Coping with hypercompetition: Utilizing the new 7S's framework1

D'Aveni, Richard A;Canger, Jonathan M;Doyle, Joseph J

The Academy of Management Executive; Aug 1995; 9, 3; ABI/INFORM Global
pg. 45

. Academy of Management Executive. 1995 Vol. 9 No. 3

Coping with hypercornpetition:

Utilizing the new
7S's fromework'
Richard A. D'Aveni
Executive Overview

This business is intensely, vigorously, bitterly, savagely competitive.

-Robert Crandall, CEO, American Airlines

Major sustainable competitive advantages are almost non-existent in the field of
financia! services.
-Warren Buffett
I don't believe in friendly competition. I want to put them out of business.

-Mitchell Leibovitz, CEO of auto parts retailer Pep Boys

Declare business war. This is the enemy.

-Statement over a photo of Northern Telecom CEO

Paul Stern on posters at an AT&Tplant in Denver2

In the old days in science, the universe was lairly simple. Nearly every science
museum had a huge, old model ol the solar system in which ali the movements
ol the planets were controlled with clockwork gears. Then we realized that
reality was much more complex. All motion was relative.

"' ri

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Business has also entered an age ol new realities. It is essential to understand

and take advantage ol the dynamic motion and flux ol our global markets and
technological breakthroughs. Moreover, a fundamental shilt in thinking is
necessary lor coping with these changes. While companies have struggled to try
to sustain their advantages, in iact, no organization can build a competitive
advantage that is sustainable. Every advantage erodes. So in this
hypercompetitive environment, companies must actively work to disrupt their
own advantages and the advantages ol competitors. To cope with this new
reality, managers must employ a new 1S's lramework3 that can be used to
analyze industries and competitors and to identily one's own strengths and
weaknesses in meeting the challenges ol hypercompetition.

We have seen giants of American industry, such as General Motors and IBM,
shaken to their cores. Their competitive advantages, once considered
unassailable, have been ripped and torn in the fierce winds of competition.
Technological wonders appear overnight. Aggressive global competitors arrive
on the scene. Organizations are restructured. Markets appear and fade. The
weathered rule books and generic strategies once used to plot our strategies no
longer work as well in this environment.
The traditional sources of advantages no longer provide long-term security. Both
GM and IBM still have economies of scale, massive advertising budgets, the
best distribution systems in their industries, cutting-edge R&D, deep pockets,
and many other features that give them power over buyers and suppliers and
that raise barriers to entry that seem impregnable. But these are not enough

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45

Academy of Management

Executive

any more. Leadership in price and quality is also not enough to assure success.
Being first is not always the same as being best. Entry barriers are trampled
down or circumvented. Goliaths are brought down by clever Davids with
slingshots. Welcome to the world of hypercompetition.
Hypercompetition
Hypercompetition results from the dynamics of strategic maneuvering among
global and innovative combatants. It is a condition of rapidly escalating
competition based on price-quality positioning, competition to create new
know-how and establish first-mover advantage, competition to protector invade
established product or geographic markets, and competition based on deep
pockets and the creation of even deeper pocketed alliances. In hypercompetition
the frequency, boldness, and aggressiveness of dynamic movement by the
players accelerates to create a condition of constant disequilibrium and change.
Market stability is threatened by short product life cycles, short product design
cycles, new technologies, frequent entry by unexpected outsiders, repositioning
by incumbents, and radical redefinitions of market boundaries as diverse
industries merge. In other words, environments escalate toward higher and
higher levels of uncertainty, dynamism, heterogenity of the players, and
hostility.

There is evidence that

competition is heating
up across the
board ..

lt is not just fast-moving, high-tech industries, such as computers, or industries

shaken by deregulation, such as the airlines, that are facing this aggressive
competition. There is evidence that competition is heating up across the board,
even in what once seemed the most sedate industries. From software to soft
drinks, from microchips to corn chips, from packaged goods to package delivery
services, there are few industries that have escaped hypercompetition. As Jack
Welch, CEO of General Electric, commented, "It's going to be brutal. When 1
said a while back that the 1980swere going to be a white-knuckle decade and
the 1990swould be even tougher, 1 may have understated how hard it's going to
get."4
There are few industries and companies that have escaped this shift in
competitiveness. Even such seemingly comatose industries as hot sauces or
such commodity strongholds as U.S. grain production have been jolted awake
by the icy waters of hypercompetition.
Movement Toward. but Failure to Reach. Perfect Competition
American corporations have traditionally sought established markets wherein
sustainable profits were attainable. They have done so by looking for low or
moderate levels of competition (see Exhibit 1). Low and moderate-intensity
competition occurs if a company has a monopoly (or quasi monopoly protected
by entry barriers) or if competitors implicitly or explicitly collude, allowing each
other to "suston" an advantage in one or more industries or market segments.
Collusion or cooperation, while it can be useful in limiting aggressiveness, is
limited because there is incentive to cheat on the collusive agreement and gain
advantage. Entry and mobility barriers are destroyed by firms seeking the profit
potential of industries or segments with low or moderate levels of competition.
Gentlemanly agreements to stay out of each other's turf fall apartas firms learn
how to break the barriers inexpensively. As competition shifts toward higher
intensity, companies begin to develop new advantages rapidly and attempt to
destroy competitors' advantages. This leads to a further escalation of
competition into hypercompetition, at which stage companies actively work to
string together a series of temporary moves that undermine competitors in an

46

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Academy of Management Executive

endless cycle of jockeying for position. Just one hypercompetitive player (often
from abroad) is enough to trigger this cycle.
At each point firms press forward to gain new advantages or tear down those of
their rivals. This movement, however, takes the industry to faster and more
intense levels of competition. The most interesting aspect of this movement is
that, as firms maneuver and outmaneuver each other, they are constantly
pushing toward perfect competition, where no one has an advantage. However,
while firms push toward perfect competition, they must attempt to avoid it
because abnormal profits are not at all possible in perfectly competitive
markets. In hypercompetitive markets it is possible to make temporary profits.
Thus, even though perfect competition is treated as the "equilibrium" state in
static economic modela. it is neither a desired nor a sustainable state from the
perspectiva of corporations seeking profits. They would prefer low and moderate
levels of competition but often settle for hypercompetitive markets because the
presence of a small number of aggressive foreign corporations won't cooperate
enough to allow the old, more genteel levels of competition that existed in the
past.
The New 7S's
Paraphrasing George Bernard Shaw, while reasonable people adapt to the
world, the unreasonable ones persist in trying to adapt the world to themselves.
Thus. all progress depends upon the unreasonable person. In hypercompetition
the reasonable strategies that focus on sustaining advantages do not lead to
progress. It is not enough to merely adapt to the environment. Companies make
progress in hypercompetition by the unreasonable approach of actively
disrupting advantages of others to adapt the world to themselves. These
strategies are embodied in the New 7S's.
My studies of successful and unsuccessful companies in hypercompetitive
environments reveal seven key elements of a dynamic approach to strategy.
Unlike the old 7S framework, originally developed by McKinseyand Company,
the new framework is based on a strategy of finding and building temporary
advantages through market disruption rather than sustaining advantage and
perpetuating an equilibrium. lt is designed to sustain the momentum through a
series of initiatives rather than structure the firm to achieve interna! fit or fit
with today's external environment. as if today's external conditions will persist
for a long period of time.
The New 7S's are:

ij

superior stakeholder satisfaction

strategic soothsaying
positioning for speed
positioning for surprise
shifting the rules of the game
signaling strategic intent
simultaneous and sequential strategic thrusts

Because of the nature of the hypercompetitive environment, the New 7S's are not
presentad as a series of generic strategies ora recipe for success. Instead, thes
are key approaches that can be used to carry the firm in many different
directions. They are focused on disrupting the status quo through a series o
temporary advantages rather than maintaining equilibrium by sustaining
48

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'.P'Aveni

advantages. The exact strategic actions formulated under this system will
depend on many variables within the industry and the firm. Many types of
strategic initiatives can be carried out using the New 7S's, and there are many
variations.
As shown in Exhibit 2. the New 7S's encompass three factors for effective
delivery of a series of market disruptions: visin, capabilities, and tactics. What
is being called for is an increased emphasis on the first two levels (vision and
capabilities) and more creative approaches to the last level (tactics) than many
firms currently use.

Identifying and creating

opportunities for
temporary advantage
through understarrding
Stakeholder Satisfaction
Strategic Soothsaying
directed at identifying new ways to serve
existing customers better or new
customers that no one else
servesnow.

Sustaining the momentumby

developing flexible capacities for

Seizing the initiative to gain

advantage by

Surprise

Shifting the Rules

Signaling
Simultaneous and Sequential
Strategic Thrusts

that can be applied across

many actions to build a series
of temporary advantages.

with actions that shape, mold, or

influence the direction or nature of

* Speed

Exhibit 2. Disruption and the New 7S's

49
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Academy of Management Executive

Vision for Disruption: The First Two S's

Successful firms learn how to disrupt the status quo. A key to their choice of a
disruption is the realization that not all disruptions are good. The disruptions
that work are those that involve the first S-the creation of a temporary ability
to serve the customer better than competitors can.

To create this type of disruption, successful firms prioritize customers as the

most important stakeholder. This implies that employees and investors are
prioritized less highly. Thus, to create successful dsruptions, the firm must find
a way to satisfy employees and investors even though their interests have been
subordinated to customers.
Before the Pentium chip, Intel rarely asked customers what they wanted, but
now they have instituted a process of concurrent engineering to get customers
(and internal manufacturing) involved as early as possible. Now, when
designing new chips, Intel designers visit every major customer and major
software houses to ask them what they want in a chip. Intel has also provided
early software simulations of its new chips to computar makers, allowing them
to get a jump on designing their new machines, and has produced software
compilers to help software companies use the new chip.
CEO Andrew Grove holds regular meetings with employees from all parts of the
organization to brainstorm about the future, competitive challenges, and
customer needs. Employees are motivated and empowered to serve customers'
priorities above their own. Employeeshave a right to demand AR-"action
required"-of any executive. Over the years Intel has also worked to avoid
layoffs through asking stci:ff to put in overtime or cut back on hours, so
employees remain motivated to serve customers.

i:
1

Disruptions that satisfy current customer needs are not enough. Constantly
improving customer satisfaction is now so standard that firms that once led the
pack on customer satisfaction now find themselves without any lead at all.
Thus, the key to achieving real advantage from customer satisfaction is to:
identify customer needs that even the customer cannot articulate for
him/herself
find new, previously unserved customers to serve
create customer needs that never existed before
predict changes in customer needs before they happen
To do ths, firms are now engaging in the second S, strategic soothsaying. This
allows firms to see and create future needs that they can serve better than any
competitor does. even if only temporarily. The ability to see and create these
future need depends upon the firm's ability to predict future trends, to control
the development of key technologies and other know-howthat will shape the
future, and to create self-fulfillingprophecies.
Intel CEO Grove has quipped that the company bets millions on science fiction.5,
As pressure builds from clonemakers and rival systems, engineers are brought
together to consider the emerging technological capabilities and the
performance needed to keep ahead of competitors. Intel has also expanded into
other areas such as supercomputers, flash memorias, video chips, and
networking boards. lts sales in these areas are climbing at an average rate of

so

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p.veni

68 percent per year.6 It has gained 85 percent of the emerging market far flash
memory chips and practically owns one third of the market far massively
parallel computers. This experience provides knowledge that Intel can then
apply to standard chips, adding features such as video.
The second S, strategic soothsaying, is concemed with understanding the future
evolution of markets and technology that will proactively create new
opportunities to serve existing or new customers. This also contributes to the
firm's vision of where the next advantage will be discovered and where the
company should focus its disruption.
Capabilities for Disruption: The Next Two S's
To act on this visin, companies need two key capabilities: speed and surprise.
As in fencing. speed and surprise are key factors in gaining an advantage
befare competitors are able to do so and in delaying competitor reactions to the
new advantage.

As in lencing, speed
and surprise are key
lactors in gaining an
advantage .

If two companies recognize the opportunity to create a new advantage at the

same time, the company that can create the advantage faster will win. Because
success depends on the creation of a series of temporary advantages, a
company's ability to move quickly from one advantage to the next is crucial.
Speed allows companies to maneuver to disrupt the status quo, erode the
advantage of competitors, and create new advantages befare competitors are
able to preempt these moves.

ti

Intel used to bring out one or two new chips each year and a new
microprocessor family every three or four years. In 1992 it drove out nearly thirty
new variations on its 486 chip and introduced the next generation of chip, the
Pentium. To stay ahead of clonemakers. Intel plans to create new familias of
chips every year or two throughout the 1990s.7 Instead of waiting until the
current generation of chip is rolled out befare working on the next one, Intel
now develops several generations of chips at once. lt is already working on
making its chips obsoleta befare they have even hit the market. lntel has
created design-automation software that allows it to add two or three times the
transistors to each new chip design with no increase in development time. lt
also has achieved a breakthrough in modeling systems that promises to cut the
faur-year product-development cycle by six months. The new Quicktum system
will allow Intel to perorm engineering tests up to thirty thousand times faster.

'1

If a competitor is unaware of the opportunity to create a new advantage,

surprise can maintain that lack of awareness. While this is not a source of
sustainable advantage (once the competitor recognizes the advantage, it can
usually move quickly to duplicate it). surprise allows the company to create the
advantage and to extend the period in which the advantage is unique. Surprise
also allows companies to act to undermine competitor advantages befare the
competitors can take defensiva actions.
Intel's multiple capabilities-with
strengths in mcroprocessors, other chips.
flash memorias, personal computers, and supercomputers-keep
competitors
guessing about its next move. Since its early days, it has often pursued a
strategy of simultaneously pursuing altemative technology, and it currently has
its own versions of the competing RISC-based chip (Reduced lnstruction-Set
51

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Academy of Management

Executive

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Computing) although it continues to defend its stronghold of CISC (Complex
Instruction-Set Computing), which offers more software. Not wanting to compet
with its customers, Intel hesn't entered the personal computar market under its
own name, but it has developed the capabilities to do so as the only supplier t
computar manufacturers with a brand name-so competitors never know when
it might decide to enter the PC market.
1
11

11 a competitor is

unaware ol the
opportunity fo creafe
a new advantage.
surprise can maintain
that lack ol
awareness.

Intel has used advances in modeling and design of new chips to surprise
competitors. lts new modeling system gave ita strategic victory overa
competing RISC-based chip. Ata technology forum in 1991, an Intel executive
demonstrated a working model of the Pentium chip, using a link to the model,
before an actual chip was ready. In what may have been a response to Intel's
signal. six months later Compaq Computar Corporation cancelad plans to
launch a RISC-based personal computer.8 And it is still unclear whether new
research efforts in RISCchips will surprise Intel.
Intel also maintains a flexible workforce,shifting employees to different projectsj
and keeping operations lean. Despite its continuad growth in revenues, the
number of Intel employees declinad between 1984 and 1992 to maintain
flexibility.
Capabilities for speed and surprise are therefore key elements for successfully
disrupting the status quo and creating temporary advantages. These
capabilities are flexible in that they can be deployed across a wide range of
specific actions.
Tactics for Disruption: The Last Three S's
The final three S's-shifting the rules of the game, signaling, and smultoneous
and sequential strategic thrusts-are concerned with the tactics used in
delivering a company's disruptions, especially tactics that influence the flow of
future dynamic strategic interactions among competitors. These three S's follow
the vision developed by the first two S's and use the potential for speed and
surprise from the third and fourth S's.
In contrast to static approaches to strategy, these final three S's are concemed
with a dynamic process of actions and interactions. Most planning is concem .
with the company's next move to gain advantage. lt usually analyzes potential
competitiva responses but doesn't shape those responses to its advantage.

.1

The view presentad here is a set of tactics designed to disrupt the status quo
and create temporary advantage. Tactics such as actions that shift the rules of
competition create a sudden and discontinuous move in the industry, reshapin
the competitiva playing field and confusing the opponent.
1

Intel's move into new areas such as supercomputers, interactiva digital video,.I
and flash memory has helped shift the rules of competition. Flash memory
provides an alternativa to the standard memory market, where Intel lost out to'
Japanese competitors. Intel is adding ancillary products, such as networking
circuit boards and graphic chips, that make it easier for computer makers to
add these features. It has also designad a personal computar with workstatio
power, the Panther, which it is licensing to computer makers. This shifts the
rules by creating a machina that Intel is not marketing itself. The purpose of
design is to take full advantage of Intel's Pentium chip.

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D'Aveni

Signaling can delay

or dampen the
competitor' s actions to
create advantage,
throw the competitor
off balance, or create
surprise.

Signaling can delay or dampen the compettor's actions to create advantage,

throw the competitor off balance, or create surprise. Grave has signaled lntel's
intent to fight the clonemakers "with everything we've got. "9 It has also stated a
vision of making the company the center of all computing, from palmtops to
supercomputers. Its precise strategy for doing this is less visible. Although it
has clearly revealed that it has 686 and 786 chips in the works, what these chips
will be able to do is still open to speculation. As dscussed, Intel used signaling
to shift the rules of competition by transforming computer chips from a hidden
commodity to a marketing asset through its Intel Inside campaign. By making
the chip visible and using branding in marketing PCs, it made majar gains in
its battle against the clones. But the brand is only as powerful as the computer
chip behind it.
Competitive thrusts in this environment are rapid-either
a sequence of moves
ora set of simultaneous actions-to upset the equilibrium of the industry,
disrupt the status quo, and open opportunities for new advantage. Asan
example of a set of simultaneous thrusts, a company might feint a move in one
direction and then move forcefully in another direction, creating surprise and
temporary advantage from the misdirection of the opponent. One can think of
sequential thrusts as being akin to the sequence of plays used in a football
game. One team may run the hall several times until the defense is conditioned
to expect a run play. Then the offense switches to the long bomb at a time that
should call for a run. The sequence of actions create surprise and temporary
advantage, since once the play is used, the defense will watch out for the long
bomb in future plays.

,.

Intel has used a variety of simultaneous and sequential strategic thrusts to

seize the initiative. In the late 1970s, struggling with its 8086 microprocessor
chip, lntel launched an all-out assault-code-named
Operation Crush-against
Motorola and other competitors. Intel set up war rooms to work toward making
the 8086 the industry standard. It was this effort to simultaneously attack
several segments of the market that helped lead to IBM's decision to adapt the
8088 as the center of its personal cornputer.I? Intel rode the wave of the PC's
growth to dominance in the microprocessor industry.
Intel also participated in both the memory and microprocessor markets at
various points in time. In a way, Intel's retreat from the memory chip market
and return with flash memory might be seen as a sequential set of moves akin
to a strategic retreat followed by regrouping and counterattack. It has used
multiple exploratory attacks to develop a variety of know-how and technology
capabilities and gauge competitor and customer reactions (for example, its
simultaneous development of RISC and CISC technology). It has also explored
promising markets (such as video and massively parallel computing) and moved
into those with the highest potential for growth. It has built its businesses by
using a sequential strategy, moving from memory chips to microprocessors. to
boards, to building personal computers (although not marketing them).
1

These three tactics reflect the increasing speed and intensity of

hypercompetition. Although these actions sometimes push companies into the
gray areas of antitrust because the behaviors could be construed as
exclusionary or anticompetitive actions, companies are increasingly seeing
them as necessary for competitiva survival.

!.

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Academy of Management Executive

Putting Ali the S's Together

Exhibit 2 illustrates how the New 7S's work together to develop a vision,
capabilities, and tactics for disruption.
As suggested earlier, while the traditional 7S's are concerned with capitalizing
on creating a static strategic fit among interna} aspects of the organization, the
New 7S's are concerned with four key goals that are based on understanding
dynamic strategic interactions over long periods of time.
/

l. Disrupting the status quo. Competitors disrupt the status quo by

identifying new opportunities to serve the customer, signaling, shifting the

rules. and attacking through sequential and simultaneous thrusts. These
moves end the old pattern of competitive interaction between rivals. This
requires speed and surprise; otherwise, the company's competitors simply
change at the same rate.
2. Creating temporary advantage. Disruption creates temporary advantages.
These advantages are based on better knowledge of customers,
technology, and the future. They are derived from customer orientation and
employee empowerment throughout the entire organization. These
advantages are short-lived, eroded by fierce competition.
3. Seizing the initiative. By moving aggressively in each arena, acting to
create a new advantage or undermine a compettor's old advantage, the
company seizes the initiative. This throws the opponent off balance and
puts it ata disadvantage for a while. The opponent is forced to play
cctch-up, reacting rather than shaping the future with its own actions to
seize the initiative. The initiator is proactive, while competitors are forced
to be reactive.
4. Sustaining the momentum. Severa} actions in a row to seize the initiative
create momentum. The company continues to develop new advantages and
doesn't wait for competitors to undermine them befare launching the next
initiative. For example, while U.S. manufacturers are doing remedia! work
in quality improvement, Japanese manufacturers are now building key
advantages in flexibility. This succession of actions sustains the
momentum. This is the only source of sustainable competitive advantage
in hypercompetitive environments.

In hypercompetition it is not enough to build a static set of competencies. Good

resources are not enough. They must be used effectively. This is precisely why
successful firms pay attention to tactics as well as capabilities and vision in an
environment of traditional competition and to competencies in an environment
of hypercompetition. In slower and less aggressive competitive environments,
companies could concentrate primarily on making great swords. In
hypercompetition, they have been forced to concentrate much more on the skills
of fencing. lt is these dynamic skills that are the most significant competencies
of the firm. Thus, a company's success depends equally upon its swords and its
fencing sklls, and the New 7S's are intended to guide firms towards making the
right swords, learning how to fence, and pointing them in the right direction.

Sorne Tradeoffs
One final analysis can be done using
concentrate on, companies are forced
makes it difficult for companies to do
among the seven to confront different
themselves.

the New 7S's. In choosing which to

to make tradeoffs among them. This
all seven equally well. Companies choose
challenges and opportunities that present

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'J)'Aveni

Thus, it is possible to analyze a competitor (or one's own company) to see what
types of tradeoffs have been made. Once these are identified, the weakness of
the competitor (or one's own company) is apparent. Furthermore, the tradeoff
means that the competitor con't plug the weakness without giving up something
else. Thus, it is possible to identify weakness, which, if attacked, forces the
competition to be slow to respond orto give up sorne other strength in order to
respond. Either way the competitor loses.

In hypercompetition it
is not enough to build
a static set ol
competencies.

Among the tradeoffs implied by the New 7S's are the following:

Tradeolls at the expense ol stakeholder satislaction (S-1)can be undermined

by speed (S-3), as companies may sacrifice productor service quality to
gain speed or push employees to work harder and faster. Speeding
products to market with little testing could also reduce customer
satisfaction. Similarly surprise (S-4), shifting the rules (S-5), signaling (S-6),
and simultaneous and sequential strategic thrusts (S-7) also have the
potential to confuse customers, employees, and shareholders as well as
competitors.
Tradeolls at the expense ol luture orientation/soothsaying. Strategic
soothsaying (S-2) can be hurt by speed (S-3), which often leaves little time
for reflecting on what lies ahead, and surprise (S-4), which is sudden and
unpredictable enough to make prognostication irrelevant or impossible.
Shifting the rules (S-5) often reshapes competition in a way that
unpredictably changes future opportunities so that soothsaying becomes
difficult. To the extent that competitor reactions are not anticipated,
simultaneous and sequential strategic thrusts (S-7) sometimes make
soothsaying more difficult.
Tradeolls at the expense ol speed. Speed (S-3) can be eroded through the
slowness of decision making in an organization such as the ones used to
increase stakeholder satisfaction (S-1). Also, strategic alliances used to
shift the rules (S-5) sometimes reduce speed because of negotiations.
Shifting the rules of competition (S-5) may require a tradeoff with speed. lt
can temporarily reduce speed (S-3), for example, because of the confusion
and time it takes to regroup and retool to create the new rules.
Simultaneous and sequential strategic thrusts (S-7) can reduce speed (S-3)
because they require more effort than single thrusts.
Tradeolls at the expense ol surprise. The flexibility and stealth of surprise
(S-4) can be eroded by strategies to increase capabilities for speed. For
example, just in time systems could decrease the company's flexibility
while increasing speed. Alliances to shift the rules sometimes also
decrease surprise because the alliances are usually public. Signaling can
also reduce the element of surprise because it often involves revealing the
strategic intent of the company. Sequential thrusts can reduce surprise (S-4)
by committing the company to a clear set of actions.
These tradeoffs mean that firms ccm't always do all of the New 7S's equally
well, even if they are above a reasonable threshold on each one of them. Thus,
a competitor can do a tradeoff analysis to identify the maneuvers it can do
through use of the S's that the opponent con't do well because the opponent
cem't respond without depleting its strength in one of the other S's. Other firms
will creatively switch among the New 7S's to shift the rules of competition,
sometimes focusing on the opponent's weaker S's, sometimes using severa! in
concert.

SS
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Academy of Management Executive

Moreover, firms have limited resources, so they ccn't acquire all seven of the
New S's at once. They must prioritize them and make tradeoffs. Thus, it will be
rare that a firm is equally good at all of the New 7S's. This will create
opportunities for a new type of hypercompetitive behavior whereby firms use
the resource investment tradeoffs made by a competitor to determine which of
the New 7S's should be invested in first. Finally, truly hypercompetitive firms,
like Intel, will find ways to eliminate the tradeoffs. Tradeoffs exist only if firms
believe that tradeoffs are necessities and stop looking for ways to do both
alternativas. After all. it was once said that firms could not achieve low cost
and high quality at the same time. Now it is not justa reality but a necessity for
survival in many industries.

,,,

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Will Advantages from Using the New 7S's Eventually Erode?

Like all know-how. knowledge of how to use the New 7S's might eventually be
expected to erode as it becomes widely assimilated. As knowledge of these
approaches becomes increasingly widespread and all competitors begin using
them-this
is already taking place-one
might expect that any advantage
would be neutralized. In particular, this erosion may be seen in the temporary
advantages of a customer focus. As customer focus (a central part of S-1) has
been driven through U.S. organizations by the total quality movement and other
forces, it has become less of an advantage and more of a requisite to succeed in
business.

1,.
1

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):.

. . . it will be rare that

a firm is equally good
at all of the New 7S's.

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While the impact of the New 7S's may be diminished somewhat by their
widespread adoption, there are severa! factors that promise to continue to make
them a source o advantage even after they are widely used. First, the New 7S's
have sorne inherent flexibility so that different companies using the New 7S's
can take very different strategies. The use of simultaneous and sequential
strategic thrusts (S-7) presents a wide range of options and variations. There are
many other thrusts that can be designad for specific opportunities, making it
difficult for firms to exactly replicate a competitor's use of the New 7S's.
Second, the New 7S's are dynamic. Companies use them in different ways over
time. Stakeholder satisfaction changas, competitive opportunities changa,
sources of temporary advantage change. The New 7S's and their goals of
creating disruption and seizing the initiative remain constant, but the methods
companies use to achieve these goals constantly changa. In this way, even if all
competitors in an industry are using the New 7S's, their moves will continua to
be unpredictable.

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J.

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Third, companies usually cannot use all of the New 7S's at once because of
inherent tradeoffs among the S's. Companies perform a balancing act in
weighing these tradeoffs. This adds to the unpredictability of competitive
moves, because companies can use any of the New 7S's in developing their next
strategic move, and the tradeoffs may make it difficult to respond.
As more competitors focus on disrupting the status quo and seizing the
initiative, ths intent may become fairly predictable. Companies will know that
their competitors will be actively working on their next competitiva move. But
this intent does little to revea! the actual strategies of competitors. All it does is
make it clear that the company will not pursue one strategy; namely, sustaining
its current advantage. This leaves every action other than that one open.
'
56

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

 D'Aveni
1

[ fhe one certain

impact is that as the
New 7S's become
more widespread,
competition will
become more
aggressive.

The one certain impact is that as the New 7S's become more widespread,
competition will become more aggressive. Instead of having one or two
competitors seeking to disrupt the status quo, every competitor will be looking
for the next source of temporary advantage. With this further intensification of
hypercompetition, one might expect an increased interest in alliances and other
forms of cooperation to dampen the intensity of competition (as has already
been seen). Ultimately, however, the only way out of this dilemma is for
companies to become more aggressive in seizing the initiative. Cooperative
attempts to end this cycle of aggression will be seen as either illegal
(collusive antitrust violations), or futile, since it is like shoveling sand against
the tide. Leading firms will be wary of cooperative efforts that ask them to be
less aggressive and give up their temporary advantage. Lagging firms with the
fire in their bellies to be number one will not be satisfied with their permanent
status as second-class citizens. So the New 7S's will be used more aggressively
and more frequently in the future world of hypercompetition.
While the New 7S's will continue to be important, especially with the
intensifying competition of the future, there may be even newer S's that emerge
as keys to competitiva success. Hypercompetitive companies will continue to
monitor and define these new strategic approaches in new attempts to provide
temporary advantages and sustain momentum with a series of successful
short-term advantages.

Endnotes

Adapted lrom: R.A. D'Aveni,

Hypercompetition:Managing the Dynamics o

Strategic Maneuvering (New York, NY: The Free
Press. 1994).
2
R. Crandall, quoted in Business Week, July
6, 1992; W. Buffett, quoted in Harvard Business
Review, Sept/Oct 1986; M. Leibovitz, quoted in
Fortune, Feb. 22, 1993; Northem Telecom poster.
Newsweek, Dec. 28, 1992.
3
This title is derived lrom McKinsey's
original 7S's framework. See especially. R.
Waterman, T. Peters. and J. Phillips, "Structure
is not Organization,'' Business Horizons, June
1980, 14-26; James Brian Quinn and Henry
Mintzberg. "Dealing with Structure and

About the Author

Systems,'' The Strategy Process (Englewood

Cliffs. NJ: Prentice Hall, 1988). 270-276.
4
Stratford Sherman. "How to Prosper in the
Value Decade,'' Fortune, Nov. 30, 1992. 91.
5
Robert D. Hof. "Inside Intel." Business Week,
June l. 1992, 88.
6
/bid .. 90.
7
/bid., 86-94.
8 /bid., 89.
9
/bid., 87.
10
Ashish Nanda and Christopher A. Bartlett,
"Intel Corporation-Leveraging
Capabilities for
Strategic Renewal." working paper. Graduate
School of Business, Harvard University,
November 25, 1992, 3.

ir'
Ir

l.

Richard A. D'Aveni (Ph.D., Columbia University) teaches business strategy at the Amos Tuck School
at Dartmouth College and consults for severa! Forlune 500 corporations. He received the A.T.
Kearney Award for his research on why big companies fail. and has been profiled as one of the next
generation's promising new management thinkers by WirtschaltsWoche, Germany's equivalen! to
Business Week.

Executive Commentary

11

]onathan M. Cangar, Motorola

Beginning in the early 1970swith Alvin Toffler and Futura Shock, various
researchers and writers have urged us to broce or, adapt to, and otherwise
manage waves of increasingly rnpd, pervasive change. We were warned that
the demon of accelerating change would be felt everywhere-from
technology,

i'

57

'~.
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