Use rivalry to spur innovation in your company

May 31, 2010 Business Daily, Strategy

“It is difficult to overstate the extent to which the Renaissance was built on the professional rivalries of its major figures. While these men generally held each other in deep respect and esteem, they also competed passionately against each other for commissions, recognition, and prestige. Competition can sometimes yield petulance and destructive energy. But rivalry during the Renaissance seems to have contributed to a competitive culture that bred creativity and innovation. Artists were rivals—but they were also colleagues and frequently friends. To compete, they borrowed from one another, drawing on the techniques and innovations that they most admired from their peers.”

Bernard T. Ferrari and Jessica Goethals, McKinsey Quarterly (May 2010)

A chief executive I have a great deal of respect for called me into his office a few years ago. His company was the unsurpassed leader in its industry, having seen off many pretenders. But at that time an international competitor had set up shop in Kenya, and had announced significant plans to place a strategic footprint in the country.

The CEO asked me to hold a strategy workshop for his key staff, highlighting the new competitive threat and designing a concerted and urgent plan of action. “But why?” I asked. “It will take this competitor years to set up its operations properly. And the key competencies that have created your dominance are secure and entrenched. Are you really worried by this development?”

He smiled and replied: “Not worried – delighted. I need this competitor badly. My biggest fear is that my people will take our recent success for granted, will relax and become complacent, and one day will be vulnerable to attack. I don’t really think this particular new entrant will cause us much worry. But I don’t want you to say that. I want you to play up their prowess and exaggerate the threat. This is a welcome entry. Let’s make my people measure up against a credible competitor again, and put the fear of failure back into them.”

Wise words, and a wise attitude. I remembered that conversation recently when I came across the piece highlighted here in the McKinsey Quarterly. The Italian Renaissance was a remarkable period in European history. It took place in the 15th century, and its three main centres – Rome, Florence and Venice – had a combined population of no more than 200,000. Yet it produced some remarkable breakthroughs in innovation: in masonry, architecture, painting, glass-blowing, type-setting and many more.

The McKinsey authors tell us that a large force driving this amazing burst of progress was professional rivalry. In art, for example, this was the era of Leonardo, Michelangelo, Raphael, and Titian, and each was trying to outdo the others. This is equally true in many phases of history. Colonialists’ conquests of foreign lands were accelerated when the major powers were in a race to grab the most resource-rich territories. We (and particularly men) achieve most when there is a team to play against.

We have seen this phenomenon in Kenya. Not too long ago banking was a turgid and fossilized industry, disdainful of customers and utterly lacking in innovation. Today, banks open all hours, keep launching new products every other month, and bring banking to you via websites, ATMs, mobile phones and visits to your office. All of that happened because some game changers entered the market and created a spirit of rivalry – and panic – in the industry.

So my CEO friend was right. Competitive rivalry, rather than viewed as threatening, should be embraced. It is the best spur to innovation that we have, the most effective way to light fires under our people and provide benchmarks. And it has certainly served him well: his company launched a series of innovations and deepened its bond with customers as a result of the competitive threat. It remains the market leader.