A LOOK BACK

In this section, we will look back at the state of the field of strategic management from practical, theoretical, and educational perspectives and discuss the disruptions to these perspectives wrought by the introduction of the idea of hypercompetition as professed by D'Aveni and others. We will start with a discussion of sustained competitive advantage (SCA) and its centrality to strategic management paradigms, then move on to the disruption to the field of strategic management caused by the introduction of hypercompetition to the mix, and end with a brief discussion of the age of temporary advantage.

Sustained Competitive Advantage

For most of the latter half of the 20th century, the fields of business policy and its successor strategic management were dominated by the thinking of the Harvard Business School and particularly the concept of competitive advantage4 popularized by Harvard professor Michael Porter5 in the late 1970s and early 1980s. Competitive advantage was extended and expanded by Porter and others into the notion of SCA.6 The central tenet is that some competitive advantages are significantly difficult for other firms to imitate and hence potentially can be sustained for long periods of time, which in turn leads to long-term profitability (at the expense of the competition) for the firm with the SCA. The centrality of SCA to both the teaching and research of strategic management is difficult to overstate. The Harvard paradigm, based on structure-conduct-performance industrial organization (SCPIO) economics, which incorporates SCA through Porter's influence, was the primary research paradigm for decades and is still prominently featured in almost all textbooks used to teach MBA students around the world in the 21st century, including the textbooks for other fields such as marketing and management information systems.

The centrality of SCA grew even stronger when many strategic management scholars embraced the resource-based view (RBV) of the firm7 in a reaction against SCPIO. Specifically, SCPIO focused most of the attention of managers on the environment external to the firm, arguing that external factors constrained managers' choices and essentially determined what strategies would be possible and which would be successful. The model was to examine the external environment using analytical techniques such as Porter's five forces to identify "attractive" industries with the potential for sustainable competitive advantages and to choose to compete there; in short, let the external environment determine your strategy.

RBV offered a clear alternative to this idea by introducing the concept that it is a firm's stock of resources, particularly specialized resources that are valuable, rare, imperfectly imitable, and nonsubstitutable,8 that determines what strategies could be possible and which could be successful. In other words, SCPIO was focused almost exclusively externally, whereas RBV was focused almost exclusively internally. What united the two schools of thought was the concept of SCA. In SCPIO it was an outcome based on external forces such as industry structure, whereas in RBV it became the very reason for a firm's existence.9 RBV quickly gained traction and adherents, and became integrated into strategic management textbooks, supplementing Porter's more simplistic attempt at internal analysis, the value chain,10 with the richer analysis of resources, capabilities, and core competencies.

The Disruption of Hypercompetition

Given the presence of SCA at the core of the two primary theories of strategic management, it should come as no surprise that the reaction to D'Aveni's 1994 book11 was not nearly as positive in the academic community as it was among working managers. One of D'Aveni's fundamental arguments about the effects of hypercompetition was that it makes sustaining competitive advantages increasingly difficult, if not impossible. Therefore, firms and managers needed to be more adaptable and learn to both disrupt other firms' advantages and also to concatenate shorter-term competitive advantages of their own together if they wanted to maintain higher levels of profits and economic performance over time. Proponents of SCA disagreed, such as Porter who said "in many industries, however, what some call hypercompetition is a self-inflicted wound, not the inevitable outcome of a changing paradigm of competition"1 2 and went on to argue that it is likely limited to only some firms in high-technology industries.

Shortly after publication of his book, D'Aveni served as a guest editor at Organization Science, a well-respected management scholarly journal, for two special issues that focused on "new organizational forms and strategies for managing in hypercompetitive environments."13 The lead article in the first issue was a large-scale empirical study by Thomas,14 who found evidence of a "hypercompetitive shift" in 200 manufacturing industries during the period from 1958 to 1991 (this was expanded in a later more comprehensive study to cover 1950 to 200215). Other empirical articles in the first special issue found evidence consistent with hypercompetition in the software industry,16 showed processes by which 10 divisions of a large multinational high-tech company dealt with hypercompetition,17 examined diversification of semiconductor startups,18 looked at hypercompetitive new product introductions in the Japanese beer industry,19 studied hypercompetitive escalation and de-escalation in the U.S. airline industry,20 and modeled concatenating advantages ("eating your own lunch before someone else does").21 The second special issue focused on theoretical extensions to existing theories to try to accommodate hypercompetition, including flexibility and adaptation,22 organizational capability as knowledge integration,23 strategic flexibility,24 vertical integration and rapid response,25 regional learning network organizations,26 social networks, learning and flexibility,27 and ended with an interesting and far-ranging discussion of spontaneous organizational reconfiguration based on Xenophon's Anabasis.28 These special issues demonstrate that some management scholars did perform research to find empirical evidence of hypercompetition, or extend existing theories to accommodate it. Other scholars sought evidence to try to refute it.29 For an overview of the main theoretical and empirical arguments on both sides, as well as a study offering considerable empirical support to the concept of hypercompetition, see the 2005 Strategic Management Journal article by Wiggins and Ruefli,30 which not only covers most of the hypercompetition arguments, but also summarizes much of the related extensive literature on the persistence of economic performance.

Although strategic management scholars may have been somewhat resistant to the idea of hypercompetition, scholars in the wider field of general management and other related business fields realized that if the predictions of hypercompetition were true, then their research and prescriptions needed to adapt. This led to articles on the effects of hypercompetition on a wide range of subjects including relationship marketing,31 managerial cognition,32 financial services,33 enterprise integration,34 project management,35 change management,36 adaptive supply chains,37 and managerial mindsets.38

The Age of Temporary Advantage

In light of the empirical evidence, a growing number of scholars have begun to accept that temporary advantages are increasingly important for firms to understand, and have begun to include the concept in their research. Some scholars bought in early, such as Charles Fine of M.I.T., who included in the subtitle of his 1998 book the phrase "the age of temporary advantage."39 In 2010, D'Aveni was one of a trio of guest editors of a special issue of the influential Strategic Management Journal titled "The Age of Temporary Advantage?" (the question mark on the cover did not appear in the title of the paper introducing the special issue).40 Articles in the special issue addressed topics such as integrating temporary advantage into RBV,41 the roles of top management teams in an age of temporary ad-vantage,42 the interactions of complementary products in a hypercompetitive environment/3 institutional development in emerging countries/4 competitive action patterns in nascent markets,45 and under what conditions industry leaders should "self-displace" themselves.46

Still, the question mark alluded to above acknowledges a clear discomfort in the field. This discomfort may reflect a sense that perhaps temporary advantage is not pervasive, or it may reflect a resistance to a world made up of temporary advantage. The discomfort of those clinging to SCA was not helped by a series of articles in recent years, also in the Strategic Management Journal, discussing the logical and philosophical issues in the relationship between competitive advantage and superior performance; some scholars even argued that research in the area was tautological.47

Regardless of the discomfort level of some scholars, the growing acceptance of hypercompetition as a reflection of reality is continuing to spread throughout the academic community. Practicing managers working on the front lines accepted the idea years ago, some even before they were told what it was called. This leads us to our interlude, where we discuss the fact that many business school students are still not told about hyper-competition, nor about the accompanying analytical techniques that could be of great value when they graduate to become practicing managers.