Study Session 0: Strategic and Natural Competition

Jane and I began our regular study sessions today with Session 0. I was to read Industrial Organization with a supporting body of Game Theory as well as studying business strategy using a collection of Boston Consulting Group Perspectives articles. The first I read was an 1980 article by the founder of BCG, Bruce Henderson titled "Strategic and Natural Competition".

Henderson's article drove at the construction of a General Theory of Business through an analogy of business competition with natural competition (or natural selection).

We begin by likening the market as an environment with multiple niches, continuously and discontinuously melding into and out of each others, firms are as organisms competing for a set of survival-determining resources ({money} is often the singleton set), all other resources being subsidiary and holding supporting roles.

He presents a series of insights which he modestly calls hypotheses. The main one being that businesses will occupy niches in the business environment (where "occupancy" implies dominance). The next insight being that firms may compete on various "fronts" "bordering" the competencies where they lead. These "borders" being dynamic outcomes of strategic maneuver. His short article enumerates a number of other general observations relating to strategic competition.

One may take another page from the soldier's handbook of war. It is hard to invade an island foe without a preponderance of force. Just as it is difficult to assault a foe far removed, it is difficult to obtain dominance of a business niche "removed" in some sense from one's dominating competencies. One has to apply substantial business force to the take over to have any hope of success.

In the midst of this focus on strategic maneuver in the game of survival of the fittest, one cannot help but wonder if, taking a different perspective, one would chance upon a wholly different facet of this "Naturalistic Theory of Business" in the fashion of wave-particle duality. I suspect collaboration, viewed in the correct light, may yield the desired insights. Businesses too are growing increasingly multi-faceted, straddling multiple, possibly unrelated, markets. A complete General Theory of Business must describe the dynamic between markets and firms so linked.