Destructive Rivalry in Business: Models and Examples

Key Insight

Business competition, frequently compared to war, is portrayed as inherently destructive rather than necessary or valiant. Contrasting Marx's view that conflict arises from differences, a Shakespearean model, deemed more applicable to business, suggests that combatants are often quite similar and engage in conflict without clear reasons, escalating their feud until the initial purpose is entirely forgotten. This dynamic causes individuals within firms, and firms themselves, to become fixated on their rivals, thereby losing sight of their core objectives and what truly matters.

Real-world business examples vividly illustrate this destructive Shakespearean pattern. Microsoft (initially focused on operating systems and office applications) and Google (a search engine company) evolved into bitter rivals across numerous product categories, including Windows vs. Chrome OS, Bing vs. Google Search, and Office vs. Docs, despite their distinct origins. This competitive 'warfare' ultimately cost them their collective dominance, as Apple's market capitalization reached $500 billion in January 2013, surpassing the combined worth of Google and Microsoft at $467 billion. The tendency for rivalry to promote imitation is further seen in the mobile credit card reader market, where following Square's launch of a square-shaped device, numerous competitors like NetSecure (half-moon), Intuit (cylinder), and PayPal (triangle) released their own copycat products.

Competition can also lead to the hallucination of opportunities where none genuinely exist, as exemplified by the intense 1990s battle among online pet stores (e.g., Pets.com, PetStore.com, Petopia.com). These companies obsessed over aggressive pricing and advertising to outmaneuver rivals, neglecting the fundamental question of the market's viability, which ultimately led to Pets.com's collapse and $300 million in lost investment. Rivalry can also manifest as personal, distracting feuds, such as the conflict between Oracle's Larry Ellison and Tom Siebel, or Oracle's billboard wars with Informix. Informix's CEO, Phil White, became so preoccupied with personal attacks on Ellison that his company imploded due to an accounting scandal, leading to White's imprisonment for securities fraud. However, in instances where rivalry is unavoidable, a swift and decisive victory or a strategic merger, such as the 50-50 merger between PayPal and X.com driven by fear of the dot-com bubble, can be crucial for survival and success.