I am currently watching a captivating sci-fi series on Netflix called “A Three-Body Problem,” based on the trilogy of books by Chinese author Liu Cixin. The show revolves around aliens threatening to take over the world, and humans strategically using deterrents to prevent this catastrophe.

What initially piqued my interest was the realisation that the show’s themes were equally applicable to the business world. In competitive markets, businesses employ strategic deterrents to discourage rivals, retain customers, and protect their competitive advantages.

While deterrents are often overlooked in traditional strategy playbooks, they play a crucial role in sustaining long-term competitive edge.

Deterrents can manifest in various forms, including price strategies (such as bundling and long-term contracts), capabilities (like unique technology and supply chain mastery), reputation (building brand trust and a track record), networks (ecosystems, loyalty programs, and switching costs), and legal/regulatory measures (like patents, licenses, and tariffs!).

However, it is essential to use deterrents judiciously. Over-reliance can make companies defensive rather than innovative, or even damage customer trust if barriers feel exploitative.

The most successful firms strike a balance between deterrents and genuine value creation, ensuring they protect their position while still winning customers by choice, not just through lock-in.

Recent examples of deterrents in action include the ecosystems of technology companies. For instance, Apple’s devices, services, and apps make switching costly, while Microsoft bundled Internet Explorer with Windows in the 1990s as a software deterrent.

Closer to home, many of our large-scale manufacturing businesses make excessive use of regulatory deterrents in their bid to face less competition from imports!

Deterrents are proactive, aiming to shape the competitive environment before rivals act. For deterrents to be successful they have to be designed to make competitors believe in their potential effectiveness.

Defensive strategies, on the other hand, are reactive, responding to emerging competitive threats. Effective businesses strike a balance between both, building deterrents to discourage attacks while remaining agile enough to defend when disruption occurs.

Now, back to watching humans deter aliens from taking over this beautiful, bad world.😄