Are You A Level 0 Manager?


A recent paper from the University of Toronto asked, are all managers created equal? The question was posed from the perspective of strategic thinking abilities of managers, and relied on the "cognitive hierarchy theory" originally developed in this older paper. Neither paper is a particularly enjoyable read, but there was one interesting idea that came out of them – the level 0 manager.

It works like this – level 0 managers only think about their product and their market demographics, they don't factor in the decisions of other managers at other companies. Level 1 managers think about their competition but assume they are all level 0 thinkers. Level 2 managers think about their competition, but assume some of them are level 0 and some level 1… you get the picture.

The first paper mentioned above showed that managers with higher levels of strategic thinking capabilities more accurately predicted the moves of the competition and thus their companies were more likely to be around 10 years later. It's interesting because I have often heard famous business executives say that they never think about their competition, they just go heads down towards their own goals. For entrepreneurs entering new markets, that might not be so bad, but for established markets it seems like a sure way to be made irrelevant.

At it's core, strategic thinking is all about finding your company's points of differentiation, preferably ones that can be generated by some sort of competitive advantage. Differentiation without paying heed to competition could turn out badly. So ask yourself what kind of manager you are. How much to do you think about your competitors? Do you anticipate what they might do, and how you might respond? Or is this analysis all a bunch of fluff that takes the focus off execution? Should you be a level 0 manager, or is it something to avoid at all costs?

  • I think you are right…this is not really something entrepreneurs should worry with. If you are a level 0 company, you should be a level 0 manager.

    Blinders on for maidens.

  • Great post, Rob, but it only deals with part of the strategy issue. There’s more to strategy than differentiation. The goals of strategy, as I see it, are to create long term competitive advantage and profitability. The key to the former is your people, their relationships and your culture. The key to the latter is delivering high perceived value within your target market. Differentiation is a vital part of that, but it’s not the whole thing.

  • Lord

    I wonder if higher level managers are more effective in mature, stable, slow growing industries, but less effective dealing with disruptive technologies, with which only 0 level management may be possible.

  • I believe a good combination of all levels is ideal. If we went around wondering what our competition was doing all of the time.. we’d let other aspects of the business suffer, such as customer service or good PR.

  • Rob

    Wally, great point. I didn’t mean to imply that differentiation was the complete goal of strategic thinking.

  • It always amazes me when I talk to a business owner / manager and ask them how they’re better / different than their competition. After mumbling the standard nonsense (“It’s our people!”), they admit that they really don’t know.

    How is it that you can say that you’re so much better than the competition and that I should you use for whatever if you have no idea what the competition is doing?

    What’s more, why did you start a business at all if you didn’t see a hole in the market?

    I haven’t met many Level 1 or 2 managers / owners in my time.