Hypercompetition: Why it’s not Profitable?

blue targets and arrow

many blue targets and three arrows hitting the center of the first one

Hypercompetition coined by Richard D’Aveni considers competitive analysis under conditions in which competitive advantages are quickly negated. In addition, guiding policies are repeatedly flouted by iconoclastic rivals competing in border-less boundaries, and customer loyalty is constantly fickle. Can we have hypercompetition between two industries? Yes, because hypercompetition depends upon the mind-set and actions of hypercompetitive partners not on number of competitors.

Temporary advantage is with one who is slightly ahead of competitors, it is the one who breaks the silence first similar to prisoner’s dilemma. It always needs action and that creates issue on profit level for an organization, mostly hypercompetitive partners rely on margins and at times cannot withstand with the demand of innovation and R&D. Oligopolistic cooperation does not produce excess profits because of easy barriers to entry (Porter’s 5). Firms mostly compete with each other in four arenas and they are cost, quality, timing and know-how, strongholds, and deep pockets. In cost and quality arena, the trade-off between price and quality is eliminated, forcing the industry’s product offerings toward a point of ultimate value for consumers, combing low prices with high quality. This can only give minimum of marginal profit scavenging options for hyper competition. So, to overcome these most competitors either redefine quality and increase prices of products/services or force competitors towards timing and know-how arena.

The one who breaks the silence requires a uniquely different set of skills than that of followers, and that confers several advantages. The competitive moves can be easing through the know-how creating/altering resource base with speed, agility and timings. It also escalates when one competitor goes for creating a new resource base or transform strategy to imitate/replicate the one with competitor (let’s say successful competitor). This whole notion is called leapfrog strategy, and it is suggested that it is expensive, and competitors can imitate quickly, and competitions try to create strongholds. Under hypercomeptition, entry barriers can easily be circumnavigated. When Stronghold erodes through the entry of increasing rivals, the rivalry shifts to who can outlast the others based on their deep pockets. Big fishes as I’ve mentioned in my previous article in superior financial conditions can neutralize hypercompetition through tatics such as strategic alliances, acquisitions, franchising, niching, and swarming (moving is large numbers).

Hypercompetition can be in multiple arenas, or it could have stuck in a particular arena for a long period. Here comes proper project management, suppose the delay between moves are longer, and this delay is purposefully done so that enough resource can be produced to give a slack in the project for a recoup. Perfect competition gives profits significantly but hypercompetition doesn’t give profits, and if some then it’d be temporarily until the firm’s advantages are neutralized or eroded by other competitors.

Hypercompetion takes following points as assumptions:

  1. Firms mostly destroy their own competitive advantages and create new-new products. They deliberately cannibalize their own leading product before it goes through full product life cycle. Moving to new products needs capital for innovation, production costs etc decreasing margins.
  2. The one who are determined will likely to break the barrier but exiting barriers only provide a false sense of security, lulling incumbents into complacency.
  1. Consistency and logical thinking are the easiest thing to understand in competition. So, it is always advisable to be unpredictable.
  1. Long-term planning will only help to sustain and exploit existing advantage. Hypercompetitive is all about eroding existing advantage of competitors.
  1. From SWOT, one gets weakness of competitors. Studies suggest that targeting ones’ weakness consistently will make them to work on that and can improve turning into stronger instead.

Thanks for reading…


How Big Fish Can Mislead: A Thought On Technological Progress


Let’s start with digital disruption to explain how new technology disrupts everything else and prevails. Then we can see how the opposite happens in energy industry. When will disruption prevail in an energy sector?

Digitization and Digital Disruption are a few common phrases used in techno talks, and a lot of speculation on future based upon them. We’ve seen ipad disrupting physical libraries when it enhanced e-books sales closing over 30% physical libraries in United states in an year. Mobile phones disrupted almost everything including mp3 players, cameras, books, watches and sometime ornaments (studies suggest people gave away a few rings while carrying smartphones). Other examples include that of revolutionary apps like Uber, Skyscanner, Airbnb. So far it is completely understood how it changed the way of business, but it’s equally displaced the equilibrium of the business ecosystem. Let’s suppose when there were 100 smaller companies generating a billion dollar, and now we’ve just one company generating a billion dollar leaving rest 99 out of the league. In this case, what would they do? one option is to leave the current line of business and try something else, another would be to adopt the change and do the same thing like copying what the competitors doings, or leave the business. Out of those most viable option for me is to stay in the market imitate what competitors doing and target on a smaller scale than before to keep going, but the question is how long one shall keep going? In this world of Entrepreneurs, and in the society with technology change, and people appreciating innovation how long one can survive without swaying towards the current of change? What would be the plan of action for the small organization to help get bounced back to what they were, this is for me a mathematics question that has an answer within the equation. It is very important to understand the equilibrium and the shift from normal, it might be too impossible in some cases if the displacement is too much and the off set price to bring it to the normal would be either too much or impossible. There is nothing like a crystal ball with any strategist but yes envision technological change, and when everyone goes behind the same goal can lead to severe issues, it mostly gives one winner and rest all losers. The winner is often the most fearless and also the most adaptive of all, and losers mostly overconfident status-quo addict. Why I’m writing these all when everyone knows them all? In more than a century ago, the industry suffered from dominance by a large western market and competitiveness among a few private companies for the world’s oil reserves. Oil price saw the highest and indeed permanent increase in 2005. In respond to the trend in the oil and gas industry, other companies are now producing efficient vehicles, engines and aircraft and also going for an alternative source of fuels as a measure to capture the demands for transportation. There are new technologies available today which provide different opportunities for unconventional oil and gas in most parts of the world, however, the production of this unconventional energy is uncertain. So far I just wrote against the big fish in the market, but non-agile, non-adaptive or whatever are the most powerful among all most of the time, except a few industries these status-quo fishes can haul innovations or guide the whole world in a completely different way influencing interest of entrepreneurs. When such big firms, lets say Exxon Mobil and RDS, they are the biggest of all companies in the world in terms of sale, fortunately, there is no disruption for them except for oil price fluctuations that also wouldn’t have affected them much if they’d hedged at a safer rate. These organizations are completely dependent on one source of production and survival, and currently pumping crazily every second to suck as much as they can. While making their future and business model running, they might be preaching a different story, and wouldn’t like to see negative curbing for oil prices. Russia (loses about $2bn in revenues for every dollar fall in the oil price) is losing too along with United states with price slumps, but how far these companies have distracted others of not inventing alternate, source of energy. When big companies like RDS and Exxon focuses one source of energy it’ll for sure negate the interest of others, and of course, a lot of capital needed for research and development act as a super barrier stopping innovation. The reasons, Wharton professors and others note, are many. Fossil fuels have been in use for decades, a reality that makes a switch to another energy source very difficult, they point out. Oil as an energy source is not only practical, it has an entire infrastructure built around its use, they note. Politics has played a varied role too, sometimes helping energy innovation, but often hindering it, they add. But by far the biggest hurdle to alternative energy innovation is that oil wins as a simple matter of cost. “Innovation consists of matching a solution to a need”.

My question is how legal is to only think of profit and comfort, and not contributing in any innovation toward environmental risks. Unfortunately, there is no such regulation in United states and Europe to put the blame on such big fishes, since an environmental issue is a border-less phenomenon, and such regulations will promote technological innovations.

To be continued…

Disiuption of the status quo to acquire a temporary advantage is accomplished through exploiting the new 7-S framework (which replaces
McKinsey’s older 7-Ss):
1. Superior stakeholder satisfaction
2. Strategic soothsaying
3. Capabilities for speed
4. Capabilities for surprise
5. Shifting the rules
6. Signaling strategic intent
7. Simultaneous and sequential strategic thrusts

How To Build A Strategy? An Overview Of Strategy Tools

I thought of writing something to refresh memories on strategic tools, options, foresight, intent etc….Not sure whether I’d be writing them exactly how I perceived during lectures back in 2012. The reason behind saying this is because I personally feel that my understanding is differing now as I’m becoming more mature. Not sure how others think but as I am growing older I tend to focus more on the resultant force that would influence more than other forces. It might be a priori within since I’m an engineer to consider that major contributing resultant force (say top 40%), but of course it comes with risks. The only thing I can do at work is to be logical, and there is no room for philosophy or arguing about risk management or about Beck or anyone because organization are all rational to a major extent. They’d rather fail being rational than trying to spend a lot for a trade-off. Beck said so much, for example – “Science’s rationality claims to be able to investigate objectively the hazardousness of a risk permanently refutes itself” – Ulrich Beck (1986), but who cares? Leave it, let’s quickly move to strategy and exhale the frustration….

What is Strategy?

Let’s start with Strategy definition, it could be dicey to comment anything now so let’s figure out what is not a strategy first because that is very important to know what shouldn’t be considered as a strategy statement- Maximizing profit, reducing operating cost, improving quality are not a strategy. Becoming no #1 airline in the world, no #1 X in the world, maximize sale is not a strategy. Regulating money, giving the best class loan or maximizing number of accounts for a bank is not a strategy but they are goals and goals cannot be a strategy. Any strategy that is not imperfectly imitable is not a strategy.

Strategy is about doing things so differently at every step of production/services that competitors cannot imitate, and that gives you a value proposition in overall process resulting in maximizing profit or X ~ AB

Other wrote something similar to mine: P

A long-term direction which seeks to meet the expectations of, and create value for, stakeholders

  •  Johnson, Whittington and Scholes

However beautiful the strategy, you should occasionally look at the results.

  • Winston Churchill

If you’re serious about strategy work you must always do your own analysis

  • Richard Rumelt

Building Strategy: Tools

We’ve so far covered strategy definitions, then comes external audit, internal audit, corporate and competitive strategies, and developing and evaluating options.

External audit is done mostly through tools like SWOT, PEST, Porter’s diamond, Cause and Effect diagram, scenario implication etc. These tools are to access outside environment and competitors. Let me talk about the tools I use at work. So far I’ve used SWOT, PESTLE, BCG Matrix, and sometimes in fact just once Porter’s 5 Forces. However, topics from operations management are more valid for my role than any other subject including TQM, Balance scorecard, FTE calculations, Break-even, production optimization, fixed and variable costs etc…

Internal audit is equally useful because understanding and analysing own footprint matters the most. It can be done through positioning analysis, SWOT, RBV logic, VIRO, core competencies, capability resources, investment and transfer-ability, useful questions from Javidans (given below), 5 whys etc..

We know how to __________ very well.

In one part, or all, of our business(es) ?

We are better at _______ than our competitors ?

Then comes diagnosis before making a strategy, as per Rumelt’s 3 steps strategy process: Diagnosis, Setting guiding principles and coherent set of action. Diagnosis can be done through tools like open framing and closed framing (WXYZ) statements:

W …       the objective or goal of the change process
…        the process by which change will be delivered
…        the resources or skillset involved
…        the time frame for the change to be completed

In addition, tools like porters generic strategy helps to diagnose and identify the footprint, market share and other business attributes to a certain extent. Bowman’s Strategy Clock can assists with positioning and target. Strategic groups and strategic space is the most common type of graph used for representing companies of similar industry with bigger, medium or smaller circle, or using matrix visualization putting significant x/y axis for market share and responses. Porter 5 forces of course is a powerful tool but it is for me a tool with no use upfront, but a good tool to use in classroom. Other tools include Blue ocean strategies, BCG matrix, Ashridge visuals etc..

Now comes building strategy(options), to start with there is a need for development directions and tools like Ansoff Matrix can help with it revealing Existing and new markets and products, and they’re resultants from internal/external audits, 5 forces, competitive, cooperativeness analyses etc. TOWS analysis can assist with creating options through prioritizing the SO, WO combinations. And at last, choosing SFA – suitable, feasible and acceptable option(s) can give a strategy.

How To Build A Strategy? An Overview Of Strategy Tools

Related Article:

The Side Effects of an MBA

Its been a while that I’ve written something on my blog. Like always I’ve been busy with some necessary hindrances, in fact, my days are driven mostly by such priorities that are never urgent and important. Yeah, I normally drive myself, I create my own work, I mostly try innovating work because I generally get bored of mundane tasks. So, the reason for writing this article is how one should exercise stuffs/skills continuing the regular job, however, it amplifies risk in practicing with activities that have short timelines, but it helps in attenuating the side effects of MBA.

Every problem is an opportunity and there are multiple ways to solve them. Uncertainty is more predominant in this era than before and reduces dichotomy as a solution. There is no right or wrong answer is a common phrase everywhere, so who wins at the end of the day? The answer is no one but if you see opportunity in it, you consider any job, except the mighty “Button pressing” job that we use as an example all the time, there are ample opportunities to work in your own way. I don’t mind altering the way I present solutions when given the similar problem day after day. I remember solving integration problem in my school days and in engineering that has many solutions and ways to solve. This is what creativity is in my terms, solving in different ways will help to integrate different models together and you learn doing it every-time. This is how you can leverage your daily task into an enjoyable challenge-able assignment.

Now coming to what MBA thought us, I wouldn’t say I was stupid before MBA but the only one thing I can feel MBA reminds me every-time is that you can be equal to the one in the market who are in the better position or with better pay. It’s all up-to to the leverage level, the extent you market yourself at the right time and at the right place. There is nothing that we missed during MBA, covering political affairs, scientific theories, models, trading, finance, economics, medicines, arguments on issues, sales, negotiations, time management, money management, wealth management etc…you just name it and somehow knowingly or unknowingly it would’ve been covered, and again as stated earlier it lies in the word “leverage”. Now coming to the side effects of MBA, there are many, the most common one is that it makes you arrogant at times when someone talk nonsense, and with poor managers. Other side effects are ending up losing a job due to overconfidence and high expectations. It enables you to challenge and take pressure  all the time, but sometimes you don’t really need to. One very peculiar change is observed in fellow MBA grads is the ever declining ratio of emotional quotient. People lose their sensitivity and become hardened; which may be appropriately called stress hardening in pure engineering terms. Personal and intangible issues take a backseat and life of almost everyone becomes mechanistic to its extreme point. Humans turn into machines churning out PowerPoints and word reports. In addition to this the most deadliest side effect I think is that it demands you to be updated with time, and highly demands practicing tools and subjects, else there will be only artifacts on your name and slowly only “obsolete you” will be left behind.


How To Deal With ISIS? An Extremist Approach Bringing Analogy From Newton’s First Law

In this ever changing world, proliferation is the core motivation for any organization. This is quite true with even humans, we educate ourselves every day through experience. Sometimes we need some form of guidance and incentives to have focus for anything interesting to build interest, and of course there are many ways to get there. Indeed there are many universities to enhance focus and get helped by tutor to get an example set of how should we focus. University is the best place to think, open horizons, build confidence and understand what works for you and what wouldn’t? Now how to keep ourselves motivated to keep building interest of the things we have incentives attached to it. People wouldn’t spend on education unless they’ve found education is or will work for them. Once you’ve got a way to succeed and you should’ve experienced a positive outcome of your efforts. This entire world works on this motivation including machine learning, artificial learning, humans, animals, nature and everything.

Synthesizing the above theory could attempt to explain terrorism has a negative effect and why education has a positive effect. The current problems with ISIS can be related with this when comes to analyze the thought process of the people joining it. You can put anything and try to correlate your motivation and the retrospective success in form of incentives to go beyond. I would argue that it’s the failure that motivates you to go for that extra effort to make that happen but it is the motivation in the past in small forms that you can achieve it or it’s a believe that you have built within yourself to achieve. So, for me it is highly correlated to the things that you have achieved in the past, and we shouldn’t credit failures for this. It is not failure that makes you believe to achieve something but it is the past incentives or in contemporary form.

The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.

The Koran specifies crucifixion as one of the only punishments permitted for enemies of Islam. The tax on Christians finds clear endorsement in the Surah Al-Tawba, the Koran’s ninth chapter, which instructs Muslims to fight Christians and
Jews “until they pay the jizya with willing submission, and feel themselves subdued.” The Prophet, whom all Muslims consider exemplary, imposed these rules and owned slaves.

Bringing the analogy using Newton’s first law, “good” will remain “good” unless “bad” interrupts it and changes its property. This “bad” will grow ‘bad” unless a strong will for “good” act upon it. I have very limited information of ISIS’s influence on people of Syria and Iraq. Considering this analogy of Newton’s first law that I have tried to derive, ISIS will continue to grow unless a “good” interrupts it. And what should be this “good”? What can and should happen to turn the things around. The answer now lies on nature and universe? Maybe a natural calamities can be helpful going against ISIS growth but that is quite uncertain. There is a need for analysis of the areas from where they operate and climatic conditions etc so that the outer world can isolate them from basic needs so that they understand what is “good” and what is “bad”. Food supplies, water supplies, medicines, cure for any epidemics if possible would help them defining the “good’. Nearly all the Islamic State’s decisions adhere to what it calls, on its billboards, license plates, and coins, “the Prophetic methodology.”Ideological tools may convince some potential converts that the group’s message is false, and military tools can limit its horrors. But for an organization as impervious to persuasion as the Islamic State, few measures short of these will matter, and the war may be a long one, even if it doesn’t last until the end of time (Graeme Wood, 2015).

What had Keynesian that we argue?

Greece situation is politically overwhelming for not only Europe but for the entire world. I remember reading a lot on Euro crisis, Drachma, QE, Greek issue, neo-classical economy, fiscal policy, Keynesian economy, Milton Friedman, Philips curve etc..during my MBA @ University Of Glasgow.

Greece has around $600M due next week to pay as a result of debt, but speculation is that they might default. However, their prime minister Alexis Tsipras denied any such speculation and assured that they have money to repay the debt this time. Many are saying that Greece is playing chicken game, they started to borrow first, they defaulted first, they are responsible, but they cannot be punished by offsetting them from Euro zone for Geo-political reason. They had enough defaults and help through austerities. It is also to be considered that Greece currently contributes <1% in world’s economy.

Greece is suffering highest unemployment at the moment, going to neo-classical economical theory that suggests reduce wages can help minimizing unemployment, I am sure Greece would’ve administrated this positively.

The classical solution to tackle unemployment, in whatever form they conceived it, is totally inadequate and unsatisfactory. They have relied entirely on a cut in the rate of interest and wage rates. These are self-defeating polices. Any cut in wage rates will result in widening the gap of unemployment instead of correcting it in modern times. This is because of the fact that any attempt to cut wage rates at the bottom of the depression period will cause a considerable portion of the aggregate or effective demand to reduce further causing a more severe unemployment situation. This can be illustrated with the help of a simple example:

Let’s assume that a small fruit seller sells 20kg of fruit at a market price of $10 on a daily basis. Thus his daily turnover is $200 (20 ´ 10) of which the only cost of production is in the form of wage rate. If he employs 10 laborers at a daily rate of $15, then the total wage payment is $150 (10 ´ 15). The fruit seller therefore earns a daily profit of $50 (200 – 150). If for some reason the demand for fruit that he sells reduces, then he will have to reduce the price say from $10 to $8. In this new situation his total daily turnover goes down to $160 and at the old cost of production, his profit margin declines to $10 (160-150). The fruit seller is not satisfied with this. Therefore he may reduce the number of his workers from 10 to 8 and bring down the cost of production from $150 to $120 (8 ´ 15). The two workers are then rendered unemployed. If the unemployed laborers insist on their re-employment, the producer will lay down the condition that wage rate of all the workers will be reduced from $15 to $11. If the workers accept this then the total wage bill will be $110 (10 ´ 11) which restores the seller’s profit of $50 (160 – 110) as before. It appears that even with reduced demand and fall in the price of fruit, unemployment of workers has been avoided with the help of a cut in the wage rate. But this in only a momentary and superficial solution. The workers’ total income has now reduced from $150 to $110 as a result of which they can spend less and reduce demand for every other commodity that they consume. Therefore initially the problem of depressed demand and unemployment which was faced by a single seller will eventually become a general and wider problem faced by all other dealers. Instead of curbing it, the wage cut solution will therefore increase the problem of unemployment. Though this example is oversimplified and hypothetical yet it helps to bring out gist of the Keynes’ Criticism of Classical theory.

Keynesian theory opposes this reduce wages, and suggests that it has adverse effect on economy reducing MPS (marginal propensity to save) and MPC (marginal propensity to consume). It will in-turn decreases multiplier factor that Keynes described in his book The General Theory of Employment, Interest and Money that was published in 1936. Keynes emphasized on Fiscal policy and tax reduction during recession. He also emphasized on investments in industries to produce more to meet demands, or to spend more to innovate and create demand, supporting as long as there is an active demand unemployment can be controlled.

Milton Friedman Argued Keynesian theory that why would industries would enhance investments if there is no profit. Why to enhance Fiscal policy, and government expenditure in recession?

The Good Society by Galbraith covers a concise description of the process of stabilization of the flow of aggregate demand which is the vital factor in the Keynesian economy.

Aggregate demand has three decisive components: consumer expenditure, expenditure for private investment and expenditure from the fiscal operations of the state – from government spending that exceeds or falls short of tax receipts. If the flow of purchasing power – of aggregate demand – is insufficient to sustain a high level of economic activity and growth, it is commonly believed that certain readily available and greatly benign measures will restore consumer and business confidence. There are three substantive lines of corrective action that will increase the flow of aggregate demand as required. First, taxes can be lowered, thus releasing to the consuming public more revenue to be expended on private consumption. Second, interest rates can be reduced by central bank action, thus encouraging business and consumer borrowing and investment or expenditure, which add to the flow of aggregate demand.

Third, the government can contribute directly to the flow of demand by new expenditure in excess of tax receipts – by a deliberately accepted or deliberately increased deficit. By one or a combination of these steps aggregate demand can, or so it held or hoped, be kept at a level that will cause business and the government to reach out for all available workers.There is, unfortunately, a wide difference in the effectiveness of these several public actions. There is also the problem of inflation. Action on interest rates, commonly referred to as monetary policy, has the highest establishment approval as an effective measure against stagnation and unemployment; it must, accordingly by the first for consideration. The serious flaw in monetary policy is that it may have little or no effect on the flow of aggregate demand. When times are poor and unemployment is high, lower interest rates do not reliably inspire consumer expenditure; depressive attitudes, including those which are the product of unemployment or uncertain employment, are in control. Tax reduction is also celebrated as a way to sustain aggregate demand during recession. Here again the hope is at odds with the reality; there is no certainty that the funds released by tax reduction will be invested or spent for the most good. As a way to stimulate demand in times of negative growth or stagnation, there remains only direct and active intervention by the state to create employment. In an ideal world this last would not be necessary. In the real world of recurrent and prolonged stagnation there can be no effective alternative. To intervene, the government must borrow and accept the reality of a larger deficit in the public accounts. Improvements to the public infrastructure – roads, schools, airports, housing – that are effected by the work of those newly employed also add to public wealth and income. Public borrowing can, over time, be a fiscally conservative act. When the economy recovers and public revenues rise, there must then be the discipline that brings simulative expenditure to an end. In brief, Keynesian doctrine suggests that the government should, in times of serious unemployment, run deficits to support the flow of aggregate demand7 and a wise government could stabilize the economy close to full employment and avoid fluctuations.


Rest later….Structuring needed

Cisco VIC Boot from SAN troubleshooting

the rants of a data center crash test dummy

Boot from SAN is not necessarily one of the easiest things in the world; however, Cisco UCS does take away a lot of the complexity with its Service Profiles and associated Boot Policies. I’m not going to get into an exhaustive post around booting from SAN on Cisco UCS as I think most people have readily documented and how it works. However one important caveat to keep in mind is that the Cisco M81K-R does not have an “HBA BIOS” that is typically available in the Emulex or Qlogic HBA/CNA’s that we’re all familiar with. If you’re unfamiliar with the HBA BIOS utilities, this is typically as Cntrl+E or Cntrl+Q sequence that you can type in as a host is booting up so you can have the HBA log into the fabric and scan for its available luns.

Not to turn into a Debbie Downer, but there is a very…

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