The business landscape of the past couple of decades is replete with companies that have flourished as third wheels, and with companies that have struggled to make money despite being No. 1 in their industries. (Today, would you rather be Honda or G.M.?) And while it’s true that in many industries there is a correlation between market share and profitability, one doesn’t necessarily lead to the other. A recent survey of the evidence on market share by J. Scott Armstrong and Kesten C. Green found that companies that adopt what they call “competitor-oriented objectives” actually end up hurting their own profitability. In other words, the more a company focusses on beating its competitors, rather than on the bottom line, the worse it is likely to do.

From “In Praise of Third Place” in the New Yorker. Believe it or not, the article starts out about video games, which is why I read it.

This actually ties in with the most recent case in my B-School class, on Capital One’s use of an information based strategy to target profitable customers, rather than going after market share.

Categories: Entertainment Media, Strategy, Video Games