The winners in business have always played hardball. When a company plays hardball it means that they use every legitimate resource and strategy available to them to gain advantage over their competitors. When they achieve competitive advantage they use it to attract more customers, gain market share, boost profits, reward their employees, and weaken their competitors' positions. They then reinvest their gains in their businesses to improve product quality, expand their offerings, and improve their processes, to further strengthen their competitive advantage. When they can continue this virtuous cycle of activity for a prolonged period they can transform their competitive advantage into a position even more powerful and desirable -- they can achieve decisive advantage. With that, they put themselves into a far more powerful and influential position than that of just the market leader. They can use their decisive advantage to bring about fundamental change to an entire industry, put their competitors into a reactive position, cause their partners and suppliers to make adjustments, and deliver so much value to their customers that their market share grows larger still.
This kind of winning through competitive advantage may sound like nothing more than good, serious, and sensible business practice. But hardball companies are further distinguished by their attitude and behavior. They play with such a total commitment to the game, such a fierceness of execution, and such a relentless drive to maximize their strengths that they look very different from other companies that have admirable performance and sound business skills. Hardball players always play to win, in every aspect of the game. They always seek decisive victory. They don't want to win a 2-1 squeaker. They would prefer a 9-2 rout.
Softball players have no competitive advantage or, if they have one, may not know what it is or may be unable to exploit it. Some softballers can drift along for years, finding ways -- through trade loading, for example, or cost cutting -- to stay afloat from quarter to quarter. A few may seek to disguise their poor performance through activities -- such as creating shell customers -- that are questionable, if not illegal. In the parlance of pitching, such companies are throwing junk.
We believe that in our society it is the fundamental purpose of companies to compete as hard as they can against one another. In the September 13, 1970 edition of the New York Times Magazine Nobel laureate Milton Friedman quoted from his book, Capitalism and Freedom, when he wrote, "There is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
Friedman's comments sparked a debate about corporate purpose that raged in corporate suites across the country and around the world, in the halls of academe, and in the influential "chat societies" of our nation's capital. The debate continues to this day.
Bruce Henderson, founder of The Boston Consulting Group, fundamentally agreed with Friedman, but placed even more emphasis on the importance of competition. In 1973, troubled by the actions taken against IBM and AT&T in the name of competitive "fairness", Henderson wrote: "The leading competitor in every business should increase his market share steadily. Failure to do so is prima facie evidence of failure to compete."
Henderson went on to describe the virtuous cycle that creates decisive advantage. "Competitors' market shares should be unstable. Low cost competitors should displace higher cost competitors. Customers should share the benefits of lower cost through lower price with those suppliers who make it possible. Any failure to gain market share even with lower cost is self-evident restraint of trade..."
Henderson concluded by saying that companies that did not operate in this way would lead to a failure of their industry to "concentrate" (consolidate and improve), which would lead to an even larger failure -- "a failure of the national economy to optimize productivity and reduce inflation." In other words, as self-centered as playing hardball and seeking to win may appear, it is, in fact, essential to the health and strength of the larger economy and our society.
This book follows in the tradition of Milton Friedman, Bruce Henderson, and many others who believe that it is the function of companies to compete as hard as they can to gain customers and profits, with the goal of achieving the greatest advantage they can over their competitors.
