The new competition

At the core of the new competition is the belief that the entrepreneurial firm will drive continuous improvement. Based on the Schumpeterian notion of creative destruction, these firms offer a new approach to business production and processes. Benetton, for example, is a collection of collaboratively linked smaller firms that manufacture, design, and market a line of stylish clothing based on a model first developed centuries before by Italian lace producers. Benetton, the name most people recognize, is mainly a marketing and distrib­ution company that relies on its alliances and cooperative relationships to design and manufacture under its label. There are many other examples of net­works of companies that form virtual corporations with the sole intention of challenging the dominant paradigm by which business conducts itself. During the 1980s and the 1990s a number of industries have converged and been redefined. Recognizable names like Nike, FedEx, Nucor, Calyx & Corolla, and Dell have emerged as change agents in their respective industries. More recently, other cutting-edge companies have continued to redefine their com­petitive spaces. Telezoo, LendingTree, CNet, and many others have used the power of the Internet to bring buyers and sellers together and have reduced significantly the asymmetry of information between trading parties that had traditionally existed.

A number of Internet companies that thrived during the mid-1990s, fueled by venture capital dollars, came to a hard landing during the time before and after our celebration of the new millennium. Nonetheless, wealth and jobs were created, and the Internet transformed businesses because time and distance became irrelevant. The problem of information asymmetry was solved through transparency, and business as usual became the exception. The new technology that drove the Internet allowed businesses to reengineer their processes as well as to innovate new ways to deliver value across the globe. Internet sites allow shoppers to compare, via one click, dozens of competing offerings. For example, car buyers now have insight into the cost structure of a new car, and the price dance with the salesperson and the sales manager over discounts is out of step with todays music.

The new competition is based on four dimensions and is driven by a proac­tive approach to strategy whereby the competitive landscape is not taken as a given, but rather is subject to reinterpretation. Managers strive to invent the world in which they choose to compete, often by changing the rules of the game. These four dimensions are (1) the firm, (2) the production chain, (3) the sector, and (4) the government.

The Firm

The firm here is defined as an entrepreneurial company, which is in contrast to the firm as portrayed by Chandler and others who view the firm through a bureaucratic hierarchy. Here, the firm strives to maintain continuous improve­ments in support of its strategic goals. Innovation comes as a result of marginal gains in production, processes, and organization. Innovation is seen as part of the learning process, which lies at the core of the firm's values and culture. While a centralized research and development facility can engage in sea-change levels of innovation, the entrepreneurial firm survives by its ability to induce workers at all levels to participate in small, incremental attempts at continuous improve­ment. There is no question that inventions derived from work at Bell Labs have changed the course of history. Yet AT&T's bureaucratic structure and regulatory environment inhibited the firm's ability to turn these innovations into competi­tive advantages in a number of markets. Competitors like MCI, with their relent­less attempts to create innovative marketing programs, have caused AT&T to lose important and costly market share in a number of areas such as the residen­tial long-distance market. Bell Labs was spun off with the creation of Lucent, which has fallen on hard times, partly because of the economic downturn and partly because it has fallen out of touch with its customer base. In fact, since C. Michael Armstrong has taken the helm as CEO, AT&T has shed its cable TV business that it spent billions to acquire; rumors circulated that AT&T and Bell­South were to merge and that AT&T was considering selling its long-distance business. From an apparent strategy of providing connectivity across all media, AT&T is beginning to refocus its efforts. Since the breakup of the Bell System, AT&T has struggled to redefine itself.

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