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Understanding Hidden Interaction Codes that Drive Business Success

Understanding Hidden Interaction Codes that Drive Business Success

A new study from Associate Vice Dean Peer Fiss and a former Marshall PhD students found that “category interaction codes” influence how consumers evaluate, buy, and use products. 

by: Faculty Perspectives
11.04.25
A man and a woman sit and talk at a table while people walk by them.

[Photo courtesy of iStock]

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  • Peer C. Fiss

    Peer C. Fiss
    • Jill and Frank Fertitta Chair in Business Administration
    • Professor of Management and Organization, and Sociology (by courtesy)
    • Associate Vice Dean for Research

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Business strategists often focus on features such as performance, price, or branding. However, that approach may miss another, largely overlooked factor that often determines success: how a product fits into people’s routines and the decision-making processes inside customer organizations.

In a new study published in the Strategic Management Journal, PEER FISS, associate vice dean of research at USC Marshall School of Business and Enlan Wang, professor of business at University of Missouri and former Marshall PhD student, call this “category interaction codes” — the often-invisible rules that shape how people inside organizations use, evaluate, and buy products. Their research shows that these interaction patterns can be as decisive as a product’s design or performance in determining who wins in the marketplace.

Wang and Fiss define category interaction codes as shared expectations about where, when, how, and by whom products are evaluated, purchased, and used. These codes guide everything from who controls the budget to who touches the product day-to-day.

“Every market category, from mainframes to craft beer, has its own social script,” Fiss explained. “Firms succeed not only by designing the right product but by aligning with, or reshaping, those interaction scripts.”

To illustrate the power of these codes, the researchers conducted a historical case study of Wang Laboratories, a pioneering computer firm that grew explosively in the 1970s before declining in the late 1980s. Drawing on extensive archives — including internal memos, product manuals, and interviews with founder An Wang — they traced how the company’s fortunes rose and fell with the interaction codes of the early computer industry.

When Wang Labs entered the market, IBM dominated the “mainframe” category. Selling a mainframe required navigating a long, bureaucratic procurement process controlled by Management Information Systems (MIS) departments. Competing in that space was nearly impossible for a newcomer; Wang needed a different way of breaking into the market.

Instead of calling its devices “computers,” Wang Labs strategically labeled them “calculators,” a subtle but powerful categorization shift. This change moved purchasing decisions away from MIS executives to engineers and department managers, people closer to actual users. By sidestepping IBM’s entrenched relationships, Wang Labs accessed new budgets and decision channels, growing at an average rate of 50% per year during the 1970s.

Markets are made up of people — engineers, secretaries, IT managers — whose work routines give categories life. Understanding how those people interact is key to strategic positioning.

— Peer Fiss

Associate Vice Dean of Research

The company then institutionalized these new interaction codes through product design. Its word processors were easy to use, empowering office secretaries and departmental staff who had previously depended on centralized computing departments. For a time, this decentralized approach gave Wang a major edge — its machines became staples of office productivity across industries. But as the market evolved toward networked office automation systems in the 1980s, decision-making authority shifted back to MIS departments. The very interaction codes that had once protected Wang now left it vulnerable. Within a decade, the company that had once rivaled IBM declared bankruptcy.

Wang and Fiss’s research helps explain why some firms succeed not by radically innovating technology, but by reconfiguring who interacts with it and how. Firms can gain advantage by targeting alternative decision-makers whose interests better align with their offering, by redesigning products to embed new interaction routines, or by institutionalizing new codes that redefine how a category operates.

“Markets are made up of people — engineers, secretaries, IT managers — whose work routines give categories life,” Fiss said. “Understanding how those people interact is key to strategic positioning.”

Although the case centers on the early computer industry, the implications extend to today’s technology markets — from cloud computing to artificial intelligence. Modern firms operate in spaces where categories and decision authority shift rapidly. Selling an AI tool, for example, may involve navigating not only technical departments but also compliance officers, HR leaders, or data-ethics boards. Each group represents a different interaction code, and success may hinge on understanding whose routines and responsibilities a product aligns.

Ultimately, the research underscores a broader lesson: strategy is enacted through interaction. Competitive advantage depends not just on what a product is, but on how it lives within the web of relationships, routines, and meanings that make up a market.

As Fiss concluded, “Every product competes twice—once on performance and once on participation. Knowing which interactions your category invites or excludes can make the difference between market leadership and obsolescence.”

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