By Sahil Aggarwal
Bruce Greenwald and Judd Kahn
Publisher: Portfolio (Member of Penguin group)
Author: Bruce Greenwald and Judd Kahn
The Essence of Competition Demystified by Bruce Greenwald and Judd Kahn
Business success is about ‘Barriers to Entry’. If there are no barriers to entry, there is no competitive advantage. Yes, it is that short and straight! Nevertheless, one has to indulge in each page of the book to know ‘Why’ and ‘How’ of it.
According to my personal observation, I find the title of the book apt, ironic and misleading all at the same time. The title is ironic because it mentions the approach to business ‘strategy’ as ‘radically simplified’ and these two words are tough to imagine in the same sentence. The title is misleading as it doesn’t give away any code of one-size-fits-all that would get the competitor strategy ‘demystified’. The title is definitely eponymous because it talks about real business strategy in a simplified and comprehensive way that is easy to recognize.
The book carries forward the groundbreaking work of Michael Porter
To give a heads up, the book is an extension to Michael Porter’s groundbreaking work, ‘The Competitive Strategy’, published in 1980 and followed religiously worldwide till date. Among the five forces stated in Porter’s work, this book concentrates only on one, ‘potential entrants’, which is considered as dominantly winning strategy. The framework of ‘Barriers to Entry’ can be summarized as:
- Supply- To have a cost advantage, Proprietary technology , Unique know-how
- Demand- High switching cost, High search cost, Consumer’s habit/addiction
- Economies of Scale- Larger scale operations, Lower ratio of fixed costs to sales
- Moats- Keeping crocodiles around your pond
The study of above mentioned framework helps to construct a mindset around questions like why companies don’t invest in R&D, why the first mover advantage is touted, why there is rat race in every new business opportunity and why start-ups die of hunger and conglomerates of eating too much.
Competition Demystified: Success has many fathers but failure is an orphan
It is more of a compilation and deep analysis of classical cases of failed & successful conglomerates which holds its validity in today’s world of start-ups and MNCs. Unlike this book, most of the management books mention only successful cases probably because success has many fathers but failure is an orphan. This book understands that actual insights can be gained only from the wearer that knows where the shoe pinches.
The authors have explicitly stated the competitive advantage model initially around which the whole book is woven. To demonstrate the impact and prowess of the model, some competent case studies along with highly credible data have been used to make a symphony out of it.
How else would one decipher that growing business in various geographies can be dysfunctional for a company like Walmart? Or how one ‘generous’ (read disastrous) decision by a behemoth like IBM can lead to creation of disruptive technology firms like Microsoft and Intel? The eternal cola war between Coke and Pepsi is no less an enigma unless decoded by prisoner’s dilemma. And many more such cases…
Why You Should Read Competition Demystified
The strength of this book lies in its conspicuousness and not beating around the bush. The book in first few pages distinguishes between strategic and tactical decisions for once and all. The rest of the book is about how strategic decisions are “dependent on the actions and reactions of other economic entities” as much as inwards and creates competitive advantage for the company.
Similar book recommendations:
- Understanding Michael Porter by Joan Magretta
- The Little Book that Builds Wealth by Pat Dorsey.
- Zero to One by Peter Theil
There are definitely many other factors, like flawless execution, managerial prowess, brand value, luck, et cetera that are significant to make a business successful but this book doesn’t talk about any of these as it is focused on one aspect of strategy i.e. competitive advantage. Moreover, the cases in the book are not meant to mock the failures of strategists and conglomerates but to take insights and learn from them.
Bruce Greenwald is a Professor at Columbia University’s Graduate School of Business. Columbia University introduced this book in early 2000s as a text book for students with majors in strategy in MBA program of 2 years. He has been referred by The New York Times as “a guru to Wall Street’s gurus” for his additional expertise in productivity and the economics of information. Judd Kahn is COO of Hummingbird Management, LLC, an investment management firm. Along with this book, they are co-authors of ‘Value Investing: from Graham to Buffett and Beyond’, which again is an international bestseller.
About the Author
Sahil Aggarwal is an MBA graduate with a specialisation in Human Capital Management. He describes himself as an immature ping pong player, voracious reader, avid writer, Urdu shayari lover, a street foodie by heart and a perpetual learner. He likes to read various genres of books such as philosophy, psychology, epistemology, biographies and of course fiction.
One of his favourite quotes is – “I wonder and gaze upon myself as an atom in the universe and the whole universe within the self.”