Hypercompetition

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Hypercompetition, a term first coined in business strategy by Richard D’Aveni,^[1][2] describes a dynamic competitive world in which no action or advantage can be sustained for long. Hypercompetition is a key feature of the new global digital economy. Not only is there more competition, there is also tougher and smarter competition. It is a state in which the rate of change in the competitive rules of the game are in such flux that only the most adaptive, fleet, and nimble organizations will survive.^{[3][unreliable source?]} Hypercompetitive markets are also characterized by a “quick-strike mentality” to disrupt, neutralize, or moot the competitive advantage of market leaders and important rivals.^[3]

Often a hypercompetitive market is triggered by new technologies, new offerings, and falling entry barriers that cause market leaders to be dethroned, causing standards and rules to be in flux. This results in near chaotic competition that confuses management and causes the destruction of the core competencies of established firms. While most firms are blindsided and lose their competitive advantage, other firms find opportunities to enrich themselves through reinvention and rapid escalation of competition.^[4]

The empirical evidence for the concept of hypercompetition is somewhat equivocal. McNamara, Vaaler and Devers, Vaaler and McNamara, as well as Lindskov, Sund, and Dreyer, have for example contested the existence of a universal state of hypercompetition.^[5][6][7] Lindskov, Sund and Dreyer conclude that instead it may be that some industries, regions or time-periods could be associated to hypercompetition, others not.^[5] In later work studying the technology sector in particular, the same authors suggest that hypercompetition may be linked to the industry life cycle.^[8]

In D’Aveni's conceptualization of hypercompetition, the only source of a truly sustainable competitive advantage is a company’s ability to string together a sequence of temporary advantages. Firms manage their dynamic strategic interactions with competitors by means of frequent movements and counter-movements that maintain a relative position of strength in each of four arenas.^[9]

According to D’Aveni’s model, competition unfolds in a series of dynamic strategic interactions in four arena’s: cost/quality, timing and know-how, strongholds, and deep pockets.^[9] Each of the four arenas represents different types of competitive advantage. The price/quality arena represents the competitive advantage from product positioning. The timing and know-how arena represents the competitive advantage from tacit and explicit knowledge and the timing of their deployment – first movers, fast followers and cautious followers. The strongholds arena represents the competitive advantage from high barriers of entry, but more importantly, from the ability to circumvent, neutralize, and destroy entry barriers. The deep pockets arena represents the competitive advantage from size including financial and political clout.