“Competition is not only the basis of protection to the consumer, but is the incentive to progress.” – Herbert Hoover
Adam Smith (1723-1790), the father of modern economics, believed that competition in capitalism would benefit society by lowering prices, improving goods and services, and keeping everyone honest.
As a theory, it works nicely. In general practice, however, business competition isn’t necessarily focused on what’s best for society and consumers.
In recent times, bailout money, pollution, cooking the books and untrue advertising shows that some companies favor profit over societal values.
We’ve all heard stories of competition in business going way beyond what Adam Smith ever envisioned as fair and equitable, becoming self-destructive cannibalization of the organization. Think Enron and the auto industry bailouts.
Our current paradigm of capitalist competition is steeped in a world-view of scarcity of resources where the objective is not necessarily to better society at large, but to eliminate your rival. In this model, limited rewards trump ethical behavior and the rules of engagement are skewed toward selfish self-interest rather than a focus on everyone involved, including customers and society.
Let’s consider some approaches to doing business.
Think of two small children playing in a sandbox who argue and tug over who gets to use the bucket now. The lowest level of competition in business is that of duality, or win-lose thinking.
In this model, costs for advertising, secrecy and marginal cost accounting tend to be higher and margins small.
The bloody duel ends with businesses starving each other until one competitor finally crumbles into bankruptcy or yells “uncle” and concedes to takeover or acquisition.
A bit higher up the ladder is cooperation, which appears on the competitive landscape as an opportunity to compete while sharing available resources.
Everyone agrees to play fair and take home their agreed-upon piece of the pie. The assumption is that there is enough to go around, so there’s no need to extend undo effort to secure every customer.
This is like two squash buddies going at it full force during the game, with one taking a slight edge and both enjoying a post-game meal and genuine friendship.
At the pinnacle of the competitive ladder is the creative plane.
This is where companies are totally focused on effectively serving their clients and thereby open uncontested market space through innovation.
In this plane, competition is largely irrelevant. Creative companies see the available rewards as plentiful and infinite. When asked, “Who is your competition?,” they typically respond confidently and not at all naively by saying, “We have none,” or “We are our only competition.”
Do you think Southwest Airlines is more concerned with what USAirways is doing or how they can best improve their day-to-day service and really wow their customers?
True competition is cordial, focused on cooperation and the well-being of society at large.
In his book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant,” author W. Chan Kim cites Cirque de Soleil as an example of a creative company.
In the circus industry, profit margins and attendance have been dwindling since the advent of video games, but Cirque de Soleil, a new kind of circus focused on a market other than families, has been expanding steadily due to its unique and creative offering and competition-less market space.
In general, you would do well to ignore your competition and make use of your precious time and resources to improve your goods or services.
Your aim should be for your clients to be so loyal that they forget there is anyone else but you in the marketplace. Repeat business is one of the most important indicators of long-term success.
By bringing back the best spirit in business and rising to the highest plane, you’ll be the best company you can be. And then you can make yourself even better, for everyone’s benefit.
John Miles holds the title “chief of what’s next” at Integritive, an Asheville firm specializing in Web design and development, strategic planning, social media and e-marketing. For more information, visit www.integritive.com and www.twitter.com/integritiveJM.