chapter
7
Making far-reaching decisions
(when you can’t see a fricking
thing ahead of you)
The Red Queen
“[T]hey were running hand in hand, and the Queen went so fast that it
was all she could do to keep up with her: and still the Queen kept crying
‘Faster! Faster!’ but Alice felt she could not go faster, thought she had not
breath left to say so.
The most curious part of the thing was, that the trees and the other
things round them never changed their places at all: however fast they
went, they never seemed to pass anything.”
Have you read Lewis Carroll’s Through the Looking Glass? If so,
you might remember the passage above when Alice meets the
Red Queen. They are running and running, but appear to be
stationary. Competition among organizations can have the same
effect. It is a race (whether in the mist or not). In order to keep
up with competition, rms have to change continuously, in
terms of adopting new technologies, launching new products
and services, adapting to new business models, etc. Sometimes it
really can feel like a race, and be quite exhausting.
“Suddenly, just as Alice was getting quite exhausted, they stopped, and
she found herself sitting on the ground, breathless and giddy.
Alice looked round her in great surprise. ‘Why, I do believe we’ve been
under this tree the whole time! Everything’s just as it was!’
Business Exposed160
‘Of course it is,’ said the Queen, ‘What would you have it?’
‘Well, in our country,’ said Alice, still panting a little, ‘you’d generally get to
somewhere else – if you ran very fast for a long time, as we’ve been doing.’
‘A slow sort of country!’ said the Queen. ‘Now, here, you see, it takes all
the running you can do, to keep in the same place. If you want to get
somewhere else, you must run at least twice as fast as that!’”
Although quite exhausting – if you
don’t like running – it does make
organizations better. Professor Bill
Barnett, from Stanford, studied Red
Queen effects among companies at
length. He found that those exposed
to ongoing competition and change
improved considerably and became
much stronger rms.
This is due to a “Darwinian effect” and a “learning effect”. First
of all, in such a race, the weakest rms go bankrupt, leaving only
the strongest competitors. However, it also stimulates rms to
learn and adapt quickly. And if you’re learning and adapting, and
becoming a more agile competitor as a result of it, this prompts
your competitors to do the same (or die). It’s a bit like an arms race
. . . but one that consumers, and society as a whole, benet from.
Bill documented another, long-term effect though; sometimes
everybody is running in the wrong direction. Or at least,
someone took a bit of a wrong turn and everybody followed.
It is related to this thing I described at length in Chapter 2: the
success trap; rms have been running in a particular direction
only to nd out that the world has just changed and some other
corner of the market has become more attractive. This triggers
the entry of newcomers, while the original leaders struggle to
catch up, simply because they have advanced so far into the
other corner of the world.
This is nothing new; we’ve seen it in the disk-drive industry,
but also among freight companies using sailing ships when
steamboat technology was introduced, among retail banks
‘‘
companies exposed
to ongoing competition
and change improved
considerably and became
much stronger firms
’’
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