Hi-Ho Destructive Competition!

Tom Peters

Universities are viewed as placid, "ivory towers." In fact, they are home, worldwide (no cultural differences on this score!), to violent competition. Big science may call for more teamwork to conduct grand experiments these days. But have no doubt about what the Fermi lab high-energy physics team is up to: Destruction of others' ideas, supplanting them in decisive, ego-crunching fashion.

Einstein overturned Newton. The transistor destroyed the vacuum tube and most of the firms that made it. And the wind-up watch was decked, along with most Swiss watchmakers, by the quartz-crystal powered variety. Winners crow. Losers weep.

Some decry such "destructive competition" and champion cooperation among big competitors. Such "strategic alliances" can be useful, and I applaud their selective application. But make no mistake, progress and long-term economic efficiency depend mostly on destructive competition.

Competition ain't pretty, neither in big-university settings nor in the local retail marketplace. But grudges held for decades (the spice of research-university faculty life) and general untidiness are no cause to reject the largely beneficent result.

Private railroaders greedily butted and shoved one another around for two decades after the Civil War. Bloodthirsty, destructive competition led to massive overbuilding; so much so that 20 percent of all track had to be abandoned by the turn of the century.

A waste? Hogwash! This greedy, personal competition led to remarkably rapid track laying and associated technological and administrative breakthroughs. Arguably, the railing of America took place 25 years earlier than it would have without the vigorous rivalry. Perhaps the best case for that vicious competition is what happened when collusion replaced it: Railroads cozied up to one another, then the government had to curb collusion's (uh, strategic alliances') most wretched excesses—and America's premier business pioneers (those railroads) turned into bloated, national jokes.

So, competition fuels innovation. But c'mon, you retort, do we really need so many flavors of financial spreadsheet software? Even the experts can't tell them apart! One question gets at the heart of the matter: How would "constructive" competition have affected software development? Well for one thing, we would doubtless still be wrestling with the first generation of VisiCalc.

Chairman John Akers lambastes all 375,000 IBM employees in a most ungentlemanly fashion. Why? Not because of newfound strength at Germany's Siemens or Japan's Fujitsu. Instead he's frustrated by a diffuse attack from Sun Microsystems, Convex, Sequent, NCube, Intel, Cypress Semiconductor, ASK, AST, Microsoft, Dell, Acer, Hyundai, Apple, Compaq—and several thousand other unsung, niche-minded outfits determined to skin him alive.

Some say Silicon Valley breeds excessive competition. Lots of firms go out of business. Many survivors never reach "critical mass." No matter. It's home to the most creative destructive competition this country has seen since the days of those miserable railroad tycoons.

Consider: The U.S., it's said, is "coming back" in semiconductors. Actually, we were never "away," save to some crybaby big-firm semiconductor bosses and Harvard economists bent on creating industrial policy and relaxing anti-collusive legislation. As so-called "design-rich" chips become the cornerstone of the huge industry, the are recapturing overall market share—and widening our smart-chip lead—largely a tribute to many, many vigorous, stuff-it-in-your-face, upstart Silicon Valley companies and a few viciously competitive, not-so-gentle giants like Intel.

Now shift gears to the innards of the firm. A decade or two after some new technological discovery is commercialized (e.g., autos in the early years of this century), brutish technological competition is usually replaced by a relentless pursuit of efficiency, leading to the likes of Ford's mass production techniques (which almost destroyed GM). After these battles establish a pecking order, firms become complacent: Witness U.S. automakers' decidedly polite tiff over tail-fin supremacy in the 1950s.

Since then, "destructive" global competition (which was a boon to the consumer and a wake-up call to U.S. industry after a four-decade slumber) was spurred by outsiders. Alas, the Big Three, like the railroads before them, failed to engage in timely, "destructive" competition, especially inside their firms. Suppose GM, for example, had moved a division to Dallas, another to Atlanta, and headquarters to Los Angeles in 1975. I'd wager it wouldn't still be stuck in the doldrums.

The problem: It's the rare established outfit that's capable of creative self-destruction. IBM's biggest enemy today is IBM. It's still too smug to seriously consider blasting the company into a half-dozen or so, wholly independent pieces. But what, short of such self-annihilation, will allow you to compete in a frisky marketplace where massiveness invariably translates into sluggishness?

(C) 1991 TPG Communications.

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