This spring, a team of 17 Wharton faculty members and distinguished colleagues around the world published a book for managers on competitive strategy in dynamic environments. Wharton on Dynamic Competitive Strategy (Wiley & Sons, 1997) presents key insights from diverse fields on the challenges of the fast-paced competitive interactions of today’s markets. The volume, organized and edited by Marketing Professors George Day and David Reibstein, draws together research and insights on game theory, competitive simulations, scenario planning, signaling, conjoint analysis, information technology, and other areas. It focuses these perspectives on the current challenges facing managers in building and sustaining competitive advantage in rapidly shifting environments. We interviewed Professors Day and Reibstein shortly after the book’s release in April.
Why did you write this book?
Reibstein: Strategy is so complex today, you can’t rely on just one viewpoint. It is so dynamic — with shifts by competitors and in the competitive environment — that the new watchwords are anticipation and preparation. Every move of a competitor is met with a rapid countermove. Thus any advantage is merely temporary. These are the challenges facing the executives and companies we have worked with. We wanted to create a book that would provide deep perspectives on addressing these challenges.
Why Wharton? How does the book draw on Wharton’s strengths?
Day: Many people don’t know this but Wharton has one of the largest and most diverse groups of faculty studying strategy anywhere in the world. This project grew out of a series of roundtable discussions we organized with Wharton faculty. We found we were all examining our own piece of the challenges facing managers. So, we decided to develop a book that would draw together these perspectives and put them in the hands of managers. Wharton is one of the few places in the world where you could find this kind of depth and breadth. We were also fortunate to have funding support from the Huntsman Center for Global Competition and Innovation. Jon Huntsman, W’59, who faces intense competition in the global chemical market, strongly encouraged us in this project.
What is the book’s point of view?
Reibstein: The distinctive point of view is that competitive strategy today must be dynamic and cross-functional. What does dynamic strategy mean? It means that today’s competitive environments are changing rapidly as a result of deregulation, globalization, technology shifts and many other forces. That’s a truism, of course, but think about the implications for formulating strategy. If you think of competitive strategy as a chess match, you have to think ahead multiple moves instead of playing the game linearly. Now, imagine that at the same time you are playing this chess match, other players are entering and leaving the game, maybe from different sides of the board. Maybe they have some superior new technology like IBM’s Deep Blue that totally undermines your current advantages. Then imagine that the actual size and shape of the board is being reconfigured as you are making your move. Maybe a regulator suddenly declares all the white spaces off limits and you have to move your pieces off those areas. You can see how complex and malleable this situation becomes. This is an environment in which traditional strategic theories and approaches are no longer completely adequate. And the complexity of this environment requires diverse perspectives on strategy — an interdisciplinary view — which is the approach we take in the book.
How do you address this dynamic environment?
Day: The book is organized around the key issues managers need to consider in formulating strategy. Questions like: What are your advantages? Who are your competitors? How will they react? First, we look at ways to understand the competitive environment, including examining advantages and defining the competitive arena. We also look at the impact of regulations, technology and other forces. We next examine a variety of approaches for anticipating the actions and reactions of competitors. Then, given the environment and competitive moves, we examine ways to formulate your own competitive strategy — including planning reactions, preemption, using signaling and commitment, and considering antitrust implications of strategic moves. Finally, we look at ways to choose among alternative competitive strategies. These include conjoint analysis, scenario planning and competitive simulations. These approaches help you examine how these strategies will play out over time, given the likely reactions of customers and competitors.
What kind of mistakes do managers make by ignoring the dynamic aspect of strategy?
Reibstein: Failure to see the dynamic implications of strategic moves can lead to price wars, missed opportunities, customer defections and many strategic mistakes. One of the common errors, as we note in the introduction, is failure to see how the moves of competitors can undermine your brilliant strategic moves. For example, when a British bank began offering Saturday hours, it initially experienced an increase in business. But then competitors imitated the move, and the bank found it merely had stretched five days of banking across six days. This is easy to see in retrospect, but it is surprising how often we fail to systematically think through the impact of moves by rivals. This book gives you ways to do this.
How is this book different from others on the same topic?
Day: In contrast to some of the current popular literature in strategy, this book does not offer a simple recipe for strategic success. Instead, it provides deeper insights from decades of research in strategy and work with leading companies. In today’s world, you may not need a guru as much as a cabinet — a team of advisors with different perspectives. That’s what this book offers. It brings together a diverse and highly talented group of leaders in strategy research and sits them at the same table. The book is designed for thinking managers who want to get their hands around the competitive situation and want the best tools and perspectives available to make their strategy more effective in the current environment. We took great pains to make it accessible for managers, but it does not offer simplistic answers to the complex challenges facing us today.