In baseball, some batters hit better when a pitch is low and outside while others find success with high and inside. Regardless of the preference, there is a preference. The most important part is that the batter knows which pitch they need to work on and which pitch gives them the best chance of knocking it out of the park. The same is true for your business.
What are your strengths? What do you need to work on? What is the next pitch (opportunity) for your business? Will you be ready to knock it out of the park or will you foul it off? Do you know the answers to these questions or are you swinging blindly at whatever the pitcher throws? Competitive strategy is too important to leave to gut feeling, guess work, or good luck.
No one (including me) can answer those questions for you. Just as each batter prefers their own pitch, each business has their own strategy. However, like in baseball there are coaches that can teach you the tools to identify your strengths and weakness and develop strategies to give you the best chance of hitting a homerun.
SWOT, Porter’s Five Forces, etc.
- What pitch gives you the best chances of hitting a homerun (What are your strengths)?
- What pitch do you normally foul off (What are your weaknesses)?
- How are the field conditions (What does the competitive environment look like)?
If you have never done a SWOT or Porter’s Five Forces analysis for your business, you probably don't know the answers to these questions. SWOT analysis is a tool to evaluate the strengths, weaknesses, opportunities, and threats of an organization. Most decision makers believe they inherently understand their SWOTs but, in my experience, until you actually put them to paper there is a tendency to mentally overestimate the strengths and opportunities while underestimating weaknesses and threats. Similar to SWOT but with a different focus, Porter’s Five Forces is a framework for evaluating the competitive environment in an industry and is an invaluable tool for predicting current and future competitive threats.
Game Theory and Competitive Strategy
- What pitch will my competitor throw next (What strategy will my competitor use)?
- Should I swing or let it go by (How should I respond)?
- If he throws some chin music, should I charge the plate (How aggressive should my pricing strategy be)?
These aren't rhetorical or unsolvable questions. Game theory and competitive strategy can give you a better understanding on how competitive decisions are made and how to use that knowledge to predict the actions of your competitors. Remember the “Nash Equilibrium” from the movie “A Beautiful Mind”? That is just one of the concepts from game theory you can use to make informed competitive decisions.
So where do I learn this stuff?
The key to any good baseball team is strong coaching. Everyone has weaknesses and a good coach can help you to overcome them. The courses highlighted below are taught by respected faculty from prestigious universities and available, completely free, on the Coursera MOOC platform at Coursera.org.
- “Foundations of Business Strategy” by Dr. Michael J. Lenox of the University of Virginia’s Darden School of Business
- I highly recommend this course as a starting point for strategic analysis. Lenox teaches how to use every tool in “The Strategists Toolbox” (including SWOT and Porter’s) to analyze the competitive position of an organization and how to utilize that knowledge to improve positioning and maximize value. The next offering date has not been posted yet but you can add it to a watch list and be notified when the next session is announced.
- Competitive Strategy and Advanced Competitive Strategy by Tobias Kretschmer, Professor at the Institute for Strategy, Technology and Organization at Ludwig-Maximilians-Universitat Munchen
- For competitive strategy and game theory, I recommend these two courses (obviously take Competitive Strategy before Advanced Competitive Strategy). They cover the basic concepts of game theory and how to use it as a tool to attain competitive advantages. Ever wonder why Reese’s Pieces are featured in the movie ET? You probably haven't but the answer involves M&M’s and game theory. Professor Kretschmer uses this and other real life examples to make game theory understandable and somewhat entertaining. Both courses are always available.
Like any baseball player worth his salt, your business needs to know its strengths and weaknesses, opportunities and threats. You need to know the rules of the game and what your opponent is most likely to do in each situation. Get a good coach to teach you the tools to make the smart decisions. Use the concepts they instill to improve your organization’s strategy and get ready to hit one out of the park.
Competitive strategy is too important to leave to gut feeling, guess work, or good luck.
Note of attribution:
I’m going to attribute this blog to Ernie Banks.
The general topic of this missive (“Do you know your company/industry?”) has been on my list of possible ideas for a while. I even had a rough draft penned and waiting to be published. I was just never happy with it. I didn't have a theme to tie it all together. The ideas were just a bunch of related but relatively random thoughts—more like a list of tweets than an essay. It wasn't until I heard about the passing of legendary Cubs player and ambassador Ernie Banks that it struck me to use baseball as a metaphor. As such, I thought it would only be appropriate to use his picture as the title image and attribute this article to Mr. Cub.