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Hyper-Competition Factors

 

Many industries have entered into a state of competition called hyper-competition. Hyper-competition is a state of intense and often lethal competition within an industry. It has some very alarming characteristics:
Advantage. It is increasingly difficult, if not impossible, to create and main-
tain sustainable competitive advantages. The war of advantage migrates
to creating an endless stream of overlapping and staggered temporary
advantages from trying to defend a set of sustainable advantages.
Innovation. There is rapid and dislocating innovation in the industry. All
forms of know-how are subject to rapid devaluation and continually have
to be refreshed.
Competitive escalation. Competitors continually raise the ante to play the game. A state of market equilibrium is neither achieved nor desired by
winner-takes-all competitors.
Customer power. Customers become extraordinarily demanding and have ever-heightened expectations. These demands are made actionable by
effortless substitution between suppliers’ products and services.
Value proposition. There is a continuing market redefinition of what is valued by consumers. Competitors constantly search for new combinations
of basic products and add-on features that will entice customers.
End of chivalry. There is no respect for the status quo by competitors. Barriers to entry are viewed as challenges to circumvent.
End of customer loyalty. Markets are characterized by excessive churn.
Customer loyalty is fleeting and often needs to be bought.
Market disruption as the rule. Competitors take actions to disrupt markets rather than protect markets. The objective of competitive strategy shifts from protecting what one has to taking what one doesn’t have. Explicit
actions are designed and executed to devalue the opponent’s advantages and renew one’s own advantages before a competitor decreases the value
of your advantages.
Hyper-competition is caused by the concurrence of a number of market
factors:
Shift of market power to customers. Customers perceive a wide selection of
choices and become accustomed to shopping across multiple alternatives.
Rapid decline in barriers to market entry. Ways are discovered to circumvent barriers to entry by creative and ambitious competitors. With ingenuity, it is often discovered that a seemingly impenetrable barrier to entry can be breached.
Accelerating technology/know-how change. The half-life of competencies
is dramatically shortened by rapid innovation. The game of advantage
through know-how is constantly restarting, with all the players starting
over again.
Rise of multiple deep-pocket players. Multiple companies enter an industry with the financial resources to fight it out. One big company can no
longer bully all the others into submission and make them stay in their
places.
Deregulation. Government and regulatory authorities disassemble legal
barriers to entry. Often, the deregulation not only disbands legal barriers
to entry but also aggressively encourages intense competition.
Inability to sustain advantage. The durability of advantages dramatically
declines. Dramatic innovation, shifts in technological know-how, and creativity in redefining the product value proposition conspire to reduce the
resiliency of any advantage.
Globalization. Time and space barriers to market entry are overcome. Geo-
graphic strongholds become easily breached, and foreign competitors can
effectively invade markets—often with deep pockets, no respect for the
status quo, and rich resources.

Hyper-competition takes place in four primary arenas of competition (see
Figure 1.9). While competition takes place within these same arenas within a
state of moderate competition as well, what is important to appreciate is the
rapid escalation and intensity of competition, both within and between arenas,
that occurs with hyper-competition. The speed of competitive interaction
increases and escalates within an arena, and as opportunities depreciate
within an arena, competitors rapidly jump to other arenas to continue the fray.

The four arenas of competition are these:
Cost and quality. Competition focuses on the price and value proposition
mix to be presented to the customer.
Know-how. Competition focuses on competencies and creating the skills
that are required to create future value for the customer.
Strongholds and barriers to entry. Competition focuses on creating advantages that block competitors from entering the market.
Deep pockets. Competition focuses on the use of financial resources to fund and endure the competitive war.

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Ultimately, competitors have no choice but to become hyper-competitive or
to exit the marketplace. Either you learn to compete as a hyper-competitor, or
those who have leave you behind in the marketplace. You are left behind
because the hyper-competitors keep redefining value for the customer. This
makes your stable value proposition a dated artifact.
Hyper-competitors demonstrate very aggressive market behaviors. Typical
hyper-competitive behaviors are as follows:
A hyper-competitor quickly and purposely brings assets to a chosen
point of opportunity that offers disproportionate returns for the effort.
Hyper-competitors create menaces for their opponents. They make their
opponents turn their attention from their planned agenda to the hyper-
competitor’s agenda.
– The hyper-competitor creates friction for the opponent. It destabilizes
the opponent’s business by making it respond to the hyper-competitor
and, in so doing, forces the opponent to alter plans, processes, initiatives,
and alliances.
– The hyper-competitor continually raises the tempo and occurrences of
the marketplace maneuvers in all the arenas of competition. Unable to
respond and being confronted with an increasingly deteriorating situation, the opponent’s internal processes begin to collapse under the strain
and stress of rapid and unpredictable change.
– The hyper-competitor deliberately creates imbalances and destabilizes
the market. There is no respect for the status quo.
– The hyper-competitor wins by being the marketplace puppeteer. It creates a dynamic set of actions, built on opportunism, to excite customers.
– The hyper-competitor continually redefines the value proposition
offered to the customer. By aggressive redefinition of value propositions,
established and long-standing competitor advantages are devalued.
– The hyper-competitor shows no respect for the competitors’ advantages.
It views every advantage as having an innate disadvantage component.
– The hyper-competitor robs opponents of the ability to make choices. If it
can keep them busy chasing it, they don’t have time or energy to develop
plans of their own making.
– The hyper-competitor improvises to take advantage of opportunistic situations as they unfold. Opportunities emerge, as opposed to being
planned.
– The hyper-competitor lures opponents out of their strongholds to fight
on more favorable turf. This nullifies stronghold and barrier-to-entry
advantages.

– The hyper-competitor is an experimenter. It tests opponents to learn
where they are strong and where they are weak.
– The hyper-competitor uses deception, speed, and surprise to paralyze
opponents into inaction. Shocked and numbed by the speed and surprise
of the hyper-competitor’s actions, the hyper-competitor gets a long grace
period before the opponent regroups and mounts a counter-offensive to
its actions.
– The hyper-competitor competes against time. Through rapid innovation,
the hyper-competitor contracts the anticipated duration of return that
competitors expected on their advantages and mangles their business
model.
– The hyper-competitor focuses on satisfying the customer while its makes
its opponents focus on the hyper-competitor.
– The competitive attitude of a hyper-competitor is best captured in the classical dictum of Sun Tzu to “Go forth where they do not expect it, attack where they are unprepared.”
Hyper-competitors see competition as a war of movement where market
success goes to those who can move with purpose and alacrity. Even when
wrong, speed and dexterity permit rapid corrections.

 

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