Controlling Competitive Dynamics by Taking Strategic Initiative

Abstract

Today the popular press as well as the academic literature is replete with discussions of the increased turbulence of competition. The surviving competitors in the wake of this past decade's turbulent times are highly competent, aggressive, and possess significant resources. The implication for corporate strategy is that any competitive advantage currently held will eventually be eroded by the actions of these competent, resourceful opponents. It is no longer a question of whether the current competitive advantage will be eroded but rather a question of when. As a result, the challenge for today's strategist is to constantly seek the "second act" even as the firm is benefiting from the current competitive advantage it should be laying the groundwork for the upcoming competitive advantage. This challenge is best depicted by Exhibit 1. From the time the firm decides to make some strategic move to secure the initiative to the time that this initiative has been achieved and some type of competitive advantage has been created, is called the launch period. It is critical to minimize this period of time. The longer it takes to get an initiative in place, the more likely it is competitors will spot the move and the more time they will have to develop a counterinitiative. Furthermore, the launch period is a period of investment rather than revenue generation. So the longer it takes, the more we have to discount the revenue streams that result from having secured the initiative. In today's high cost capital markets, projects with long launch periods and high early outlays seldom return a positive net present value.