The Timing and Know-How Arena

Although there is no direct correlation between the timing and know-how arena and Porter's analyses, it does capture some of the support activities of the value chain as well as capture centrally the concepts of first-mover advantages. In fact the first strategic interaction in the arena is "capturing first-mover advantages" such as response lags, economies of scale, brand loyalty (product differentiation), advertising and channel crowding (access to distribution channels), user-base effects (the network externality), learning effects, and preemption of scarce assets (linking to RBV of the firm). Note that many of these first-mover advantages appear in Porter's five forces as static barriers to entry, but here they are being dynamically built. The longer the response lag before the second mover responds, the greater the capability of the first mover to expand the firstmover advantages. For example, when Apple introduced the Macintosh in 1984, it was several years before serious competition arrived (some would argue that it wasn't until Windows 3.0 that there was a truly viable competitor, which would be a response lag of six years, by which time Apple was on Mac OS 6). The second strategic interaction is "imitation and improvement," whereby second and late movers can overcome first-mover advantages, as is often observed in the real world (Windows did eventually prevail over the Macintosh, despite the very long response lag). Other strategic interactions in this arena include creating impediments to imitation (patents, deterrent pricing, secret information, size economies, contracts, bundling, restrictive licensing, threats of retaliation51), overcoming the impediments (where D'Aveni shows how each impediment in the previous strategic interaction can be countered), transformation and leapfrogging, and downstream vertical integration.

In high-technology industries, the timing and know-how arena is often where the action is. Although imitation is frequently discussed in scholarly articles as well as the popular press, D'Aveni's addition of the word "improvement" changes the playing field. Whereas many authors only discuss pure imitation (knockoffs), D'Aveni notes that it is often improvements made by imitators that change the nature of the game. TiVo didn't merely imitate ReplayTV, they added valuable features such as the Season Pass. Apple didn't just imitate existing smartphones, they added features such as the App Store to the iPhone (the Android-based phones, on the other hand, primarily just imitated). These examples are particularly appropriate as both of these industries have moved onto the "creating impediments" and "overcoming impediments" strategic interactions as evidenced by the sea of patent litigation in the smartphone industry and the TiVo/Dish Network patent lawsuits (which have recently been joined by Motorola and Microsoft).

The Strongholds Arena

The strongholds arena maps onto Porter's entry barriers in the five forces, but again is dynamic rather than static, as indicated in the first strategic interaction, "building entry barriers," many of which are built in the other arenas. Then comes launching forays into a competitor's stronghold, the incumbent's short-run counterresponses (often no response at all), the incumbent's delayed reaction (often too late), overcoming the barriers, slow learners and the incumbent's reaction to entrants who don't get the message, and unstable standoffs.

The strongholds arena is the best example of the dynamic versus static approaches. In Porter's five forces, entry barriers are present or not, and if present, reduce the threat of new entrants coming into the industry to increase competition. D'Aveni's strategic interactions, on the other hand, posit strategies for jumping over or slipping under or going around entry barriers, so that even in the presence of strong entry barriers, incumbent firms should not feel safe. An interesting comparison can be drawn between the two approaches by looking at a Harvard Business School case, "Microsoft's Networking Strategy,"52 set in 1991 when Novell was the industry leader. A classic Porter analysis shows Novell to have a powerful competitive advantage, and even the instructor's note that accompanied the case suggested that students would come to the conclusion that Microsoft probably couldn't win a fight with Novell and should walk away. But, of course, Microsoft did win this fight in a hypercompetitive fashion, by shifting the rules and moving the battle to their own stronghold (desktop operating systems) and out of Novell's (network operating systems).

The Deep Pockets Arena

The deep pockets arena best maps onto the SCPIO concept of market power, and deals with strategies for both successful incumbents (who have the deep pockets and the market power that comes from being large and successful) as well as for smaller firms seeking to overcome their larger rivals' advantage. The strategic interactions in this arena include "drive 'em out," using the courts or Congress to derail the deep-pocketed firm, large firm thwarting the antitrust suit, small firms neutralizing the advantage of the deep pocket, and the rise of a countervailing power.

Although the deep pockets arena is the least remarkable of the four, it does offer some hope for the small firm when facing a Microsoft or a Google. In addition, the increasing power of the European Union when it comes to antitrust-type activities gives the small firms even more hope. Had D'Aveni written his book more recently, the strategic interaction would probably have been called "using the courts, Congress, and/or the European Commission."

Before we move to the next section, "A Look Ahead," to where we think the theories and practical aspects of hypercompetition are going, allow us to encourage both managers and educators to look into four arenas analysis and how they might use it in their businesses and in education. The dynamic nature of the four arenas greatly enhances the insights that can be gleaned from the analysis as opposed to the static analyses of the past.

Earlier adopters may even find it gives them a competitive advantage, albeit likely a temporary one.

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