Competitive strategy is no longer about assets, positions and economies of scale. Supercompetitors such as IKEA or Amazon build on distinctive capabilities that are scalable and relevant to offer one single powerful value proposition that transforms their industries.
Traditionally, industry-leading companies used to be large conglomerates that gained their dominant competitive advantage through an accumulation of assets and positions, which gave them unbeatable economies of scale. Thanks to the diversity of their portfolios, these conglomerates had a wide reach, allowing them to pursue short-term profitability and growth wherever they could find it.
Today, more and more industries are led by ‘supercompetitors’ — a phrase coined by a team of researchers from Northwestern’s Kellogg School of Management. Supercompetitors gain their competitive advantage through certain distinct capabilities that allow them to offer something unique, relevant and scalable to the marketplace. The scalable nature of their capabilities is key. For Amazon, for example, the capabilities behind its original online bookstore — specifically, world class information technology and supply capabilities combined with a unique automated customer recommendation system — could be applied to a broad and expanding number of products, services and customers. In one of the purest examples of scaling seen in the history of business, the biggest bookstore in the world became “the everything store.”
Apple is another example. The Kellogg team identifies three distinctive capabilities: consumer insight, intuitively accessible designs and technological integration. Apple was able to combine “a deep understanding of how people live, work and play, applied to the innovation and marketing of leading-edge products and services” with its intuitive designs (led, of course, by its revolutionary graphic user interface). The final piece, technological integration, enables all of its offerings to work together seamlessly. As with Amazon, Apple’s distinctive capabilities were relevant — offering consumers an array of constantly changing and improving personal computers — but also scalable: as fully applicable to phone service and the distribution of music as personal computing.
Naturally, some industries, such as the dry cleaning industry, will never be the domains of supercompetitors. Such industries do not lend themselves to distinctive capabilities — there is nothing that a dry cleaner can do that cannot be quickly imitated by competitive dry cleaners.
In contrast, the packaged goods industry, despite its long history, did evolve from a conglomerate to a supercompetitor-driven industry. Incumbent conglomerates realized that a portfolio strategy of companies offering disparate products and services based on disparate capabilities was undermining profitability, and opening the door for more focused upstart competitors. Thus, major players such as Sarah Lee and Kraft started divesting certain of its companies and acquiring others that allowed them to build a more homogenous group of brands built on similar capabilities.
For many corporate strategists, focused on current limits and constraints such as their established positions in the industry, the potential of supercompetitors will be seen as a threat to their business. The solution is to be proactive: first, by determining whether your industry is primed to evolve (or has begun to evolve) into a supercompetitor-driven industry, and second, by taking the necessary steps for you to be the supercompetitor of the industry.
Analyse your industry. Are the old winners in your industry starting to be replaced by new upstarts? Are conglomerates breaking up? Do assets and product portfolios seem to carry less competitive weight? What about “differentiation relevance”: Do customers care about differentiation among products or services in your industry? (For example, paper towel manufacturers keep inventing new ways to differentiate themselves, such as being thicker, more absorbent, greener and so forth, but most customers simply don’t care.) Are the key capabilities of your industry leaders scalable? If the answers to these types of questions are “yes,” then supercompetitors are or will be emerging in your industry to take the lead.
Focus on your distinctive capabilities. Having dissected the competitive logic of your industry, it’s time to look inward. What do you do well that is relevant and scalable, and would position you to be the next supercompetitor? Identify the capabilities in which you need to invest. Draw up a game plan for 1) developing or acquiring those capabilities, and 2) connecting them so they are mutually reinforcing; you will also need to apply that mutually reinforcing system to all your products and services — which will probably mean divesting some products and services and acquiring others.
In the age of the wide-ranging conglomerate, the key strategic question was simply, “Where can we grow?” In today’s age of the cohesive and focused supercompetitor, the key question is: “Who are we going to be?” Building on the scalable strengths and capabilities of your company most relevant to your customers will put you at the top of your industry.
Getting the Growth Strategy Right. Fred Schmalz. Kellogg Insight (2nd September 2014).
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