Whenever I give a workshop on strategic focus, I can count on getting this question: If focus is so important to success, how can so many unfocused companies grow so large? In other words, how can you explain the success of a company like General Electric, which markets everything from power plants to plastics, and light bulbs to light rail systems? Or Mitsubishi, which puts its name on 23,720 offerings from automobiles to aerospace, textiles to tobacco, and banks to broccoli?

The fact is, as powerful as the principle of focus is, companies with different approaches to focus can coexist in the marketplace. Perhaps the easiest way to understand how this can happen is through the children’s game of Scissors Paper Rock. Remember how it goes? Scissors cuts paper, paper covers rock, rock breaks scissors. Each position has its strengths and each has its weaknesses, creating a balanced cycle of competition.

Business history has shown that companies thrive best when they settle into “stable states,” conditions in which the business environment is fairly predictable and employees have confidence in what they’re doing. In self-organization theory—the part of chaos theory that studies how order seems to arise spontaneously in complex systems—these stable states are called “attractors.” As a company grows, it’s attracted toward one of three main states, which we can call scissors, paper, and rock.

A “scissors” company is a startup or small business, often having only one brand. What distinguishes a scissors company is its extremely sharp focus. It competes by snipping small pieces of business from the market dominated by much larger “paper” companies, who are either too busy to notice or too slow to respond.

As a scissors company becomes successful and begins to grow, it morphs into a “rock” company, a medium-sized organization that typically has more brands and less focus. Its defining characteristic is no longer focus but momentum. Rock companies thrive by crushing “scissors” companies, who don’t have the resources to compete head to head with them.

As a rock company grows, its momentum begins to fade, and eventually it turns into a “paper” company. What distinguishes a paper company is its sheer size. With even more brands and even less focus, it survives by using its network and resources to smother “rock” companies.

And round and round they go.

There are three observations you can make about the competition cycle: 1) companies tend to grow clockwise, from scissors to rock to paper; 2) they tend to compete counter-clockwise—paper covers rock, rock breaks scissors, scissors cuts paper; and 3) the spaces between the stable states are “unstable states”—periods of time when change is not only possible but necessary. It’s during these unstable periods that companies often need to reposition their brands.

Now let’s look more closely at the ways each type of competitor can maximize its particular advantage.

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Marty Neumeier is an author, designer, and brand adviser whose mission is to bring the principles and processes of design to business. His series of “whiteboard” books includes ZAG, named one of the “top hundred business books of all time,” and THE DESIGNFUL COMPANY, a bestselling guide to nonstop innovation. An online presentation of his first book, THE BRAND GAP, has been viewed more than 22 million times since 2003. A sequel, THE BRAND FLIP, lays out a new process for building brands in the age of social media and customer dominance. His most recent book, SCRAMBLE, is a “business thriller” about how to build a brand quickly with a new process called agile strategy. In 1996, Neumeier founded Critique magazine, the first journal about design thinking. He has worked closely with innovative companies such as Apple, Netscape, Sun Microsystems, HP, Adobe, Google, and Microsoft to help advance their brands and cultures. Today he serves as Director of Transformation for Liquid Agency in Silicon Valley, and travels extensively as a workshop leader and speaker on the topics of design, brand, and innovation. He and his wife divide their time between California and southwest France.

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Marty Neumeier ZAG, THE DESIGNFUL COMPANY, THE BRAND GAP, THE BRAND FLIP, SCRAMBLE, Critique magazine, Apple, Netscape, Sun Microsystems, HP, Adobe, Google, Microsoft, Liquid Agency