Artificial Competition

Creating the illusion of competition by establishing or funding a secondary entity that competes with your own offerings.

"Creating two competing bodies to become the focus of competition and in effect driving oxygen out of a market."

• Simon Wardley

🤔 Explanation

What is Artificial Competition?

Artificial competition is a strategy where an organisation creates or supports a secondary entity that appears to compete with its own offerings. The two entities—though ultimately controlled or influenced by the same leadership—are positioned as rivals. This illusion reshapes market perception, giving the appearance of healthy competition while maintaining internal control.

The core aim is to dominate the competitive narrative. By filling the competitive space with a proxy, an organisation can divert attention, reduce the threat of genuine challengers and frame customer choice around controlled options.

Key principles include:

• Plausible independence: The secondary entity must appear autonomous. Brand identity, leadership, and operations should be clearly distinct, even if the ownership is not.
• Overlap in market focus: Both entities should target the same user segments, making it harder for true outsiders to gain a foothold.
• Narrative control: The existence of “competition” allows the parent to steer public discourse, influence regulation, and neutralise scrutiny.

Why use Artificial Competition?

Used effectively, artificial competition offers multiple layers of strategic benefit:

• Regulatory positioning: In sectors prone to monopoly concerns, creating the perception of competition can deflect legal and public scrutiny.
• Market insulation: By pre-occupying the competitive space, leaders can delay or prevent disruptive new entrants.
• Strategic hedging: Maintaining two brands with different positioning provides flexibility. One can take risks or test innovations while the other maintains stability.
• Customer trust through illusion of choice: People are more likely to trust a marketplace with visible competition. Even when orchestrated, the perception alone can improve customer confidence and brand legitimacy.

This is about shaping the environment in which decisions are made. Skilled leaders use this strategy to create optionality, reduce volatility, and consolidate advantage

🚦 When to Use / When to Avoid

🚦 Artifical Competition Strategy Self-Assessment Tool

Find out the strategic fit and organisational readiness by marking each statement as Yes/Maybe/No based on your context. Strategy Assessment Guide.

Landscape and Climate

How well does the strategy fit your context?

• We dominate a market or segment where regulatory or public scrutiny over monopoly risk is increasing.
• There is a lack of credible competitors in our space, leaving us exposed or unchallenged.
• Our mapping reveals untapped adjacent segments or personas we could reach via a differentiated brand.
• We see value in testing alternative positioning or pricing strategies without altering the core brand.
• Regulatory dynamics or public trust factors suggest visible competition would improve legitimacy.
• Customer sentiment data suggests skepticism about choice or market concentration.

Organisational Readiness (Doctrine)

How capable is your organisation to execute the strategy?

• We can establish or acquire a secondary entity with sufficiently distinct branding and operational separation.
• We have internal governance structures capable of maintaining plausible independence while aligning high-level strategy.
• We are able to operate dual brands without creating internal conflict, inefficiencies, or cannibalisation.
• We can manage the legal, operational, and reputational risks if the relationship is revealed.
• We have clear goals for the strategy, including success criteria and an exit or integration plan.
• We understand the ethical implications and have considered alternatives to artificial competition.
• We have experience managing public perception, media narratives, or regulatory engagement.

Assessment and Recommendation

Strategic Fit: Weak. Ability to Execute: Weak.

RECOMMENDATION
Consider alternative strategies or address significant gaps before proceeding.

Use when

• You hold significant market share and face monopoly concerns.
• You anticipate customer demand for alternative approaches.
• You aim to pre-empt new entrants by controlling the competitive narrative.

Avoid when

• Maintaining two entities is prohibitively costly or complex.
• Transparency in your industry makes affiliations easy to uncover, risking trust erosion.

🗺️ Real-World Examples

MediaMarkt and Saturn

The consumer electronics retailers MediaMarkt and Saturn in Europe are perceived as fierce competitors. However, both belong to the same holding company. This strategy consolidates market share within the holding company while blocking out other entrants.

🎯 Leadership

Core challenge

Balancing the illusion of competition while maintaining operational efficiency and avoiding exposure.

Key leadership skills required

• Strategic foresight to manage dual entities effectively.
• Risk management to mitigate exposure risks.
• Communication skills to maintain plausible independence.

Ethical considerations

Leaders must consider the ethical implications of misleading customers and regulators. Transparency and fairness should guide decision-making.

📋 How to Execute

1. Identify the market segment where artificial competition would be most effective.
2. Establish or acquire a secondary entity with plausible independence.
3. Develop distinct branding and messaging for both entities.
4. Monitor and manage the performance of both entities to ensure market dominance.
5. Regularly assess risks of exposure and adjust strategies accordingly.

📈 Measuring Success

• Increased market share across both entities.
• Reduced entry of genuine competitors.
• Positive customer perception of choice.
• Regulatory approval or lack of scrutiny.
• Operational efficiency in managing both entities.

⚠️ Common Pitfalls and Warning Signs

Exposure

If affiliations are uncovered, it can lead to accusations of "astroturfing" and loss of trust.

Inefficiency

Running two entities may result in internal cannibalization or duplicated efforts.

Neglect

The secondary entity may underperform, making the strategy unconvincing.

🧠 Strategic Insights

Shape Perception, Not Just Structure

Success hinges on how others perceive the relationship between your entities. Brand differentiation, messaging, tone, and even company culture must be designed to appear independent. Surface-level separation is not enough—perceived rivalry must feel real.

Operate with Autonomy, Not Separation

The secondary entity should have real decision-making power within defined boundaries. Avoid over-engineering control mechanisms. Instead, set clear strategic guardrails and let the team run. This both reduces risk of exposure and allows genuine value creation.

Use Contrast to Create Credibility

The entities should differ in pricing, customer experience, or values. When customers can clearly articulate what makes each option unique, the illusion of choice becomes more convincing. Avoid making one obviously weaker—each must have a real appeal to a segment of the market.

Drive Ecosystem Behavior

A well-designed artificial competitor can steer conversations and shape adoption curves. Whether resisting standards, promoting new norms, or buying time, your proxy should play an active role in setting direction. Use it to shift narratives without exposing your core brand.

Design for a Clear Exit Path

Artificial competition is rarely permanent. Know from the outset whether your endgame is acquisition, absorption, or retirement. Build systems and structures that make transitions clean and minimize fallout with customers, staff, and regulators.

Plan for Scrutiny

Deniability requires preparation. Separate legal entities, distinct leadership teams, and different operational processes all help reduce risk. If the connection is ever questioned, you need more than spin—you need documentation that supports the independence narrative.

Manage the Ethical Balance

There is a line between strategic positioning and market distortion. Regularly test your reasoning with trusted peers. If the strategy erodes trust or harms your ecosystem in the long run, the short-term gain may not be worth it.

❓ Key Questions to Ask

• Independence: How plausible is the independence of the secondary entity?
• Market impact: Does this strategy effectively block genuine competitors?
• Risk management: What measures are in place to mitigate exposure risks?
• Customer perception: How do customers perceive the competition?

🔀 Related Strategies

• Playing Both Sides - Benefiting from both ends of a competition.
• Market Enablement - Enabling more competition under your control.
• Misdirection - Misleading customers about the true competitive landscape.

📚 Further Reading & References