Chapter 6: Dealing with “the Competition”

Continuing with the chapters of the“10 foundations of business success”, an excellent very practical book by my friend and colleague Guy Hamilton.

If you missed any of the articles in the topic, see links below.

Series Intro – 10 Foundations of Business Success

Chapter 1: Market Segmentation Part 1

Chapter 1: Market Segmentation Part 2 – The Steps

Chapter 2: Customer Needs – You only have a business if a customer wants to buy your products.

Chapter 3: Value Propositions – What a customer perceives as good value is all that matters. A business view of value does not count.

Chapter 4: Customer Experiences – When a customer really engages with a product or service they become a passionate advocate for it. This is at the heart of repeat or referred business.

Chapter 5: Metrics and Performance Management – What gets measured gets done. It is as simple as that!

 Today, I bring to you, the 6th Chapter: Dealing with “the Competition” – If managed well, competition is fuel for a vibrant business with a continuing right to win.

As you move into the “execution phase” of your plans the next discipline comes into play: keeping ahead of the competition and trends in the marketplace.

Every business needs to keep reassessing its business offers and value proposition against those of its competitors, your business needs “situational awareness” to ensure it can quickly pick up new trends in your marketplace so you can proactively anticipate or positively react to them. This awareness is as vital to long term business success as it is to driving a car.

In business, being aware of the competitor activity is a critical element of “market situational awareness”. But there is a tendency to focus too much on pricing and specific product or service offers. At a tactical level this may be helpful, but over time it will not provide a complete situational picture and may well create blind spots that place a business’ market share and position at risk.

Tracking competitor activity should be an intuitive and standard activity for any business, right? Then ask yourself, when was the last time you had a meeting that reviewed the competitor landscape, significant trends and activity?

Many of us follow sports closely and we know that top teams and individuals spend a lot of time analysing their competition and adjusting tactics to give them the best opportunity to win. Business is no different. Let’s remind ourselves of some basic business facts:

• Successful businesses manage margins effectively.
• Acquiring new customers is a time-consuming and costly activity.
• The nature of free markets is that competitor activity is dynamic.
• The best competitive responses are those that retain differentiation and margins for a longer period of time through value for the customer rather than price.
• As markets change, doing more of the same and expecting different outcomes is unlikely to be a path to success.

Each of these statements is linked to competitor activity, and the dynamic pressures competitors place on the business. Following the market puts the business in a risky place: you find yourself continually behind the curve, running hard to catch up. Over time, the business runs out of breath and falls behind. That’s why this chapter is about managing the competition. While you cannot directly manage your competitors, you can manage the threats they pose and their possible impacts on your business. This requires time and commitment, particularly to make it part of your business’ culture.

Let’s consider some basic rules:

RULE 1. Understand your competition at a whole-business level, not just at a product level.

RULE 2. Identify both the points of competition and the basis of competition.

RULE 3. Track competitor activity from the customers’ perspective.

RULE 4. Understand how the internet is changing buying decisions and geographic boundaries.

RULE 5. Focus on both positive and negative competitor trends.

RULE 6. Consider how competitors price as well as the absolute price.

The Steps:

Here are some common elements all businesses can use to form a basic tracking discipline.

1. Identify and analyse your competitors using a simple framework. It only needs to contain elements and points of competition and how they can be a risk for your business.
2. Split the list into “direct” and “indirect” making sure you keep a balance view of both.
3. Rank each “threat” into high, medium or low. This should be based on their potential to negatively impact profitability.
4. Examine you highest risk competitors in more detail.
5. Build simple processes to capture customer feedback.
6. Be forwarding-looking. Try to identify trends early by tracking what is happening in lead markets.
7. Consider pricing strategies. Compare your pricing…

This discipline should be consistent and constant. A one-time competition analysis will not have much value. The primary objective is to make sure management focus is on threats that matter the most. Finding competitors’ weak spots and looking to exploit them increases the chance of a win. Situational awareness evolves and should be prioritised! Also, understand the possible impact of competitor activity on margins and prioritise remedial actions based on those areas that the greatest commercial benefit. As it’s been famously put: “Don’t sweat the small stuff”.