Thursday, May 14, 2020

The Importance of Relativistic Competition and Theory

In a race what matters most is your position relative to your competitors'.  If everyone in a race is slow, then the winner must simply be less slow.  It's all relative. 

"It is not enough to do your best; you must know what to do, and then do your best." ~ W. Edwards Deming

Given the importance of relativity in winning, it is critical to understand how you are positioned against your competitors even in business.  This has traditionally been a very difficult exercise because of the lack of data.  Today, however, systems that use artificial intelligence can scan millions of data sources, multiple languages and dozens of news feeds for information related to your competitors.  This data when given value scores can generate a competitive ranking number that can be used to determine relative positions in a competitive field. 

“Without data you're just a person with an opinion.” ~ W. Edwards Deming

Only one company can be in 1st place in a competitive ranking.  That doesn't mean all the other companies are not profitable or competitive, just that they are in different relative positions.  The importance of competitive ranking is to help identify how different companies aka "competitive systems" deliver different results.  If a competitor with a better competitive ranking utilizes a different system than yours, then it is important to understand in what ways that system is an improvement over your's.

"Every system is perfectly designed to get the results it gets." ~ W. Edward Deming

According to quality improvement and management expert W. Edwards Deming, if a company is ranked behind a competitor, it is because their system is perfectly designed to place them there.  That of course means it is necessary to adjust the system to improve it, because as the saying goes, "If you always do what you have always done, you will always get what you have always gotten." 

Deming also taught that the purpose of capturing data is to provide a basis for action or a recommendation for action. In our discussion of relativistic competition, we would want data that shows how our competitors' systems are different from ours.  Once we have the data, we need an action plan, but first we need a prediction on the likely impact of that action.  The task of predicting means all managers must at times wear a futurist's hat according to Deming, "The management’s job is to look ahead and predict what the results of a particular action will be."  In order to make a rational prediction, however, there must first be a theory on how the action will impact results.  "Without theory there is nothing to modify or learn," wrote Deming. 

“This is a long, sad story... JC Penney offers no reason to shop there compared to its competitors, whether it’s Macy’s or T.J. Maxx or Walmart," said Ken Perkins, president of Retail Metrics, a retail research firm. 

In summary, it's important to know (i.e. measure) how you compare relative to your competition, both now and over time.  Scoring systems can define the ranking of both your's and your competition's "competitive systems."  So to improve your competitive position you need data.  The data will help you define an action plan.  An action plan requires a prediction.  A prediction on how the action will help accomplish your goals.  A prediction requires a theory.  A theory on how actions impact results.

For more read Deming's 14 Key Principles,
Kevin Benedict
Partner | Futurist | Leadership Strategies at TCS
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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I work with and have worked with many of the companies mentioned in my articles.