Alfred Sloan, the legendary executive of General Motors, believed strongly in the power of competition. So strongly in fact, that he encouraged his close friend, Walter P. Chrysler, to start his own company, despite working for Sloan as the head of the Buick division. He did this because he saw Ford declining in the mid 1920s and he knew that GM needed a strong competitor to stay innovative.
Few executives would encourage the creation of a competitor but Sloan knew that competition is a positive force for the best companies. All organizations—private, non-for-profit, public—need competitors. Unlike the Elvis song referenced in the title, they could all benefit from a little more competition.
Competition provides the necessary motivation to focus on the right things and ignore the irrelevant. Here’s a few reasons why competition can be so powerful.
Decline Happens Internally
Much has been written about the decline of the Roman empire. Historians can’t agree on what destroyed the empire but they all concur that it was an empire in decay. Internal issues and disagreements had weakened the empire’s ability to fend off enemies. By the time the Germanic tribes attacked around 476 AD, it was no longer the empire of Caesar or Augustus.
Strong organizations rarely fall because of external enemies. That might be the proverbial straw but the fall only happens because of internal decay. RIM didn’t lose dominance the moment the iPhone came. They failed to innovate even after seeing the iPhone. When they got out of the smartphone game, they were no longer the same company that had innovated with the Blackberry.
In our times, we are seeing the positive effects of competition on the United States. The US had an incredible growth post WWII, including the creation of many life-changing technologies such as the internet, the atomic bomb and the Apollo missions. It’s not surprising that many of these things happened during the cold war confrontation with the Soviet Union.
China is the new competitor against the US. We may debate strengths and weaknesses but the rise of China as an economic and military equal is forcing the US to innovate. The country is gearing up to increase investments in future technologies like chips, supply chains and AI. China may just delay the perceived internal decay of the US.
Competition is a Focusing Force
Industries without competition tend to go stagnant. It is much easier to reap the profits of today than to invest for tomorrow. The Spanish empire secured incredible riches when they colonized the New World. They had so much money that they lacked motivation to adopt the trends of the industrial revolution. Eventually, the riches dried out and Spain was no longer a dominant empire.
The taxi industry went through a similar process. Before Uber, taxis had failed to innovate. I remember trying to order a taxi via the phone on New Year’s Eve. I waited 20 minutes on the phone and the taxi never came. Today, all taxis have smartphone apps that replicate Uber—albeit not as good.
Competitors remind companies that they can’t take customers for granted. It was easy for taxis to ignore the complaints. What else are you going to do, take the subway? The fear of competitors is so great that taxis fought with every legal means to prevent Uber from entering their cities. They eventually upped their game, cleaned their cars, added wifi and made it easy for customers to book them. It’s amazing how quickly an industry can change when faced with an external threat!
It’s Not About Imitation but Motivation
I want to make a distinction that I bring up with clients often. Use competition as motivation but not as imitation. Social media giants are racing to copy TikTok in the hopes of driving similar engagement. However, copying features is not innovation. A leaked report showed that Instagram users spent 17.6 million hours a day watching Reels (their copy of TikTok) which is less than one-tenth of the 197.8 million hours TikTok users spent. Facebook is learning they can’t just copy features and get the same results.
Bed, Bath and Beyond also tried the imitation strategy. They tried to replicate the private labels that Amazon made popular, resulting in record losses and issues. Instead, they should have used Amazon as motivation but focused on what made them unique in the eyes of their customers. Their customers didn’t want private labels, they wanted unique items they couldn’t find on Amazon.
In sports, athletes tend to lose playing time as they get older. Exceptions like Lebron James and Tom Brady are rare. However, we can see why these two players have lasted so long. They know they can’t physically keep up with a 21-year old so instead, they adapted their games. Lebron James dunks less but became a world class passer. Tom Brady runs the ball less often and learned how to minimize the damage from tackles. Motivation, not imitation.
A Little More Action
If you follow golf, then you know about the LIV-PGA golf tour rivalry. Who knows if the LIV league will succeed but it has already forced the PGA to innovate and tweak their rules. They knew what their players wanted but lacked the motivation to implement the changes. The threat of competition from the LIV did just that.
You can compete against yourself but organizations need external competition. It’s too easy to fall into routines of mediocrity. We could all benefit from a little more competition. Alfred Sloan and GM certainly did from the creation of Chrysler. GM had a fantastic run from the late 1920s to the 1960s when it became the dominant automaker in America.
Photo by emrecan arık