The Death of Competition

James Moore boldly demonstrates that for many vibrant companies, the future is now; that today's great enterprises no longer compete for product superiority or even industry dominance. What matters now, and from now on, is total system leadership. Make no mistake - business rivalries have never been more intense. But the playing field is raised, the speed and stakes multiply geometrically, and the strategic options have never been more diverse.
Grasping the complex, hidden patterns in today's competitive terrain, Moore envisions a future characterized by organized chaos. As the old powers wait and wonder, vast new fortunes flourish where entrepreneurs jostle to integrate technologies and cultivate utterly new markets of unimaginable richness.
Inviting readers to approach their own businesses with equal boldness, Moore introduces biological ecology as a metaphor for strategic thinking about business coevolution and radically new cooperative/competitive relationships.
From his vantage point at the hot centers of global economic competition, Moore provides a topographical map to competitive systems, enabling readers to position their own companies within interlocking business networks, to identify the development stage of their system, and to pursue the strategy most likely to prevail and ultimately dominate the whole.
But a business model for one's own firm is simply not enough. Leaders must build strong communities of shared meaning, yielding a special resiliency, flexibility, and resistance to catastrophe.

James F. Moore is the founder and chairman of Geo-Partners Research, Inc.

Acknowledgments
Introduction
Why Businesses Fail
An Ecological Metaphor
Leading Business Ecosystem
Coevolution and Cars: Stages in Action
Stage I: The Terrain of Opportunities
Stage II: The Revolution Spreads
Stage III: The Red Queen Effect
Stage IV: Renewal or Death
The Paradox of Powerless Activism
Notes
Index
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Why Businesses Fail

Circling the big island of Hawaii in a small plane affords one of the most spectacular visual experiences imaginable. An isolated outcropping in the sea more than 2,000 miles from the nearest continent, Hawaii has as its center Mauna Kea, a magnificent extinct volcano that rises nearly 14,000 feet. Occasionally, its tip is sprinkled with snow. Closer to sea level, along the southeastern shore, glowing red, active volcanoes smolder. These boiling kettles periodically spew lava into the ocean, adding some small contributions to the landmass and generating immense steam clouds. Amid this varied terrain are dozens of distinct and glorious ecosystems, composed of communities of species, and ranging from alpine deserts to teeming rain forests.

For most people, Hawaii brings to mind images of towering hotels and pearl divers, not to mention pineapples and papaya. For me, Hawaii offers a picture of how some communities of businesses behave and evolve.

For most of its thirty-million-year history, Hawaii was a marvelously self-contained biological world. Plants and animals arrived by wind or wave, but few established themselves. The best scientific estimates are that a successful plant immigration occurred only once every 20,000 to 30,000 years. These few colonists gave rise to a wide diversity of new species. From some 270 colonizing flowering plants, more than 1,000 were created. From a few hundred insect settlers, around 10,000 came into being. From no more than 15 bird species, more than 70 developed.1

Evolving in protected isolation, Hawaii's flora and fauna are reminiscent of traditional industries: heavily protected by tariffs and regulations, old guard owners, and other well-entrenched interests. Inefficient technologies and business processes abound, similar to the unique life-forms that inhabit the Hawaiian islands.

Unlike Hawaii, however, traditional industries are not scenes of verdant splendor. More often, they exhibit intractable class divisions and crusty resistance to anything that threatens the established order. Yet the pattern of their establishment and the dynamics of their demise are strikingly similar.

Hawaii's prolonged period of ecological equilibrium was snapped by the arrival of Polynesian voyagers more than 1,500 years ago. These settlers brought pigs, dogs, and a variety of new plants. Western influence commenced with James Cook's landing in 1778. Subsequent voyages introduced ants, wasps, cats, rats, mosquitoes, and an immense array of plants. These invaders wrought havoc in paradise. More than 40 percent of the indigenous Hawaiian bird species have become extinct since human settlement began. More recently, golf courses and housing developments have radically transformed many local ecosystems.2

In much the same way, new technologies, business processes, and organizational life-forms invade all traditional businesses. They are borne on the winds of global capital flows and managerial migrations. They cross bridges of deregulation. They are encouraged by government policies that foster economic development. A vast tangle of skills and processes is being rendered obsolete.

As a management theorist of sorts, I realize the need and the benefits of these changes. But I also acknowledge the hurt and confusion that innumerable individuals feel as their businesses and livelihoods come under intense pressure. For many people, economic and technological progress constitutes the destruction of their Hawaiian paradise.

The Death of Competition

Shift now from beaches to traffic, from sand to carpet, from bright Hawaiian shirts to gray wool suits. Every day in my work, I observe companies that are drastically affected by the changing ecology of business competition and that seek ways to understand and shape the transformations engulfing them. I tell them about the death of competition.

Not that competition is vanishing. In fact it is intensifying. But competition as most of us have routinely thought of it is dead-and any business manager who doesn't recognize this is threatened. Let me explain. The traditional way to think about competition is in terms of offers and markets. Your product or service goes up against that of your competitor, and one wins. You improve your product by listening to customers, and by investing in the processes that create it.

The problem with this point of view is that it ignores the context-the environment-within which the business lies, and it ignores the need for coevolution with others in that environment, a process that involves cooperation as well as conflict. Even excellent businesses can be destroyed by the conditions around them. They are like species in Hawaii. Through no fault of their own, they find themselves facing extinction because the ecosystem they call home is itself imploding. A good restaurant in a failing neighborhood is likely to die. A first-rate supplier to a collapsing retail chain-a Bradlees, Caldor, or Kmart-had better watch out.

Sometimes the ecosystem as a whole is more or less robust, but the particular niche a business occupies is challenged by newly arriving species. The problem becomes that there are so many similar businesses in a market that none can make a reasonable profit. Airlines, steel companies, long-distance telephone companies, and deregulated electric utilities all face this dilemma. Their contributions have become commodities traded mainly on price. One of the most significant side effects of electronic airline reservation systems has been to enable customers to do comparative shopping. This newly efficient market has been a major factor in driving down prices and margins.

The continued expansion of electronic shopping and the Internet will bring commodity like trading into markets ranging from groceries to automobiles. While such intense price competition is good for consumers in the short run, the threat of razor-thin margins makes it difficult for companies to justify investing in next generation offers-and can stifle innovation.

Neither of these types of business problems-the collapse of the economic fabric around your business or the invasion of your territory by too many similar contributors-is recognized by the conventional view of competition. In my consulting practice, I have seen instance after instance of well-meaning, thoughtful, hardworking people whose businesses were wrecked by these effects. This despite having good products and services, produced by well-run processes.

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Excerpted from The Death of Competition by James F. Moore Copyright © 2003 by James F. Moore
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