When we talk to CEO’s and marketing & sales directors about competition, we often feel they are most worried about their closest competitors. Competitors that do exactly the same stuff as they do. Virtually every company gathers loads of information on direct competitors.
At first sight, there is nothing wrong with that. Following up on what your main competitors do is just fine. But only “just” fine, because it is the Olympic minimum. You will hardly find out more than the things you already knew. In the first place, it will give you a good understanding of what decisions or actions brought other players to the point where they are today. Secondly, it may help you to see your assumptions being confirmed. In other words, you are looking into data of the past. Whereas the future of your company is… ahead of you. In the future. Exactly.
Stop focussing on the competition you know
Why? Because analyzing the past and analyzing the things you are more or less aware of, will in no way show you your competitors’ next steps.
Moreover, your main competitors are not the most interesting ones to monitor. They have the same problems, challenges and business obstacles as you are having. You will not find the solution with them. They are in the same boat. They are fishing in the same pond.
There is no such thing as a free lunch. Either have lunch or be lunch.
First of all, wach out for newcomers in your industry. “Fast seconds” like Costas Markides from London Business School tends to call them. You do not suspect them becaue they are small players that look harmless at first sight. In reality, they can be very harmful because they are more agile than you are. They learn from your mistakes and move faster. Think of Kodak who invented the digital camera technology way back in the 1970s, but who didn’t dare to cannibalise its lucrative film business. When Sony and Canon launched their digital cameras decades later, and Kodak also decided to get in the game, it was too late.
And remember how little known Enterprise became the largest car rental company in the U.S.A. when Hertz and Avis already were the undisputed leaders. Enterprise succeeded in taking over the market leaders by simply addressing a new niche in car rental the others hadn’t thought of yet: the replacement market. Afterwards, they took their fair share of the regular car rental business too.
Adjacent industry players
Secondly, you should watch out for companies that are active in adjacent industries, and that can easily get into your market because they bring added value to what you are doing today, or because they bring your offer in a different way. Think of supermarkets such as WalMart selling Over-the-Counter medication, which is a serious threat to pharmacies, and Kruidvat shops selling reading glasses and contact lenses, at a fraction of the price of the good old optician store.
Today, because of the digital age, competition can come from just anywhere and can disrupt the whole value chain. Digital killers are to be found all over the internet so to speak. And that is because the middleman is quickly becoming obsolete in virtually any industry. So if you are in a business where they can do without you, where they can substitute what you do by bringing on a more convenient alternative to your customers, you can welcome a brand new competitor.
Let’s have a look at the hotel business, where online services like booking.com have been eating lots of margins away from the regular travel booking agencies in the cities. Why could they do that? Because it is more convenient to search at home and book immediately when you see something thats suits your plans. You do not need the middle man behind the counter anymore. And even these established online booking services, have to be on the lookout. Competion for them is fierce too. With sites popping up like AirBnB and Couchsurfing, where households offer spaces to rent in all price categories at prime locations.
On the road, think of Uber, the new Taxi app, that is conquering the world by connecting riders and drivers in a more flexible and affordable way than we used to know. And how about Google’s driverless cars that will be safer and more reliable than traditional cars? No doubt, they will make Google and some other smart car manufacturers incredibly rich one day. And while doing so, they will cause a lot of damage to the insurance companies whose traditional business model exactly is making a living from car damages.
These are typical examples of new competition that can arise any day. Even a start-up with nothing more than a simple and straightforward app may have the potential to disrupt a traditional market in no time. Think of how FitNow, with its Lose It! app is posing a serious threat to established organisations such as Weight Watchers, who was the reference in losing weight since the 1960s. The app gives people exactly what they like: keeping track of what you eat, some helpful and fun gaming and … a network of buddies that help you to stay away from your fridge when you feel another craving.
Don’t fight change. Embrace it.
How an organisation deals with digital disruption depends on its specific situation. Some will consider the newcomer as a different market, ignore him for that matter, and invest even more in the traditional industry. Others will embrace the innovation and try to play the traditional and new game simultaneously whereas only a few will fully embrace the new innovation and increase scale.
Digital disruptors are here to stay and will only increase in numbers. Also in your industry. Act before you have to act. Act when you still have a choice. And in case you are taken by surprise, don’t ignore them. “If you can’t beat them, join them,” will then be a valuable strategy.