William P. Barnett
The Red Queen among Organizations: How Competitiveness Evolves
(Princeton University Press, 2008)
Sony vs. Samsung: The Inside Story of the Electronics Giants’ Battle for Global Supremacy
Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter
(Harvard Business School Press, 2007)
As in the past, many of the books about strategy published in the last year employ a familiar set of buzzwords. They advise us to “think big,” to “outsmart,” and to “break through”; they urge us to “break the rules,” “change the game,” and strive for speed, agility, and focus.
Managers may find a useful idea or two in each of these books, but few of them are fundamentally persuasive or insightful. Most are long on admonition and exhortation — Be innovative! Be bold! — but short on critical thought. Many suffer from a fatal flaw: They feature companies that have achieved remarkable performance — whether great success or colossal failure — and then explain those outcomes using simplistic ex post facto rationalizations. In doing so, they fail to appreciate the real uncertainties facing managers as they make decisions. And they ignore the fact that it is just as easy to select a handful of successful companies and conclude that they prevailed through dogged persistence and focus as it is to pick a set of companies whose success seems to be based on their willingness to scrap the conventional and do something radically different. After the fact, it’s always possible to tell one story or the other.
As for words like agility and resilience, they describe wonderfully aspirational qualities that also tend to be observable only in hindsight. Show me any successful company, and I can make a case that it is agile and resilient; show me any less-successful company, and I can argue that it lacks those qualities. But unless we can define these concepts as we observe them, rather than infer them from past performance, they provide little more than retrospective storytelling. Which is not a bad way to describe many strategy books.
Corporate strategists deserve better, and the good news is that 2008 saw the publication of a number of strategy books that are in fact better. For the past two years, the focus of strategy+business’s essay on best strategy books was growth. But strategy is fundamentally about choices made in a competitive setting, and this year, a few books bring competition back to center stage.
Red Queen Competition
The most ambitious and important new strategy book is The Red Queen among Organizations: How Competitiveness Evolves, by William P. Barnett, a professor at Stanford University’s Graduate School of Business. The book’s central image comes from Lewis Carroll’s classic children’s story Through the Looking-Glass, in which the Red Queen explains to Alice that in her country, “it takes all the running you can do, to keep in the same place.”
The driving mechanism of Red Queen competition is straightforward. “Organizations learn in response to competition, making them stronger competitors and so triggering learning in their rivals,” writes Barnett. Thus, performance is relative to competition, not absolute. A company can run faster and fall farther behind at the same time. Despite our fondest wish to achieve high performance by following a simple formula — and despite the dozens of strategy books that cater to that desire — the realities of Red Queen competition are starkly different.
Barnett identifies two of these realities: “The threatening effects of current-time competition, and the viability-enhancing effects of hysteretic competition.” (Hysteretic refers to systems that, like thermostats, are slow to switch back to their previous state after a stimulus has been removed.) The danger of competition is obvious: the greater its intensity, the greater the threat to survival. But the benign effect of competition is also important, although often overlooked: “Organizations with more exposure to a recent history of competition are more viable and generate stronger competition.” The central insight of Red Queen competition is that through competition itself, firms learn about rivals, about customers, and about the competitive context — and therefore become stronger. Yet as companies become stronger, rivals learn from one another and emulate the leader’s winning ways, leading to a narrowing gap between the best and the rest. That’s the nature of Red Queen competition — companies have to run faster to avoid falling behind.