels of performance than either conformity or radical deviation. All of this would suggest a U-shaped effect of distinctiveness on performance.

In a particularly innovative study, Haans (2019) suggests we can reconcile these conflicting perspectives when we make a distinction between homogeneous and heterogeneous market conditions.

Homogeneous market conditions are characterized by highly similar and undifferentiated firms clustered closely around the average attributes that define a market (Haans, 2019, p. 9). In a homogenous context, a salient view exists of what a firm in that market should look like. As a result, a narrow range of acceptable market positions exists, making it very difficult for a firm to legitimately claim a differentiated market position. In a homogeneous market, differentiation will reduce the number of direct competitors (the good news). However, it will also generate a sharp drop in perceived legitimacy (the bad news). Undifferentiated firms in homogeneous markets tend to be highly legitimate. But, they will also suffer from fierce competition. Conversely, highly differentiated firms will be able to isolate themselves from competition but will face significant legitimacy challenges. Firms that attempt moderate levels of distinctiveness will have the lowest level of performance as they suffer from the dual effects of reduced legitimacy and insufficiently reduced levels of competitive intensity. In contrast to homogeneous markets, heterogeneous markets consist of firms occupying widely varying competitive positions. In heterogeneous markets, customers will likely have a high tolerance for competitive differentiation. However, while distinctiveness enables firms to ‘escape competition’, in heterogeneous markets this effect will likely be much less as competitors will be more widely dispersed. With respect to perceived legitimacy, it is unlikely that failure to conform to the behavioral expectations of market participants will have a strong negative effect on perceived legitimacy. Legitimacy is maximized for firms that adopt a distinctive, bit not excessively so, position in the market.

Haans (2019) tests these propositions in the context of the Dutch creative industry. He observes a U-shaped effect of distinctiveness on performance in homogeneous categories. As heterogeneity increases, this U-shaped effect flattens out significantly suggesting that both legitimacy and competition-related pressures weaken to such an extent that distinctiveness loses its performance effect.

Back to the Queen Elisabeth piano competition. Why do all finalists choose “the same” repertoire? Why do they not choose for competitive differentiation? According to Taes (2021), what matters is acceptability and familiarity. Individuality (i.e. distinctiveness) will get you nowhere.

Following Haans (2019), a finalist performing an outlier (competitively distinct) piano concerto will position him/herself outside of a limited range of acceptability which will trigger “difficulties in audiences’ sense making by calling into question, what the firm [in our case finalist] does, why [s/he] does it, and how it should be valued” (2019, p. 6). Also, given the ‘relative impossibility’ of radical distinctiveness (i.e. performing a radically different piano concerto) choosing for Rachmaninov’s piano concerto No. 3 is the safe and smart thing to do. Members of the jury (customers) know the concerto. They value it. Preferences and legitimacy expectations are homogeneous. And – from the perspective of the jury - the evaluation of good and bad performances is greatly facilitated.

The next Queen Elisabeth Competition for piano will take place in 2025. Don’t count on any of the finalists going for Maurice Ravel’s piano concerto in G major. Most likely, you will find yourself listening to numerous renditions of “Rach 3”. Once again.

Bibliography

Deephouse, D. L. (1990), To be different, or to be the same? It’s a question (and theory) of strategic balance, Strategic Management Journal, Vol. 20, No. 2, pp. 147-166.

DiMaggio, P. J. & Powell, W. W. (1983), The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields, American Sociological Review, Vol. 45, No. 2, pp. 147-160.

Haans, R. F. J. (2019), What’s the value of being different when everyone is? The effects of distinctiveness on performance in homogeneous versus heterogeneous categories, Strategic Management Journal, Vol. 40, No. 1, pp. 3-27.

Porter, M. E. (1996), What is strategy? Harvard Business Review, Vol. 74, No. 6, pp. 61-78.

Taes, S. (2021), The strategy of predictability (De strategie van de voorspelbaarheid – in Dutch), De Standaard, May 22-24, p. 45.

Zott, C. & Amit, R. (2007), Business model design and the performance of entrepreneurial firms, Organization Science, Vol. 18, No. 2, pp. 181-199.

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