While Govindarajan found strategy in innovation, Richard D’Aveni, the Bakala Professor of Strategy, found it in competition. D’Aveni is considered one of the top five thinkers in competitive strategy in the world. And it all started with a hurricane. Hurricane Bob, to be precise, the Category 2 storm that destroyed parts of coastal New England in August 1991. D’Aveni was on vacation with his family at the time, on Cape Cod, and then, suddenly, the vacation was pretty much over. The power went out, trees were uprooted and blown across the nearby golf course, and the D’Avenis were stranded in their rental house for four days. When the storm had passed and the electricity returned, D’Aveni turned on the TV and saw, to his surprise, that the Soviet Union had collapsed. “Here was a four-day window and I couldn’t predict the most significant economic and political event in my lifetime,” he said. “I was working on five-year strategic plans for corporations. It was at this moment, I realized that what we were doing, as a field, was quasi-fraud.”
So D’Aveni set out to write a book about what happens in highly disruptive environments with constant changes, where competitive advantages disappear overnight and new ones take their place. To begin he set up four card tables in his basement, each one representing a different competitive advantage—product positioning, resourced-based (know-how and timing), barriers to entry, and size. Then, like a grand chess master, he made an opening move, and followed with counter moves. He realized that each new competitive advantage would destroy the prior ones, if firms were playing to win. At the end of the process he discovered something he called “escalation ladders.” Rather than trying to decrease rivalries (as suggested by Michael Porter’s Five Forces Theory), the successful strategy was to continually trump the previous move—through things like redefining quality, circumventing barriers to entry, revolutionary new resources, and building war-chests to destroy the strongholds and advantages of rivals. D’Aveni describes these strategies, and how companies can use them, in his now classic, global best-seller “Hypercompetition: Managing the Dynamics of Strategic Maneuvering” (1994).
In recent years, D’Aveni has widened his focus on hypercompetition from domestic firms trying to disrupt the status quo to multinational businesses competing for turf and, ultimately, nations competing for world economic dominance. In 2001, he published “Strategic Supremacy: How Industry Leaders Create Growth, Wealth, and Power Through Spheres of Influence,” which explained how established firms could restructure their global portfolios around core markets, and then create buffer zones and forward positions that would disrupt rival spheres of influence, and affect the balance of power among global competitors. Continuing to expand his application of hypercompetitive strategy, D’Aveni published “Strategic Capitalism: The New Economic Strategy For Winning the Capitalist Cold War” in 2012. This book argued that China’s economic strategy was based on hypercompetitive principles leading to the disruption of the national advantages of the U.S. economy, and it set out economic and geopolitical strategies designed to turn the tables in favor of U.S. economic preeminence.
Using the principles from his three books, D’Aveni teaches two electives in the MBA program: Advanced Competitive Strategy and Global Strategy. He brings 10 to 12 Fortune 500 CEOs to Tuck every year as guest lecturers talking about the core concepts of hypercompetitive strategy: market disruption and the use of temporary competitive advantages.
D’Aveni has recently turned to applying his hypercompetitive notions to what he considers to be the next big move available to manufacturers: 3D printing, which he calls “the perfect hypercompetitive device.” Why? Because it could destroy China’s competitive advantage by doing away with the need for assembly plants based on low-cost labor. Instead of products being made in China and shipped around the world, they could be 3D-printed in the countries where they’ll be used. “It will change the balance of trade,” D’Aveni said. “The faster 3D printing comes into place, the better off we’ll be.”
Learn from Professor Richard D’Aveni in these upcoming Executive Education Programs on Strategy
Read the entire series!
Part 1 - Tuck Strategists: The history of “strategy”
Part 2 - Vijay Govindarajan
Part 3 - Richard D'Aveni
Part 4 - Constance Helfat
Part 5 - Sydney Finkelstein
Part 6 - Giovanni Gavetti
Part 7 - Ron Adner
Part 8 - Andrew King
Article originally published on Tuck.edu, December 12, 2014.