Competing on the Edge

Shona L. Brown and Kathleen M. Eisenhardt (Harvard Business School Press, 1998)

In Competing on the Edge, Shona Brown and Kathleen Eisenhardt, respectively McKinsey consultant and Stanford University professor, propose a new model of strategy. The authors conducted an inductive research in the computing industry, studying 12 businesses in depth with a replication logic. Although not stated in the book, the research question must have been along the lines of: “How does one manage in a fast-paced industry?” or “What does strategy look like in a fast-paced industry?”

The insights from this research are both important and provocative. Moreover, the authors have anchored their results in the paradigm of complexity theory, and present many illustrations from various fields to great effect. These illustrations, including sports, bird behavior, and a prairie ecosystem, add a lively touch to the book.

The book is organized in a very clear manner. The introductory chapter presents the Competing on the Edge model of strategy. It relates this model to several complexity theory concepts such as time pacing, complex adaptive behavior, and punctuated equilibrium. It also contrasts the model with traditional ones: five forces, core competence, and game theory. The argument is that competing on the edge adds more dynamics and uncertainty.

Chapters 2 to 5 all share the same pattern. Each presents a management dilemma, describes extreme positions on the dilemma continuum, identifies warning signals, and explains at length the “edge” position, which consists in building on the best of both worlds. The final part of each chapter deals with implementation. The chapters are illustrated with many examples.

The first dilemma centers on how much structure is needed, and has chaos and bureaucracy traps at its ends. This dilemma can be resolved through improvisation, which can lead to “killer strategies.” The second one opposes too much vs too little collaboration across businesses. The resolution of this dilemma is coadaptation. The third dilemma, exploiting the old while creating something new, requires an edge-of-time solution: regeneration, which relies on evolutionary tactics. Finally, the fourth dilemma opposes planning and flexibility. The solution lies in experimentation.

Drawing from the dynamic theories of complexity and evolution, the book adopts a process view of strategy that departs strongly from “classic” models such as the five forces or the core competence. Not surprisingly, then, the second part of the book (Chapters 6 to 8) focuses on process issues in strategy.

In Chapter 6, Brown and Eisenhardt explain the logic of time pacing and illustrate how a firm setting the pace for its entire industry has a competitive advantage. Chapter 7 explains how to grow or to switch to a “competing on the edge” strategy. Chapter 8 concerns leadership.

Finally, Chapter 9 recaps the whole book in 10 rules:

  1. Advantage is temporary.
  2. Strategy is diverse, emergent, and complicated.
  3. Reinvention is the goal.
  4. Live in the present.
  5. Stretch out the past.
  6. Reach into the future.
  7. Time pace change.
  8. Grow the strategy.
  9. Drive strategy from the business level.
  10. Repatch businesses to markets and articulate the whole.

What makes this book interesting is that it addresses well-known paradoxes in strategic management in a very convincing manner. For instance, the question of flexibility versus consistency is not one that is easy to resolve. Of course, the authors know that the solution is not simply a question of weight. In that regard, drawing from complexity theory is indeed very valuable. Overall, their propositions rest on a triad: real-life business problems analyzed in depth, concepts borrowed from complexity and evolutionary theories, and metaphors from other domains. While the links between these three components must have been quite difficult to make at times, the result is both interesting and rich.

Readers of Emergence should be especially interested in this book, as it is a perfect example of how complexity and management thinking can enrich each other. Even though concepts such as dissipative equilibrium are not detailed enough to teach most readers very much, the interest lies in how they can be applied to management issues. For instance, the problem of planning is very well addressed. The authors devise a new way to deal with planning: don’t let it become a straitjacket, but rather allow for experimentation, small moves, and anything that could help learn about and adapt to the future. As Eisenhardt puts it elsewhere (Journal of Business Strategy, 1998): “It's the five-week schedule, the five-month plan, and the fifteen-month intuition that managers really need to have.” This is consistent with one of the main point of chaos theory: prediction is impossible.

My only reservation is that the usual separation between corporate- and business-level strategies could have been discussed more thoroughly. I had the feeling that this separation was somewhat inherent in classic, static models of strategy. Moreover, some complexity concepts such as structural invariance at different scales might have been used to challenge this dichotomy.

I would finally like to emphasize that the insights from this book go far beyond their origins. While strongly rooted in high-velocity environments, these insights nevertheless generalize to most business environments. As is common with the type of methodology used here, one shouldn’t think of a statistical generalization, but rather of an analytical one, i.e., how to transfer results in another domain (Yin, 1990). In this regard, this book has more to do with managing change than with man-aging computer businesses. This point is briefly addressed in the book (pp. 21-2), but the authors might have been too careful here. After all, managers also enact their environment, and setting the pace might well be a good idea whatever business is considered. In a high-velocity environment, the point is to take advantage of relentless and fast change, not merely to try to keep up with it. In more “quiet” environments, the point is to set the pace, to decide how often to make strategic moves, whether those be new product launches, new market onsets, or new acquisitions.

BERNARD FORGUES

REFERENCES

Eisenhardt, Kathleen (1998) “Eulogies for the Long-term Plan”,Journal of Business Strategy, 19(4): 44-51.

Yin, Robert K. (1990) Case Study Research: Design and Methods, 6th printing, Newbury Park, CA: Sage.


Competing on the Edge navigates a breathtakingly fine course through high-velocity and unpredictable businesses environments using an impressive array of case studies and many well-chosen sporting examples to illustrate the central strategic challenge tackled in this book—that of managing change to gain competitive advantage.

Brown and Eisenhardt begin with the suggestion that traditional approaches to strategy have overemphasized the degree to which planning is possible at the expense of maintaining a continuous flow of advantage that is more closely synchronized with the rapid pace of change. To redress this balance, they suggest five key building blocks: improvisation, coadaptation, regeneration, experimentation and time pacing, drawing on insights from academic research on complex adaptive behavior, evolutionary change and the nature of speed, along with data from in-depth interviews with over 100 computer industry managers in Asia, Europe and North America, and extensive examples from the business press to develop these ideas throughout the book.

“Playing the improvisational” introduces the edge of chaos as a place between too much and too little structure that is conducive to complex adaptive behavior. In organizational terms, these extremes are characterized respectively by rule-following or rule-breaking cultures, by overly rigid or loose structures, and by excessively channeled or random patterns of communication. Improvisational management ensures an adaptive culture where change is expected and that operates through a “semistructure” in which just a few key issues such as priorities, deadlines and responsibilities are well defined. Improvisation ensures that temporary advantages are seized and realized.

Coadaptation, explored in the next chapter, is used to describe the way in which some businesses are able to balance synergistic collaboration and individual success by focusing on high payoff areas rather than all opportunities for collaboration. Lessons from the Tour de France illustrate the inequity inevitably entailed among collaborators and capture a sense of the more emotive aspects of collaboration. However, by aligning coadaptation so closely with localized collaboration, Brown and Eisenhardt perhaps underdevelop the broader systemic implications of coadaptation for understanding organizations within their environments. Although the interdependence of complex systems is explored further in a later discussion of ecosystems, there remains a disjunction between the broad implications of these insights from complexity science and the local imperative of the competitive edge that Brown and Eisenhardt seek to elucidate.

The fourth chapter uses some particularly poignant cases from the computer industry to demonstrate the way in which different companies have, to greater and lesser extents, been able to exploit past experiences and to explore the new, by diversifying and refreshing old businesses. They emphasize the need for a critical mass of experienced people to prevent past knowledge from being lost and an ability to recombine modularized business elements in new ways. Two interesting patterns of failed change are identified as “error catastrophe,” where there are too few ties between new and old activities, and “complexity catastrophe,” where too many mutually dependent connections between past activities produce a gridlock that prevents adaptation and change.

Chapter 5, “Winning tomorrow today,” explores the use of a variety of low-cost, experimental “probes” to provide insight into the future in order to avoid the perils of a single market vision and rigid strategy- structure fit. Brown and Eisenhardt recognize the importance of learning by doing and of expecting and learning from mistakes, suggesting that the success of probes should be evaluated as much by the extent to which their results are surprising. They make a subtle but powerful distinction between having a clearly defined vision and yet not overly describing the future envi-ronment, while emphasizing that it is the present that matters most.

Chapter 6, “Setting the pace,” breaks the rhythm of the previous chapters of too much, too little, just right, and instead sets out to demonstrate the extent to which time pacing is absent or present in the cases examined in this chapter. Time pacing is about disciplined adherence to regular rhythms of new product development, launching or market entry according to the calendar, and beginning to synchronize or “entrain” these internal processes to external rhythms created by customers, com- plementors and competitors. Brown and Eisenhardt use more sporting examples to demonstrate how rhythm gets players into a “zone” that creates momentum, and imparts confidence, focus and a sense of control. They also stress the importance of creating and choreographing formal transition processes—something, they have observed, that managers too often underestimate.

Several of the business cases used in earlier chapters resurface in later sections of the book, creating a sense of continuity and providing a deeper insight into the all-round operations of these businesses. Case that resurface initially are those that succumb to the excesses of too muc or too little activity in key areas, increasing anticipation as to how a sin gle business can successfully navigate a course through all these elements simultaneously. The last three chapters deal with the integration of core concepts into a complete “competing on the edge” strategy, bringing together the processes, tactics, roles, responsibilities and approaches evoked in the previous chapters, and setting them off against each other like so many spinning tops colliding and redirecting the interplay of paths and courses of action.

Although not a main theme in the book, a strong undercurrent in Competing on the Edge is a timely concern for the inappropriateness of reengineering and mechanistic approaches—particularly for businesses that are characterized by change. This undercurrent surfaces most strongly in Chapter 7, when the authors suggest the more appropriate analogy of an ecosystem that adapts and evolves through a process of growth rather than through the rigid assembly of machine-like parts. This is explored through an evocative account of a long-term experiment with growth on a prairie savanna—perhaps one of the most potent examples in the book of the way in which an understanding of the nature of complex systems can illuminate the circumstances of relative success or failure in the business place.

The final two chapters reiterate the main themes and concepts of the book by refracting them this time through three key leadership roles and ten rules for best practice, with the latter sectioned by strategy, organization and leadership. Overall, the real value of Competing on the Edge resides in the way in which the authors have been able to crystallize and cluster key insights through accounts from their own research encounters with managers and organizations. Yet paradoxically, the rigorous structure and iterative sectioning by which this is achieved place the authors themselves on the edge of underplaying the real-world complexity of lived experience from which they draw. However, as a reflection of the contemporary climate and culture of the “industries of change,” this book excels and provides managers with many compelling precedents for action.

ANNETTE KARSERAS