The Impossible Advantage E-Book

Wolfram Wördemann

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 387

Veröffentlichungsjahr: 2010

Beschreibung

Conventional business strategies tell you that differentiation, the right positioning, and defining your superior edge will turn you into the ‘best player’ in your market – but this is wrong. The Impossible Advantage reveals that success can be achieved by changing the market in which you operate, rather than trying to beat the competition.  The authors illustrate that the biggest, most spectacular and groundbreaking business success stories feature companies that make the rules – instead of just following them. The best companies seem to know how to break, change, or reinvent the rules of the market that everyone else follows.

This book:

• Will help you to break through to an entirely new level of thinking: winning the game by changing the rules in your own favour.
• Explains that you don’t need a technological breakthrough, product innovation or a massive marketing budget to change the rules of the competition.
• Shows you that you can become a ′game changer′ and gain a seemingly ‘impossible’ advantage even over far larger competitors, no matter how large your market or how small your segment is.
• Introduces you to four compelling ‘Game Changing Strategies’ that work for managers from any industry or business sector.

For more information on The Impossible Advantage, go to the official website: http://www.impossible-advantage.com

Leseprobe

Table of Contents

Title Page

Copyright Page

About the authors

Foreword

The surprising limitation of the World’s Number One business strategy

WHY THERE ARE LIMITS TO THE POWER OF POSITIONING

THE RULE MAKER’S ‘IMPOSSIBLE’ ADVANTAGE

GAME CHANGING STRATEGIES START WHERE POSITIONING STOPS

SIX PREJUDICES TO IGNORE

It’s time to think radically about growth

SOMEONE COMMITTED TO BREAKING ALL THE RULES

GAMES AS A STRATEGIC MODEL

FOUR CLASSICAL GAME STRATEGIES

WANTED: A ‘HIGHLY INFECTIOUS’ GAME CHANGING IDEA

OUR PLEA FOR FREE, OPEN AND RADICAL THINKING

First Game Strategy: redefining the measures of performance

INFLUENCE THE CRITERIA OF THE ‘CUSTOMER JURY’

HOW TO MAKE STRONGER OPPONENTS PLAY YOUR GAME

ATTACK ON AN ‘INVINCIBLE’ MARKET LEADER

SURPRISING ESCAPE FROM A PRICE WAR

HOW GLOBAL POWER PLAYERS RULE THE GAME

THE ESSENTIALS IN OVERVIEW

Second Game Strategy: reshaping the market landscape

HOW MARKET STRUCTURES ‘REGULATE’ THE COMPETITIVE GAME

BALANCING ACT BETWEEN FLOP AND GLOBAL SUCCESS

OUTFOXING A NEGATIVE TREND IN THE MARKET

HOW TO CONQUER ‘IMPOSSIBLE’ MARKET POTENTIAL

THE LAW OF THE SELF-FULFILLING PROPHECY

CHANGE THE WORLD WITH A RADICAL IDEA

THE ESSENTIALS IN OVERVIEW

Third Game Strategy: restaging the competitive confrontation

WHAT ARE ‘GAME PATTERNS’ AND HOW CAN YOU USE THEM?

‘STAGING’ THE COMPETITIVE CONFRONTATION - HOLLYWOOD-STYLE

LESSONS LEARNED FROM POLITICAL CAMPAIGNS

BREAKING FREE FROM A NEGATIVE ROLE PATTERN

MOVING OUT OF THE SHADOWS INTO THE LIMELIGHT

TURNING THE TIDE OF AN ALMOST-LOST BATTLE

THE ESSENTIALS IN OVERVIEW

Fourth Game Strategy: taking the Game to the next level

TAKING THE GAME TO THE NEXT LEVEL ... WHAT DOES THAT MEAN?

OLD ‘TOP DOGS’ CAN BECOME TERRIBLY SHORT SIGHTED ...

WHY IT TAKES SO LITTLE TO CONTROL A CATEGORY’S EVOLUTION!

COURAGEOUSLY SLAY THE SACRED COWS!

TAKE THE LEAD WHEN A VALUE SHIFT HITS THE MARKET

WHEN THE MARKET NEEDS A COMPLETE OVERHAUL

RADICAL VISIONS AND THEIR PITFALLS

THE ESSENTIALS IN OVERVIEW

How your business can profit from Game Strategy

1. EXPLORE THE ‘IDEAS THAT RULE THE MARKET’

2. NOTHING CAN BEAT A‘GAME CHANGING IDEA’

3. GAME CHANGERS CAN TAKE A CERTAIN DEGREE OF CONTROL IN THE MARKET - AND OVER ...

4. GAME STRATEGY AS A‘BEHAVIOR CHANGING’ INSTRUMENT

5. FINALLY ... GAME STRATEGY IS A TRULY ‘DEMOCRATIC’ TOOL

THE FIVE STEPS TO GAME STRATEGY

IT’S TIME TO EXPLORE YOUR OWN GAME CHANGING OPPORTUNITIES

After the Game

Postscript: how Game Strategy differs from Game Theory

Acknowledgements

Index

Copyright © 2009 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester West Sussex PO19 8SQ, England

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Based on a German work entitled Speilstrategien im Business: Die Regeln des Wettbewerbs verandern by Andreas Buchholz and Wolfram Wördemann, copyright © Campus Verlag 2008, published by Campus Verlag.

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About the authors

Andreas Buchholz, Wolfram Wördemann and Ned Wiley all began their professional careers at Procter & Gamble, where they occupied executive positions in marketing. Buchholz and Wördemann are management consultants for the development of ‘topline’ growth strategies, and have published numerous articles in the professional press, including the Harvard Business Manager. Wiley is the managing director of a new media operation of the Axel Springer group.

Foreword

This is a book written by marketing experts for entrepreneurs. Not for corporate employees seeking to work their way up the ladder, but for those who, whatever their status, look upon business as a creative and even risky task. It presents a Game Strategy which is based on an understanding of how to change, rather than follow the conventions of the marketplace. As the authors themselves suggest, this Game Strategy is designed for contrarians, ‘for people who think big and free.’ So be forewarned. This is not a handbook for the grey flannel bureaucrat.

But as the authors also argue, they have devised a truly democratic tool. You don’t have to be rich or prestigious, you don’t have to sit on a world-beating new technology in order to apply these guidelines. You don’t even have to have gone to business school. Its recommendations are applicable to the most dynamic independent corporate mogul or to a assistant beginning in the marketing division of Procter & Gamble, where the three authors began their careers. As the authors point out, the wisdom in this work is not limited to marketing or to business. They present a philosophy and a practical method for dealing creatively with challenges, whatever their origin. In fact, the authors suggest that political campaigns are perfect places to begin the study of their theories of Role Games and patterns.

Most surprising about the ideas in The Impossible Advantage is that they haven’t been widely spread among business and management schools for years. The authors have combed the literature and believe that their ideas have never before been presented as we have them in this book. I believe them, because if the ideas presented here had been revealed even in a less comprehensive form, they would long ago have been applied as one of the basic methods of problem solving at training schools all over the world.

This is one of those books which is almost obvious in the retrospective, but hard to imagine beforehand. Of course Ryanair owed its success to the way in which it created an entirely new concept for airline operations! They changed the rules of the Game. Of course the Swatch turned the entire chronologue industry on its head. Building your business on a cheap plastic watch broke every convention of the tradition-laden international watch industry. The analysis we are given as to why Ryanair or Swatch were in fact rule changing products are so logical, you wonder why you didn’t think of them yourself.

The basic point of this book is that simple: ‘... those players that take control of the rules in a competitive game enjoy a remarkable advantage over other players that strictly play by the rules.’

I knew that when I was ten years old. I used to tip over the Monopoly board every time my brother got too far ahead and demand that we start again. I usually got slugged in return. That was the risk-taking part of the strategy. But somehow I knew that the rules on the back of the box didn’t always serve my interests. What I didn’t know was how to turn this audacious behavior into a strategy for business success.

To correct that deficit, the authors take us through their strategy step-by-step. We start out learning exactly what a game is and is not. We then learn about the origin of rules and what they say about our culture. The authors then explain the concept of Game Masters, the persons and institutions who make up the rules. We are also introduced to the concept of the Game Changer, the person who turns the rules on end.

This is where it gets exciting. The authors point out that games in the marketplace are different from set piece games such as sporting competitions or Monopoly for that matter. In the marketplace, some of the players are also Rule Makers. ‘They are changing the rules of a game to their own advantage while they are playing it. Compared to ordinary players, they enjoy an advantage that would be nothing less than “impossible” in any formal game or competition.’

Formality versus flexibility. This is not a theory about breaking formal rules enforcedby a higher authority. It is a strategy for changing the ‘collection of prevailing ideas, concepts and conventions which competitors believe they must respect if they are to win.’ Amazingly, large percentages of business respondents believe that to be successful, they must abide by the established rules of the marketplace, whatever they are. Thus, Game Changers enjoy ‘An Impossible Advantage.’

This book takes you through the methods of gaining this ‘impossible advantage’ in considerable detail. They provide both analysis of how the market functions and of how to devise a strategy for success. It is from this standpoint, a hands-on guidebook for success. At the same time, it is peppered with fascinating historical background, from how the rules for soccer football were set by a group of persons in a room in England in the 1870’s to how an Indian-born economics Professor provided insights based on Game Strategy to help integrate poor countries into the globalized economy.

In fact, while the authors work hard to remain true to their marketing origins, they have written a book well-designed to help us understand many of the perplexing challenges of the globalized age. For most of its history, human society has generally been a fairly disorganized undertaking. Formal rules of business, government and national behavior are generally less than 300 years old. Game Changers were more widespread than were Game Masters for most of human history.

And that was the problem. As the industrial revolution gained steam, society could no longer tolerate the proliferation of Game Changers who had guided its affairs until then. Modern science and technology demands standardization and discipline. Wars are no longer friendly fights among rival Barons. They became catastrophic in their destructive effects. Game Changers became frowned upon. The Game Masters took over and the corporate bureaucrat was born.

The past twenty years have witnessed both dramatic advances in science and technology and an amazing release of human energy which accompanied the end of the Cold War. Whether they know it or not, the Game Masters are being swept away. Both political and industrial structures are changing fast. The result is confusion and at times conflict. Our 21st Century world is in desperate need of creative methods for understanding the new rules of a new age.

The Impossible Advantage will not answer all of the questions being thrown at us at the moment. But it can give us a very important framework for analyzing the confusion which has overtaken our societies and for helping understand how to overcome it. I wish specialists and general readers alike an enlightening journey through these chapters. I am sure you will enjoy it.

John C. Kornblum Berlin, January 2009

John Kornblum served as an American diplomat for more than 30 years before retiring in 2001 as Ambassador to Germany. Since then he has served as Chairman of Lazard Freres Germany (2002- 2008) and as a private advisor to a number of German and American firms. He has also served on the Advisory Boards of Bayer, Thyssen-Krupp Technologies, Motorola Europe and Russell Reynolds. Ambassador Kornblum lives in Berlin.

The surprising limitation of the World’s Number One business strategy

There are almost as many business strategies as there are stars in the sky, but throughout the 1980s, one of these strategies took root in the business landscape in a manner never seen before. We refer to the concept of ‘Positioning’. First introduced by Al Ries and Jack Trout in the 1970s, Positioning began its rise to prominence with their 1981 classic book, Positioning - The Battle for Your Mind.

The dominant role of Positioning as a business strategy is perhaps no better demonstrated than in a simple Google search. At the time of publication, a search for the keyword ‘Positioning’ returns six times as many results as the term ‘business strategy’, four times as many as the name of the US president and about as many as the high profile ‘climate change.’ Not bad for something originally conceived as an aid in the development of advertising campaigns!

WHY THERE ARE LIMITS TO THE POWER OF POSITIONING

Positioning has achieved this status of distinction because of its undeniable success. Brands have been built and companies founded on the basis of solid and distinctive Positionings. When it all first started about twenty years ago, the few corporations using smart Positioning techniques were able to achieve a lasting head start in the Competitive Game. The three authors of this book all started their careers at one of the world’s most respected ‘schools of marketing,’ Procter & Gamble. Positioning was - and remains - at the heart and soul of P&G’s marketing and advertising planning process. Nothing can be started without a succinct, precise summary of a brand’s fundamental Positioning, over which seemingly endless energy is expended in refining, polishing and perfecting, producing in the end a crystal-clear brand strategy statement.

Is Positioning still as powerful as it used to be? For the very reason that Positioning is now pretty much a standard tool in marketing, we are facing a situation today where you can expect that the majority of your competitors are as skilled in developing clever Positioning strategies as the marketing professionals in your own company. In other words, the concept of Positioning has substantially contributed to taking the Competitive Game to a higher level. Your own company, for instance, is undoubtedly playing the Game in the marketplace on a higher level these days than ten or twenty years ago - but so are most of your competitors. That is why we believe that it is time to stretch our strategic thinking a bit beyond Positioning.

It has always been the most natural thing in the world to compare competition with a game - just like football, basketball, baseball, tennis or chess. If we take that metaphor seriously, ‘Positioning’ is very much what the players do in any type of game to achieve a strategic or tactical advantage over competitors. Football players ‘position’ themselves, as do tennis players or chess players. Using the ‘game’ metaphor leads us to making an important statement about Positioning - and about its inherent limitation.

‘Positioning’ is what players do to achieve a competitive advantage. But when choosing their Positioning on the field (or marketplace), the players must respect certain limitations, namely the rules of the Game. These rules are accepted as part of the untouchable framework conditions in a game. In that sense, the rules of the Game limit your Positioning options as a player.1

It is as simple as that. The 64 squares of a chess field limit the Positioning possibilities of a chess player. Obviously, no chess player in the world - no matter how ingenious he may be - can position his figures beyond those 64 squares. That’s what the rules of the chess game define - and not even in our fondest dreams would we try to shake or break or reinvent those rules. What about the Competitive Game in business life?

As consultants and business executives we have observed over many years how companies in the most diverse business sectors deal with these ‘laws and rules’ of the ‘Competitive Game’ in the market. The vast majority act much like this chess player: they blindly respect the rules - as if they knew they were sure to lose if they shake, break or change them. At first glance, this makes a lot of sense, but then again, once in a while you come across a company or corporation that does exactly the opposite. By changing the rules of the Game, they liberate themselves from any limitations that stand in the way of dramatic and sustainable growth. By shaking or changing the rules, you can fundamentally ‘rock your market,’ dethrone competitors and achieve a sustainable leadership position. Most interestingly, it seems that any company can do this - even if they do not have a breakthrough product innovation or a market leader position or unlimited funds.

THE RULE MAKER’S ‘IMPOSSIBLE’ ADVANTAGE

Quite logically, those players that take control of the rules in a Competitive Game enjoy a remarkable advantage over other players who strictly play by the rules. In any formal game or competition, this would be unheard of, bizarre, virtually impossible. The rules are ‘taboo’ for the players - it is as simple as that. However, the Game in the marketplace is different: the players are also making the rules. Well, at least some of them do while the vast majority of players in the marketplace are happy with just playing along. They do not know much about the rules, let alone the fine art of changing them to their own advantage. Have you ever wondered what the ‘laws and the rules’ in your market really are and where they are coming from? Nobody has ever articulated or expressed these rules - neither in spoken words nor in writing. So why do we all believe we need to respect them and that we will fail in the Competitive Game if we don’t? Where do the rules come from? How does winning and losing in the marketplace depend on the rules of the Competitive Game - as opposed to more tangible competitive factors like product quality and innovation? How can you find out whether the rules of the Game are helping your company or whether they stand in the way of success? Most importantly, how can one company - yours, for instance - change the rules of the Game in your market to your own benefit?

This is the new aspect of business success that our book will address. To the best of our knowledge, it is the first publication of this kind. Go through the tons of business literature, methods and strategies, principles, insights and panaceas of the last twenty years. You won’t find much - if anything - about the rules of the Game in the marketplace. And most certainly, you won’t find out anywhere else why and how any company has the opportunity to change them to their own advantage.

GAME CHANGING STRATEGIES START WHERE POSITIONING STOPS

It was our realization that the ubiquitous concept of ‘Positioning’ had several inherent limitations that was the impetus for our development of what we call ‘Game Strategy.’ The fundamental premise of Game Strategy is that participants in the market can in fact change the so-called rules of the market, while the Game is being played. These participants are actually able to intervene in the underlying processes and rules governing the market, take control of them and turn them to their own advantage.

Game Strategy recognizes that the rules of the market can be changed and turned into powerful levers for growth and market success. In this way, Game Strategy is ultimately able to produce significant changes in the prevailing power relationships in the market.

In this book, we will demonstrate through concrete case histories across a broad range of product and service categories how individual firms are able to overturn apparently inviolable market rules, and in so doing dethrone previously all-powerful market leaders. We will also show how not only large and powerful companies are able to change the rules of the marketplace, but also smaller firms or even newcomers.

This book will show you four specific kinds of Game Strategy through which you, too, will be able to alter, modify and change the rules to your own advantage.

The ‘Positioning’ concept implicitly respects the laws and the rules of the market as part of the untouchable framework conditions in the Competitive Game. ‘Game Strategy’ goes further, challenging those rules and laws, modifying them and turning them into powerful levers for growth, and thereby shifting the market’s prevailing power relationships.

Game Strategy is something all firms, large, small or medium sized, can use to their advantage. It does not require breakthrough technical innovation or extraordinary levels of marketing and sales investments. It does require a fresh, new way of thinking.

SIX PREJUDICES TO IGNORE

In most situations in life we are used to following rules that somebody else defined - and only rarely do we assume the role of the ‘rule maker.’ From earliest childhood, most of us have been taught and trained to follow rules - and were punished if we broke them and frustrated if we tried to change them. All of life’s experiences teach us the same thing: ‘If you want to win the Game, you have to follow the rules.’

Game Strategy works only when you are prepared to challenge previously accepted rules and laws, and do so with absolutely no ‘taboos’ in your thinking. You have to ignore mental prejudices, such as these:

1. ‘The only ones who can change the rules of the Game are the big players, the market leaders, the guys with huge resources and all the time they need. That’s not our situation. We don’t have either the capital or time needed. At the end of it all, we would end up stretched way beyond our limits.’

2. ‘The rules in our market have evolved over years, or decades, or even centuries. They are what they are, and that’s that. As a single company, all on our own, we can’t do much about it.’

3. ‘By the rules of the Game, I’m talking about legislation, namely the political, regulatory and legal framework conditions in the marketplace. That’s why we have lobbyists, whose job is to represent our interests to the politicians. Our lobbyists will do whatever is possible in the political arena.’

4. ‘Why should I risk everything by trying to change the rules of my market? We have more than enough problems in trying to sell our current products and services. That’s where we have to put 100% of our focus.’

5. ‘Sure, it would be great to revolutionize the market, but to do that you’ve got to have a technological breakthrough or a truly groundbreaking product innovation. There’s just no realistic chance of that. So we had better play it safe.’

6. ‘Lots of people have tried to change the rules of the market and all they have to show for it is a big black eye. Too risky. If we try it, things will spin out of control, and then the competition and the media will finish us off. We just cannot afford to take that risk.’

By and large, these reservations are very understandable. However, they all impose drastic limits to the kind of thinking and perspective needed to realize truly outstanding potential in the marketplace. Only if you accept no taboos in your thinking will you be able to recognize and capitalize on all of the opportunities the market offers.

Our analysis and conclusions are all based on real case histories and supported by our collective experience as managers and consultants across a broad range of business sectors. The Game Strategy thought process is applicable to managers in all sectors, at all levels of the organization and across all professional disciplines. We have consciously avoided a lot of the marketing and management jargon all too often used in this field, in order to encourage a range of managers from different disciplines to get personally involved with the critical issue of marketplace growth.

After reading this book, we hope you will have a very different view of your market, your competition, your own position in the market and certainly your own growth potential. Above all, we hope to have offered you a new way of thinking, able to give you the inspiration needed to steer the way to dramatic growth in the years ahead. With this in mind, let’s get ready to find out how Game Strategy works!

It’s time to think radically about growth

A recent survey showed that over 80% of all managers in companies of any size believe it is critical to understand and follow the rules of the Game in the marketplace, if they want to count among the winners. While that may be true, our observation is that the biggest winners are those that do the exact opposite. Firms that throw the conventions of the market overboard and invent their own game. These companies - we call them ‘Game Masters’ or ‘Game Changers’ - are the ones who come up with the real marketplace breakthroughs and achieve astonishing growth - not just a few tenths of a market share point but big, even leadership, shares. Here’s the good news: the art of these Game Masters is something you can learn. There are tried and tested strategies for success that in principle ‘anyone’ can employ. All you have to do is change your entire way of thinking!

Let us start with an example from the airline business, in Europe, in 1985. Tony Ryan is an Irish entrepreneur who has just founded a new airline, called (what else?) Ryanair. His aim is to challenge the national flag carrier Aer Lingus. Tony’s company gets big quickly - unfortunately, so do its debts. After three years of trying, Ryanair stands on the brink of bankruptcy. Tony then hires a chartered accountant by the name of Michael O‘Leary to tackle this problem. After having a quick look at the sad state of affairs, Michael tells Tony to close the books and call it a day. What he doesn’t count on is Tony’s strength of will: he refuses to fail and hires O’Leary as CEO, giving him a simple brief: ‘Turn it around.’ The rest, as they say, is history.

SOMEONE COMMITTED TO BREAKING ALL THE RULES

O’Leary didn’t have any time to lose, but what he did was nothing less than lay the foundations for a completely new market in Europe: budget air travel. Borrowing from the US success story of Southwest Airlines, O’Leary created this market in Europe out of not a lot more than ‘thin air.’ He started from scratch, throwing out almost all the ‘rules and laws’ of the traditional airline business.

First, O‘Leary asked himself a lot of questions: Where is it written in stone that airlines have to fly from major metropolitan centers? Nowhere, so he decided that Ryanair should fly exclusively from second-tier airports in provincial cities and towns. Who needs complicated route structures? Ryanair routes are without exception point to point. Who says that only long distance routes are profitable? O’Leary built an extremely efficient ‘shuttle’ service on short routes. Why do you need to have a fleet made up of different types of aircraft? Ryanair concentrates on one single model of airplane. What’s the point of business class? Why have an airport lounge? Why do you need check-in terminals at the airport, employing expensive staff? To cut down on staffing, Ryanair runs almost all of its booking through the Internet or a call center. Why does everyone seem to believe that on-board service is a ‘must’? To further reduce staff, Ryanair avoids any kind of in-flight entertainment or free meals. Under O‘Leary, the company even got rid of free peanuts, not because they were particularly expensive, but rather because they increased cabin cleaning costs. Which law says that an airline has to make money on the transporting of passengers? Ryanair makes its profit on ancillary businesses: O’Leary established partnerships with firms in the tourism business. He rents out the space on the back of his seats to advertisers instead of having a seatback pocket. He sells meals, snacks and drinks. Most recently, he has announced plans to launch a fee-charging, in-flight Internet telephone service. This collection of related businesses represents a full 16% of total revenues, and is projected to rise to 25%. O’Leary even dreams of one day giving away the flight tickets! You pay for the other bits and pieces, but the flight is on Ryanair.

In a nutshell, Ryanair broke with just about every single established convention and rule in the market. O’Leary reinvented flying and his new low-cost airline market operates according to totally different rules and laws. As a result, the new type of airline transports double the number of passengers for half the cost of traditional carriers. A flight from London to Linz (or from Frankfurt to Fuerteventura for that matter) costs about 10 euros. That’s flying at the price of a taxi, assuming, of course, that you only take the cab to the corner store.

Budget Air Travel Runs Wild

Here is a boom like nothing we’ve seen for a long time. One of the world’s most traditional markets was so fundamentally reinvented that it defied the laws of global competition. September 11, 2001 plunged the entire global tourism industry into a deep crisis. To everyone’s amazement, that is exactly when the low-cost airline boom began. Like mushrooms, budget flyers sprang up out of the ground all across Europe and proved to an astonished financial world that - in sharp contrast to traditional ‘premium’ airlines - they could make fistfuls of profits during a major economic downturn. When things were at their absolute nadir - 2003 - Ryanair placed an order with Boeing for 100 brand new planes at a cost of over sixty billion dollars O‘Leary was able to negotiate a hefty 40% discount and smiled when commenting on the event: ‘During the time after September 11, 2001, I was the only one who called Boeing wanting to place an order.’

The big, state-owned airlines were put in a tremendous squeeze. It was therefore no surprise when they responded by creating their own low-cost copycats - like Lufthansa with GermanWings - but all to no avail: the original low-cost airlines, with faster turnarounds and city-to-city ‘shuttle’ services, just had too much of an advantage on the short haul routes. At one point, British Airways considered throwing in the towel, and concentrating exclusively on long haul routes. It looks like ‘David’ is putting the big, national ‘Goliath’ under quite a bit of pressure!

Then came the ultimate symbolic triumph in the battle with the national airlines: just a week after the Irish government privatized Aer Lingus, O’Leary made a takeover bid for the national carrier to a tune of about 1.5 billion euros. Panic spread through the Irish government, who at first refused to relinquish their 25% share in the flag carrier.

At this point, low-cost airlines were no longer a niche market, but the growth motor for the entire sector. By 2004, in Europe alone, there were 54 low-cost airlines, with a collective market share of 30 to 35%. By 2010, low-cost carriers are projected to account for about 40% of the market. The greatest beneficiary of this trend is the company that started it all: Ryanair, with an annual turnover today of over 2.7 billion euros and a pre-tax profit of 480 million euros. Before the end of this decade, Ryanair is a serious contender to become the largest airline in Europe, by almost all standards of measurement.

The Revolution Gains Momentum and Affects Adjacent Markets

Provincial airports used to be pleasant, sleepy little places, with a lot of historical charm. Not since budget carriers came to be. The former US Airforce base at Hahn in northern Germany has announced an expansion plan costing 200 million euros. The German federal government wants to revive old decommissioned rail connections to Hahn at a cost of 100 million euros. And here’s one crazy fact: not only is the operator of the main Frankfurt airport, Fraport, involved with Hahn’s revival, but so is Lufthansa, through its participation in Fraport. The media has loads of fun with the fact that Lufthansa is actually helping its low-cost competitors to grow even larger.

Lots of other industries have been affected, in some surprising areas. Take, for instance, the bus business: the manufacturers’ association reports declines in new registrations for tour and city buses in the range of 10%. The leading German newspaper, FAZ, reports ‘Low-cost airlines are a plague on the bus industry.’ Even the national railways cannot avoid the effect of budget flyers: first class luxury train service from Cologne to Hamburg had to be downgraded to a normal service. According to the head of the German railways, Hartmut Mehdorn, since the arrival of budget air travel, the luxury train simply no longer made economic sense.

Tour companies are also complaining: the CEO of Alltours, Verhuven, said that it is ‘absurd’ when a train ticket from Düsseldorf to Frankfurt costs more than a plane ticket from Düsseldorf to Rome. His solution is government price controls in the form of ‘national minimum air ticket prices’ together with a ban on all forms of subsidies for low-cost airlines - this from the man running one of the leaders in the low-cost travel sector.

One of the other side-effects of the structural change caused by the boom in low-cost air travel has been unprecedented competition among airports. Airport authorities across Europe are fighting furiously to secure low-cost airlines. The appeal of these carriers is the highly profitable ‘nonaviation’ business: duty-free shops, restaurants, boutiques and parking garages. These businesses represent together almost 30% of an airport’s total revenues. Who would have thought it possible: airports fighting tooth and nail for low-cost carriers! The winners, the ones who secure slots for the budget carriers, will have to introduce new standards of speed and efficiency, probably through outsourcing. Now that business travelers have discovered the advantages of low-cost carriers, even the biggest airports are going to have to get downright dirty to compete with their cheaper provincial rivals. ‘Any airport not slotting low-cost airlines is going to find it tough going in the future,’ according to one industry source.

Not surprisingly, local politicians are also jumping on the budget airline bandwagon as a means to enhance the attractiveness of their locations. Take, for example, Weeze am Niederrhein, not exactly a household name, but near the Dutch border and the beneficiary of an array of state subsidies geared to attract low-cost carriers and thereby maintain jobs in an otherwise economically distressed region.

The low-cost airline boom shows no sign of relenting. On the contrary, it is now migrating from Europe to Russia, Asia and Africa. Especially in Asia, low-cost travel is the foundation for air travel as a whole, offering accessible flights to a huge emerging middle class for whom flying used to be a dream beyond their reach. Asia has over 130 cities with a population in excess of a million, but without a single international flight connection: these are the first targets of the low-cost carriers. Growth is so dramatic that infrastructure lags far behind. Indian and African operators are forced to hire staff from abroad and build airports on 24-hour construction schedules. Of course, now the low-cost carriers face new challenges, in the form of exploding fuel costs and a worldwide economic downturn. But the airline business will never be the same again.

Get Your Mind Ready for Game Strategy

If you want to benefit from Game Strategy, you must be prepared for a different way of thinking. You need to be inspired by something greater than next quarter’s financials. You have got to crave a greater measure of growth than you have committed to in your ordinary annual business plan. What does it take to achieve a real breakthrough in the market or turn around a disastrous sales decline? Let’s assume you don’t have a secret, groundbreaking innovation in the pipeline and you don’t have a limitless supply of capital. Now what? Do you still have a realistic chance of marketplace success? Yes, you most certainly do! There are lots of examples of companies that have done just that, including some that started out very small indeed. Newcomers, too. Our conclusion is that no company should accept there is a good reason why they cannot be the next success story in their market.

One thing ought to be clear at this point: if you want dramatically greater growth in the marketplace, you obviously cannot just continue with the same strategies, the same tools and the same kind of thinking that was good enough to get you to where you stand now. Start by thinking differently and not just differently from the competition, but literally liberate yourself from your past thinking routines and past strategy templates.

If you want breakthrough growth, you have got to go beyond conventional business thinking and today’s standard strategy routines. If they have not generated the next great idea in the past, how can they provide the crucial, decisive inspiration the future demands?

How Rule Breakers Change the Competitive Game

Michael O‘Leary is going well beyond ‘Positioning’ his airline: instead of simply playing along with the other competitors, he created entirely new conditions in the market and started a new game based on his own rules. He put himself above all of the laws and conventions that had defined the airline business for decades, threw out the rules of the market and created the conditions for a spectacular success story. Nothing, but nothing, was sacred to O’Leary.

Why take off from the big airports in metropolitan centers? Why have complicated route structures? Why have expensive administration, why check-in terminals? Who needs business class or airport lounges? Why not make money with additional services? Why can’t flying be for free?

That is what makes ‘Game Masters’ different: they measure their goals against the rules of the Game and then defy those rules or establish new ones. That doesn’t mean they pigheadedly go against all norms and standards, but they are prepared to do so when the conventional rules of the Game stand in their way and limit opportunities to grow their business. That is what distinguishes them from the other players in the market, the ones who slavishly adhere to accepted rules. The entire crew of distinguished managers in the European airline industry behaved in a time-honored fashion for decades, and many of them did very well in the process. Then from out of the blue comes Ryanair and turns the Competitive Game upside down.

Rule breakers and Game Changers tend not to be the old hands in the market, but rather are newcomers and outsiders. Up to the end of the 1990s, the head of Lufthansa, Jürgen Weber, insisted that there was no market for low-cost airlines in Germany. O‘Leary scoffed back, ‘How the devil does he know that? I’ll bet the Germans will crawl over broken glass to get them.’

Revolutions Need ‘Game Changing Ideas’ More Than Anything Else

When O’Leary started out, he didn’t have a lot going for him: no technological innovation, not a single patent, no meaningful financial capital. In fact, he was looking at a huge mountain of debt. He didn’t possess any marketing dominance and he wasn’t much more than a speck of dust on the market’s radar screen.

Even the idea of low-cost air travel wasn’t new, but something as old as the twelve-year Irish whiskey O‘Leary was known to imbibe on occasion. He ‘borrowed’ the idea from Southwest Airlines in Texas. For twelve long years this idea had been aging in the cellar of the industry, but none of the old hands took any notice of it.

O‘Leary wasn’t smarter, more intelligent, more creative or more experienced than other airline managers. What he did possess was a large measure of audacious, free, radical thinking. He had a combination of fresh perspective and an ingrained lack of respect for rules of any kind. As a university student, he had his Mercedes registered as a taxi in order to drive on the bus lanes of Dublin’s streets. O’Leary is a notorious contrarian. It is not for nothing that leading business magazines characterize him as the ‘mad Irishman,’ the ‘Irish Asterix,’ the ‘pirate of the sky.’

It’s Time to Venture Beyond Conventional Business Strategies

There are lots of proven business strategies. They all claim to show how to generate growth - most of the time, however, they do this within the ‘accepted’ parameters of the marketplace. But where are the textbooks, where are the strategy experts, the business gurus who have ever asked, ‘What are the rules of the marketplace game? Who made them? How do they influence the Game in the market? Who uses them and who suffers from them? Who can influence them, and how exactly do you do that?’

Game Strategy starts where most business strategies stop, with the rules of the market, and goes on to demonstrate how those rules can be reinvented, deliberately and systematically.

Game Strategy focuses some very bright spotlights on the rules of the Game. That is something new. Our reason for doing this is simple: the biggest success stories come from companies that break the accepted rules of the Game and, in so doing, achieve tremendous growth.

Game Strategy should not be viewed as a substitute for other proven strategic approaches. It should be looked on as a way to create a dramatic shift in the market, without any need for limitless resources.

Game Strategy is designed for contrarians, for people who think big and free. Its source of inspiration is a radical and free approach. Game Strategy helps you to dissolve old thought patterns and unleash your mind. Who among us is completely free of templates, blinkers and tunnel vision? What we offer you with Game Strategy is an array of exciting case histories, we will show you how you can form, dominate, steer, change or even reinvent the marketplace game. The skills we put on offer are not only useful, but downright fun!

GAMES AS A STRATEGIC MODEL

Let’s start at the beginning, with what seems like a very simple question, but which in fact turns out to be extremely complex: What is a game? Every child knows what it means to play, but for some reason it takes philosophers, encyclopaedists, academic experts in culture and behavioral theory, mathematicians and Nobel Prize winners to arrive at a halfway reasonable definition. Not surprisingly, a lot of these attempts to define play become academic, turgid and inaccessible; they lose all of the freshness, spontaneity and creativity that should be at the heart of playing.

Fortunately for this book - and for our strategic model - a pragmatic rule of thumb and one-line definition is sufficient:

A Game is any form of competition governed by rules.

That’s just fine. To get started you don’t need a more detailed definition. This single sentence is enough, because it gets to the essence of the matter: the rules of the Game. Those rules are what differentiate games from other ‘unruly’ forms of competition - primitive battles, for example, fought according to the ‘law of the jungle.’

Competition in the marketplace is ‘regulated’ as we will see despite occasional complaints about unscrupulous ‘predatory capitalism’. Obviously, this is a dramatic distortion of the truth. By and large, no one doubts that the often cited ‘rules and laws of the marketplace’ also apply today. The rules of the Game fulfill the fundamental function of providing that degree of ‘order’ that permits the Game to function at all.

A Brief Trip Back in Time to the Origin of the Rules of the Game

In dimmest pre-history, the ‘law of the jungle’ prevailed, while today regulated competition applies. How did this change come about? Where do games and rules come from?

Scientists have made a connection between the origin of games and the origin of culture more broadly. Human evolution is based on four essential factors: (1) the development of language; (2) the invention and use of tools; (3) the mastery of fire and (4) the development of explicit rules that define living together in society. Cultural historians speak of ‘Homo ludens’ - the playing man - and contrast him with ‘Homo sapiens’, the ‘wise man’. As part of the process of becoming human, the primitive ‘laws of the jungle’ are gradually replaced by social rules. The individual must subordinate his own interests to the interests of the group in which he lives. Conflicts of interest are handled in a ‘regulated’ manner.

The discovery of games and their rules represents a cultural and historical achievement, and ultimately a milestone on the long evolutionary path from apes to man. There is still a long way to go from there to classical, formal games, such as board games or those involving dice and athletic competitions. The first board game on record dates to the year 2800 BC and takes us to ancient Egypt. The first recorded athletic competition was the Olympic Games, held for the first time in Greece in 776 BC.

The rules of the Game for the marketplace are as old as the marketplace itself. As soon as man built cities, he also founded markets, with a kind of behavioral code that ‘regulated’ the commercial games of the time. During the Middle Ages, market practices were controlled by trade guilds. Even today, some fragments of these old codes of honor survive - in the ethics of the Hanseatic trader or the Italian correttezza commerciale.

The Second, Higher Level of Games