Ever wondered what your business strategy and the study of parasites have in common? How about the predator-prey relationship and your communication strategy? Even briefly thinking about these relationships that play out in our backyard, and within us, gives us a deeper understanding of competition and how we can play to win in our chosen market places. Like the natural environment, competition shapes the market with all parties co-evolving in an evolutionary arms race. In evolutionary biology, the term given to this is the Red Queen Hypothesis.
The Red Queen Hypothesis takes its name from a passage in Alice in Wonderland where after running fast for a while Alice realises she and the Red Queen have not moved. The Red Queen then goes on to explain that it takes all your running to stay in the same place and that if you want to go anywhere you have to run twice as fast. In evolutionary terms, this means the organism needs to constantly evolve to survive; with success requiring something extra. This pressure to survive is continuous, coming from within its own species, predators, prey, parasites, and other organisms in its environment, plus its environment are also ever-changing. Every time an organism develops an adaptation that gives it an advantage another part of its environment adapts to take advantage of that change or negates it. In business terms, Michael Porter pointed out with his five forces model, it is not just our competitors that we need to account for when setting our business strategy. When creating business strategies, we need to understand what our competitors and others in the environment are likely to do as a result of our strategy.
While in some ways this sounds obvious; you have to keep on competing in the market place to win. The Red Queen Hypothesis is more insightful than this. Firstly, it tells us that you will never win. Sorry, it’s true. You may win in the short-term, but in the long-term you will never win. Even if all your competitors go bankrupt, something will keep you in check. In physics nature deplores a vacuum; in economics nature deplores a monopoly. While Apple almost wiped out many mobile phone makers only a few years ago when it launched its iPhone, many competitors have returned along with others who have products that are superior to Apple’s current product line. Similarly, Google in many English speaking markets controls the search engine market; however, IBM’s Watson is providing an indication of what will dethrone Google in the near future.
Another key insight from the Red Queen Hypothesis is that sex is good for you. More accurately, it’s good for your offspring. Compared to asexual reproduction, sexual reproduction increases the rate of intergeneration differentiation. This gives them an edge in the arms race. It allows for faster adaptation with bigger jumps. Asexual reproduction is analogous to competing by pumping out slight variations of the same offer and trying to win through sheer force: Heavy media weights, more sales promotions, SKU proliferation in consumer goods and feature proliferation with service goods, and trade deals. This approach is successful as long as you have the resources and are nimble enough to fire counter offers whenever a competitor acts. In their book ‘Blue Ocean Strategy’, W. Chan Kim and Renee Mauborgne refer to this pattern as a red ocean strategy. As Adam Morgan pointed out in “Easting the Big Fish’, this business strategy works well for the market leader. or businesses this can mean distraction, dead-ends, and changes in business structure to support a continuous innovation approach, like design thinking, in the business model.
An alternative approach is to lead through innovation. To do this successfully requires tapping a diversity of sources. In nature this is the advantage of sexual reproduction. Successful ideas of one partner (DNA) are combined with the successful ideas of another. This is why great leaps in competitions and markets often come from outside the firm, not because they lack vision but because those external to the core marketing team come into contact with innovations designed for vary different reasons. For example, Google Maps came from an Australian company with strong links to Australian universities rather than being developed at Google.
Tapping a diversity of talent can just come from including a breadth of professional skills. One client used the idea of an extended brand team which consisted of operational, sales, insights, finance, regulatory and marketing professionals to work on both strategy development and execution to increase its success rate with breakthrough thinking that leads to sales growth above market average.
An important strategy implication of the Red Queen Hypothesis is that any strategy that is likely to be effective should be met by a reaction. In a sense, you can measure how good an idea is by the likely investment a competitor will make to undermine your advantage. This type of thinking about our competitor’s reactions is the cornerstone of game theory, scenario planning and war game techniques that should be as standard as SWOT analysis in strategy development. The Red Queen Hypothesis not only tells that evolution is essential to survival but also provides insight into how to succeed.
Related articles on innovation and strategy
- Karen does Kano. Using Kano Analysis to improve products and service delivery.
- Setting Sail on a Blue Ocean Strategy. Creating strategies that leapfrog the competition.
- What type of relationship do you have with your market? Understanding how types of relationship impact customer expectations.
- Escaping the Red Ocean. Finding how to create a blue ocean strategy.
- Using the EAST framework to improve uptake and compliance. How to use a framework based on behavioural economics to grow your business.
For those who like to dig deeper. . .
- Leigh Van Valen. (1973). “A new evolutionary law“. Evolutionary Theory 1: 1—30
- Chan Kim, W. Mauborgne, R. (2005). “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant”. Harvard Business Review Press
- Porter’s Five Forces. See: http://en.wikipedia.org/wiki/Porter_five_forces_analysis
- IBM Watson. Google in Jeopardy: What If IBM’s Watson Dethroned the King of Search? http://www.wired.com/2013/10/google-in-jeopardy-what-if-watson-beat-the-search-giant/
- Tony Davila, The Innovation Strategy Big Companies Should Pursue, Harvard Business review, June 2014, http://blogs.hbr.org/2014/06/the-innovation-strategy-big-companies-should-pursue/
- Adam Morgan (2009) ‘Eating the Big Fish: How Challenger Brands Can Compete Against Brand Leaders’, Second edition, John Wiley & Sons, New Jersey