The Changing Faces of Competition

The traditional strategy playbook is no longer sufficient. Competition is growing more sophisticated and dynamic in all businesses. Business leaders accustomed to clear boundaries must adapt to new dimensions of?competition?to succeed in the coming?decade. Companies must adapt to new challenges, including adapting to unpredictable situations and surviving severe ones.?Leaders must look beyond today's situation and comprehend what will differentiate winners and losers in the future decade. The five new aspects of competition that will come to the forefront for many businesses

Competing on Rate of Learning

The business has historically valued learning. Traditional learning models focus on static, persistent knowledge; instead, organizations must establish dynamic learning capabilities, learning how to do new things and learning how to learn with new technologies. Today, artificial intelligence, sensors, and digital platforms have already increased the opportunity for learning more effectively but competing on the rate of learning will become a necessity. The dynamic, uncertain business climate will encourage organizations to prioritize discovery and adaptability over forecasting and planning. And the benefits will generate a “data flywheel” effect.

Netflix's algorithms use behavioral data from its video streaming platform to automatically make dynamic, personalized recommendations for each user, improving the product and keeping more users on the platform longer.

Competing in Ecosystems

Classical models of competition assume that discrete companies make similar products and compete within clearly delineated industries. ?Uncertainty and disruption require individual firms to be more adaptable. Companies now have opportunities to influence the development of the market in their favor, but they can do this only by coordinating with other stakeholders. As a result of these forces, new industrial architectures are emerging based on the coordination of ecosystems—complex, semifluid networks of companies that challenge several traditional business assumptions.

Platform businesses such as Uber and Lyft rely heavily on “gig economy” workers who are not direct employees but rather temporary freelancers. Ecosystems also blur industry boundaries: ?the distinction between collaborators and competitors. Amazon and third-party merchants have a symbiotic relationship, while the company competes with those merchants by selling private-label brands. A few digital giants have demonstrated that successfully orchestrating ecosystems can yield outsized returns. Alibaba, which leads China’s massive e-commerce market not by fulfilling most functions directly but by building platforms that connect manufacturers, logistics providers, marketers, and other relevant service providers with one another and with end users.

Many of the largest and most profitable companies in the world are ecosystem-based businesses.

Competing in the Physical & Digital World

Today’s most valuable and fastest-growing businesses are disproportionately young technology companies, which operate ecosystems that are predominantly digital. New opportunities are likely to come increasingly from digitizing the physical world, enabled by the rapid development and penetration of AI and the Internet of Things. This will increasingly bring tech companies into areas—such as B2B and businesses involving long-lived and specialized assets. Digital giants are moving into physical sectors: Amazon has opened new retail stores in addition to its acquisition of Whole Foods, while Google has entered automotive and transportation through its Waymo subsidiary. Meanwhile, incumbent companies are furiously pursuing digitization. John Deere has invested heavily in IoT technology by adding connected sensors to its tractors and other equipment.?

The next wave of “natural selection” in business is likely to test both digital natives and incumbents?—?and winners could emerge from either group.

Competing on Imagination

Companies can no longer expect to succeed by leaning predominantly on their existing business models. Competitive success has become less permanent over time. And markets are increasingly shapeable, increasing the potential reward for innovation. As a result, the ability to generate new ideas is more important than ever. However, creating new ideas is challenging for many companies. Inertia increases with age and scale, making it harder to create and harness new ideas. Business and managerial theory has emphasized a “mechanical” view dominated by easily measurable variables like efficiency and financial outcomes rather than focusing on how to create new ideas. To overcome these challenges, companies need to compete on imagination. Imagination lies upstream of innovation: to realize new possibilities, we first need inspiration followed by imagination.

Competing on Resilience

Looking ahead, uncertainty is high on many fronts. Technological change is disrupting businesses and bringing new social, political, and ecological questions to the forefront. Society is increasingly questioning the inclusivity of growth and the future of work. Furthermore, deep-seated structural forces indicate this period of elevated uncertainty is likely to persist: technological progress will not abate. Under such conditions, it will become more difficult to rely on forecasts and plans. Business leaders will need to consider the larger picture, including economic, social, political, and ecological dimensions, making sure their companies can endure in the face of unanticipated shocks. In other words, businesses will effectively need to compete on resilience.

These new forms of competition are highly intertwined. For example, companies that orchestrate ecosystems will have an advantage in competing on learning. Many companies will integrate physical and digital assets by leveraging partnerships in hybrid ecosystems. Machine learning and autonomous action will increase humans’ need for and ability to focus on imagination. And those shifts will collectively create further unpredictability for business, necessitating strategies for resilience.

These five emerging aspects of competition point to a new logic for “scale.” No longer will scale represent only the traditional value of achieving cost leadership and optimizing the provision of a stable offering. Instead, new kinds of scale will create value across multiple dimensions