Since the mid-1990s, the source of competitive advantage has been shifting. Leading companies used to be diverse conglomerates that based their competitive strategy on assets, positions, and economies of scale. Today’s market leaders, by contrast, are more focused enterprises. They do not follow the traditional portfolio strategies of seeking short-term profitability or growth wherever they can find it. Rather, they recognize that value is created by their distinctive capabilities: what they can do consistently well. Their strategic approach, which is based on a single powerful value proposition backed up by a few mutually reinforcing capabilities, gives them a continuing advantage over their rivals. As they consolidate their efforts around this approach, they fundamentally reshape their industries.
We call the companies that achieve this form of influence supercompetitors. A supercompetitor is a company that, by competing successfully with its distinctive capabilities, changes the dynamics of its business environment. A capability, in this context, is the ability to consistently deliver a specified outcome relevant to the business. This takes place through the right combination of processes, tools, knowledge, skills, and organization, generally developed across functional boundaries. Supercompetitors are emerging today because, in industry after industry, their few distinctive capabilities are both scalable and relevant, while other forms of competitive advantage, like sheer size, have decreased in importance.
Consider, for example, the impact that the supercompetitor Amazon has had on a variety of sectors and markets. Starting as a Web-based bookseller, Amazon learned how to develop distinctive online retail interfaces that presented complex information in a clear, intuitive way. It combined this with world-class IT and supply chain capabilities and its own unique approach to automating customer recommendations on the basis of sales and preference data. It was these capabil-ities—and especially the way they worked together in a mutually reinforcing system—that enabled Amazon to expand across multiple product categories, including housewares, clothing, and cloud-based computer services. By 2013, its sales had reached almost US$75 billion—more than four times the sales of the entire trade book publishing industry. Other well-known supercompetitors in the computer technology industry, such as Apple and Google, have also staked out cross-sector spaces, applying their own distinctive capabilities systems to everything they do.
Supercompetitors in other industries (see Exhibit 1) include IKEA, which revolutionized the home furnishings industry by creating a globally scalable business model for affordable home goods; Starbucks, which uses its experience design and customer engagement prowess to deliver a distinctive coffeehouse ambience around the world; Danaher, which reinvented the conglomerate by replicating operational excellence across its internal boundaries, serving scientific and technical tool markets with immense profitability; Enterprise Rent-A-Car, which developed a new type of auto rental business for people with unplanned transportation needs; Inditex, inventor of a uniquely effective fast-fashion business model for apparel; McDonald’s, whose global supply chain and marketing capabilities gave it one of the most iconic global brands; Qualcomm, whose prowess in developing and licensing breakthrough technologies led the mobile phone industry toward the smartphone; and Toyota, which, despite its difficulties in the early 2010s, is still the creator of the production system that every other automaker emulates.
The success and influence of the supercompetitors have begun to change the way business strategists think about industry evolution and the nature of competition. For business leaders who want to stake out a winning position in their industries, it is critical to recognize the role that the new supercompetitors play. Amid the fierce competition and turbulence of many industries today, they have found a way to gain control over their destiny.
How Industries Evolve
The uncertainty and hypercompetitive nature of today’s business world, thanks to outside forces such as technological change, globalization, and the ease of reverse-engineering many products and services, has shifted advantage to companies with distinctive capabilities. Since competitive advantage is increasingly short-lived, winning companies cannot rely on scale—the leverage that comes from being bigger than other companies. Nor can they rely on one or two assets, products, or services. They need a steady stream of offerings that only capabilities can deliver. Capabilities like these are not easy to build. They are complex and expensive. Most winning companies can only support a few—typically three to six—where they focus disproportionate investment, energy, and management attention.