Richard D' Aveni
most recent research on strategic supremacy
«Corporations compete and cooperate
for power and turf like countries»
Interview by Jorge
Nascimento Rodrigues, September 2004
The Art of War in business is an
old management practice. But American professor Richard
D'Aveni just "pulled" this strategic competence
to the forefront of management trends in the XXI st
Century. His recent "The Balance of Power",
an essay published at Sloan Management Review online,
calls for the attention of executives and business schools
to trivial concepts from geopolitics like "spheres
D'Aveni talked with Jorge Nascimento Rodrigues, editor
of Gurusonline, this Summer, and pointed out: "Business
schools are run by economists for the most part, so
they focus on economic models rather than political
models of the world. But I hope my book and my recent
MIT Sloan Management Review articles on Corporate Spheres
of Influence and The Balance of Power will help make
this point more apparent".
Richard D'Aveni is professor of strategic management
at the Tuck School of Business, Dartmouth College, and
author of various books, like Strategic Supremacy (2002),
Hypercompetitive Rivalries (1995), considered by Fortune
as "a modern day analogue to The Art of War",
and Hypercompetition (1994).
«The Balance of Power»
Strategic supremacy in business requires 'warfare'
Strategic Supremacy is as much about diplomacy as it
is about business war. The goal is to create a more
favorable world order. Fighting a business war is just
one tool. Alliances, tacit cooperation, and limited,
targeted or guerilla wars are also tools in creating
and maintaining the balance of power among major rivals
in an industry.
Geostrategy and realpolitik concepts are useful -
and unavoidable - for managers and entrepreneurs?
Yes. Corporations compete and cooperate for power and
turf just like countries do. So managers must be cognizant
of this and manage the process.
What you mean when you talk of a gap between "grand
strategy" at top management level and poor operational
tactics at the business level?
Many firms explicitly or implicitly set a grand strategy-let's
say to contain the growing power of a specific rival
and to dominate a part of the global competitive space
in which a second rival has no interest-then the divisions
or country-based subsidiaries frequently fail to contain
the targeted rival and inadvertently trigger a competitive
battle with the second rival by entering that rival's
territory. The firm unintentionally, due to the lack
of understanding of its divisions about the corporation's
grand strategy, ends up fighting the wrong battle.
Do you think business schools are aware of this new
No. They are not. Business schools are run by economists
for the most part, so they focus on economic models
rather than political models of the world. But I hope
my book and my recent MIT Sloan Management Review articles
on Corporate Spheres of Influence and The Balance of
Power will help make this point more apparent.
From the corporate examples you studied what case
impressed you more and why?
I think the changes in the global brewing industry are
very interesting right now. Anheuser Busch has a strong
sphere in the USA, but the global maneuvering of Interbrew/AmBev
(in Europe and Latin America) and SAB/Miller (in South
Africa, the USA and China) are changing the balance
of power in the industry. So we are watching the spheres
of influence change before our eyes and the balance
of power is also shifting.
Adjacent diversification and conglomeration
don't recognize that firms must dominate a core market
and use buffer zones to defend the core against rivals,
as well as use forward positions to attack rivals and
change the balance of power in their industries.
Do you think language and cultural links are decisive
for geographic spheres of influence?
I think in practice they are, but the best global firms
will overcome these problems.
People discuss a lot about adjacent diversification
and conglomeration (usually based on unrelated diversification)
as strategic tools to prevent surprises in a turbulent
business world. What's the relationship with your approach?
Adjacent diversification and conglomeration don't recognize
that firms must dominate a core market and use buffer
zones to defend the core against rivals, as well as
use forward positions to attack rivals and change the
balance of power in their industries. Adjacent diversification
theory focuses on creating and exploiting synergies
(which is the role of vital interests in the sphere
of influence framework) and conglomeration theory focuses
on diversifying risks. However, neither approach considers
the impact that portfolios have on competitors-they
act as if competitors are irrelevant in making portfolio
decisions. And the conglomeration approach ignores the
risks created by getting spread too thin.
What are the main symptoms of a sphere of influence's
The biggest problem with most companies that have spheres
of influence is that they keep growing until they become
overstretched. That is, they don't have the resources
to do a good job in all parts of the sphere and the
firms becomes a lightening rod attracting strikes from
so many competitors that the sphere becomes like the
Roman Empire in its later stages.
E-mail contact: Richard.A.D'Aveni@Dartmouth.edu
© Gurusonline.tv, 2004