THE BLOG
05/10/2013 03:24 pm ET Updated Jul 10, 2013

The Protozoan Principle

Soviet scientist G F Gause put two protozoans of difference species in a glass jar with limited food. The little creatures shared the food and both survived. Then he put two organisms of the same species in a jar, with the same amount of food as before. This time, they fought and died.

Charles Darwin anticipated the experiments when he wrote, "We can dimly see why the competition should be most severe between allied forms, which fill nearly the same place in the economy of nature."

To survive, in business as in the lab, you've got to be different.

Gause's experiments revealed three outcomes from the protozoan wars:

• Co-existence. Two species can each invade each other's space. The boundaries between them break down. They end up coexisting in the same space, but if they are too similar and there is limited food, some or all of the creatures die.

• Dominance. This happens when one species can invade the other's space, but the other species can't do the same. Typically, the invaded species is wiped out.

• Bistability. Neither species can invade the other. Like the late lamented arms race, there is a balance of power than ensures peace.

For a species or a business, dominance is attractive. For a business about to wiped out, because the opponent can invade and the first business can't retaliate, knowledge of Gause's experiments is salutary. Look at what happened to the British motorcycle industry in the 1970s. Honda had two unique markets that the British couldn't enter -- it had the large Japanese market, and it had the market worldwide for small bikes. Under attack at the bottom end of the market, British firms such as Norton Villiers Triumph retreated to the top end of the market, served by powerful, big bikes. But the relationship between the British and Honda was asymmetrical. The British couldn't enter Honda's markets, but over time, Honda found the ability to invade the larger bike market. Japanese bikes used modular components and were capable of upscaling. Honda's bikes also enjoyed higher scale, better design, and lower units costs.

The British bike makers were complacent. Even after the Japanese arrived in the European and American markets, what did it matter? They were only selling "toy" bikes, often to customers who'd never had a motorbike before. But if the British had read about Gause, they would have known their fate. The only way to avoid it would have been to build a unique niche that the Japanese couldn't enter. BMW managed that by specializing in ultra-comfortable and safe bike for big bottoms.

If dominance is best, bistability is better than coexistence. The latter is real competition, where either can invade the other. Bistability is when they can't. It is illusory competition, with real barriers to entry both ways.

This is very common in business. An industry may appear to be competitive, yet each firm may have different customers, distribution channels, product design, or some other differentiating factor. Subaru is a tiny competitor in the American car market, with only 2.3 percent share, and a simplistic reading of the rules of strategy -- get high relative market share -- would suggest that Subaru should be toast. Yet it is profitable and growing fast. The reason is that Subaru, with its artisanal values and production methods, has a unique niche.

Unlike nearly all other car markers, Subaru uses a flat 4 boxer engine, and has refined it over time instead of replacing it or running several different designs. Four cylinders are compact and efficient -- they lie flat and low in the car, reducing its centre of gravity and improving handling. The boxer engine's opposed cylinders also naturally cancel out each other's vibration, giving a smoother ride than in-line designs. All in all, it's a simple, efficient and smart choice.

Second, while the firm offers a choice of several different vehicles in the small car, sports, SUV, and utility segments, it makes the hugely simplifying and economical election to build them all on a single chassis.

Third, Subaru differentiates its cars and has enhanced its reputation by being known for "all-wheel" cars, capable of handling extreme weather conditions. Being known, for example, as the "official car of the US ski team" is a handy accolade that adds a halo effect to the brand. Subaru has carefully picked where to differentiate its product and exhibit sophistication, within the envelope of simplicity and economy. This is how Subaru exemplifies simple sophistication, a blend of attributes that is unique and appeals to many knowledgeable customers.

Gause was never lucky enough to own a Subaru, but he would have seen the link to his protozoans. Subaru has an ecological niche which manages to avoid head-to-head competition.

There is an infinite number of ways that firms and individuals can make a living, constrained only by imagination and finding something useful to do that nobody else is pursuing in exactly the same way. The ideal position is to craft your own niche where no one else makes their living in the same way, in the same place, at the same time. There are no competitors. You are unique. You have a place in the economy of nature.

Alternatively, you can just wait to be invaded. The choice is yours.