Terrence Brown Creates Value

Management

Don’t Fear Your Competitors

“The best swordsman in the world doesn’t need to fear the second best swordsman in the world; no, the person for him to be afraid of is some ignorant antagonist who has never had a sword in his hands before; he doesn’t do the things he ought to do, and so the expert isn’t prepared for him; he does the thing he ought not to do and often catches the expert out and ends him on the spot.” (Mark Twain)

This quote should serve as a notice and a warning. While most strategic planning groups within firms spend much of their time researching and monitoring their competition, the greatest threats are probably not on their radar screens. Although it is important to know who your competitors are, increasingly it is becoming important to have an expanded view.  The purpose of this column is this: As knowledge of your market and industry becomes increasingly valuable, the value of acting like a traditional industry player wanes.

In this global and dynamic business environment knowledge is vital. This means not only knowledge of the business environment in general, but also specific information about your competitors as well. This knowledge is, in part, valuable because it will help you be able to predict, anticipate and/or preempt competitive moves. As a result, the field of corporate competitive intelligence is booming. However, the ability to predict what will happen in the market space is made easier, if you know who the market participants are, you know about past industry behavior and you know the industry rules.

Unfortunately, this is not as easy as it once was. In the widely used Porter Five Forces (Strategic) analysis, one of the forces that helps determine market structure is potential market entrants. The problem is that with converging technology and converging industries, it is often impossible to draw firm lines around the competitive space. Meaning it is difficult to determine who your competitor are and even more difficult to try to predict who future or potential market entrants will be. And as we read in Twain’s quote and can see for ourselves, the players that revolutionize industries, destroy the historic balance and have little regard for industry rules, are often times totally new upstarts, who do not know better.

These industry upstarts are often extremely effective because: 1. the industry competitors did not see them coming and 2. they were not bound by the old industry history, rules and practices. This, of course, makes them unpredictable and dangerous.

Therefore, the first lesson is: In your competitive intelligence efforts pay attention to converging technologies and converging industries. In addition, be aware of be market entrants and upstarts.

If your firm is a major industry player or a firm with significant industry experience, you must be especially cautious. Why? This is because there are unwritten rules and industry practices that most businesses in your industry follow including yours.  Also given that managers often move to other firms in the same industry during their careers, these rules, practices, and culture gets shared at an industry level. These industry recipes force and enforce certain standard business behavior. As a result, industries get stuck in ruts and decisions across firms are often quite similar. Furthermore, firm behavior industry wide becomes predictable.

Lesson two: Don’t be so predictable be so predictable. Don’t follow the norms of the industry. Although it is comfortable following the tried and true industy practices, it is acting outside your comfort zone that will lead to success. Learn from the new industry upstarts. Why make it easy for your competitions to predict your actions? If market share and above normal profits goes to firms that revolutionize the industry, why shouldn’t that be you? If you act traditionally, you will get j traditional results. If you act revolutionary . . . .

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