Are You A Level 0 Manager?

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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.

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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?