Every sports fan knows the story of a sports team that reached its competitive peak at the right time on the road to championship victory. The Pittsburgh Steelers won the 2006 Super Bowl despite only having the second-best record in their division. Plus, they had to overcome the massive hurdle of playing three straight road playoff games in front of hostile crowds. Entering the tournament, the Steelers were underdogs to win a championship. But they did.
The level of competition they faced brought out the best in the Steelers.
In any field, competition is needed to enhance the vitality of the participants. A capitalist economy thrives on the ability of individuals, businesses, and organizations to compete, some winning, some failing, all contributing to the new stream of innovation that is the lifeblood of a vibrant society.
Entrepreneurs are the key purveyors of new ideas and creativity, especially in the United States. The fact that competition is so brutal, aggressive and omnipresent in search of new opportunities is of great benefit in keeping entrepreneurs alert, motivated and ahead of the curve. Inventors should anticipate that competitors will go to great lengths to circumvent novel features included in their product. This anticipation motivates them to create value-added features that are even more responsive to the competition and provide consumers with new utility and novelty.
Why is private business so much more efficient than public organizations? The most elementary answer: competition! There is an inefficient post office. There are many competitors in the package service (FedEX, DHL, UPS, etc.) The Post Office is subsidized: private companies must fight for market share, efficiency and profits. They can go out of business, the post office never will.
All state airlines (Alitalia, Air France, Varig, etc.) are bankrupt. At the same time, new private carriers (Easy Jet, Ryan Air, etc.) are entering the market and thriving. Competition creates opportunities and penalizes static business models.
Computer Associates, Wang, Digital Equipment, Gateway, and many other companies preempted Dell Computer in assembling and marketing the personal computer. Dell has been spectacularly successful, while nearly all of the early adopters are out of business, significantly downsized, or merged. Dell entered this brutally competitive product category with a new business model (production customization and direct sales). This disruptive model has proven to be very profitable and popular with consumers. Dell continues to evolve and introduce new technologies in a never-ending effort to constantly reinvent itself and remain competitive.
35 years ago, Revlon was the world’s dominant cosmetics brand. Ultima was Revlon’s luxury powerhouse, the Revlon brand dominated the mid-market, and Realistic was a salon powerhouse. Revlon’s founder, Charles Revson, was an innovator and a visionary. He once commented, “I don’t sell lipstick, I sell hope.” Unfortunately, after his death 25 years ago, the company was run by a series of financial accountants. Innovation was downplayed. The risk was out. Revlon hasn’t had a huge product success since Charlie fragrance, more than 25 years ago. Today, Revlon is nothing more than a shell of its former glorious self. Ultima doesn’t even exist. Innovative competitors like Estee Lauder, L’Oreal, Redken and Paul Mitchell, Mac, Bobbie Brown, and many more have chopped and chopped until Revlon is almost a corpse. Competition forces companies to innovate and evolve, or die – witness Revlon.
Many entrepreneurs fear competition for understandable reasons. Many have weak intellectual property protection. They fear that a larger, more mature company will attack them head-on with a version of their product. The constant worry of being overwhelmed by an opponent with higher resource levels is daunting. However, the lesson to be learned from the competition is simple: it is always going to be there and you have to face it with courage and creativity.
Sticking your head in the sand is not a realistic response to competitive threats. They are real and ubiquitous. “Survival of the fittest” doesn’t just apply to the natural world, it applies to the business world as well. To be one of the fittest, the entrepreneur must remain innovative and think outside the box. As Satchel Paige said, “don’t look back, someone might be closing in on you.” I like, “you’re never the best, just last.”
The successful entrepreneur is always looking for ways to improve their business model, add features, improve performance, and anticipate the strategy that competitors might use to overcome their market advantages. The ability to survive and prosper requires entrepreneurs to be flexible, quick, and opportunistic—all qualities that larger rivals often lack. Tap into your entrepreneurial instincts. Large entities often make decisions by committee and consensus. Speed and agility are their natural advantages.
Competition keeps the economic blood running free and pure. When an entrepreneur is successful, it is easy to identify the elements most responsible for that success. Equally important is that every failure is turned into an educational opportunity. It’s okay to make mistakes: once! Learn from mistakes and don’t repeat them.
Competition ensures that our modern world continually advances, improving and weeding out the weak, thus rewarding and encouraging the strong. The benefits of competition in a free economy are reflected in the vitality and prosperity of the population. Compare this to state controlled countries where central planning eliminates the creativity and disruptive innovation provided by entrepreneurs. No competition creates a disincentive to growth, opportunity, and a healthy economic life so essential to human satisfaction.