By Alex M H Smith
Generally speaking, what’s bad for our competitors is good for us.
Any slip by them—any scandal, piece of mismanagement, or boardroom turmoil—we’ll tend to welcome with glee, seeing it as an opportunity to take a few slivers of precious market share from them before the dust settles. All sounds pretty reasonable right?
What if I were to tell you that this perspective, common sense as it may seem, is actually built on a flawed assumption and may not be the right way to think about this at all? Indeed, what if I were to then tell you that, in reality, you should be cheering and supporting your competitors, rather than wishing for their demise? Sound implausible? Then let me explain.
A race to the bottom in order to keep afloat: A commodity market
The desire for your competitor’s failure is rooted in the idea that you can take their customers. However, if we go one level deeper there’s an admission here: the admission that both you and your competitor have heavily overlapping customer bases, and that if push came to shove, those customers would happily shop with either of you.
Where you see this dynamic played out most acutely is in commodity markets. If you sell a commodity, then your customers genuinely don’t care who they buy from, so long as the quality and price are right. In a commodity market, the problems of your competitor do genuinely represent a great opportunity—and so you should celebrate their demise.
However, as we all know, a commodity market isn’t a nice place to operate. Margins are razor thin. The graft is endless. You have to engage in a race to the bottom in order to keep afloat, culminating in a scrap between a bunch of undifferentiated, unprofitable businesses.
Bottom line? If your competitor’s challenges represent a big opportunity for you, that’s a sign that you’re operating in a commodity market. A sign that you and your competitors are too much alike, and that neither of you have a defensible position from which to make a strong profit.
Divide up the pie rather than compete for all of it: The decommodified alternative
So what’s the alternative?
Well, at the opposite end of the spectrum from a commodity market is a market which is divided up, very neatly, between different brands looking after different segments. In other words, a group of brands that divide up the pie, rather than compete for all of it.
To give you a hypothetical example, imagine if the only four car brands in the world were Ferrari, Skoda, Rolls-Royce, and Jeep. In this scenario, although you could argue that on paper the car market is “highly competitive” with four brands “battling” for market share, in reality it wouldn’t be competitive at all. Each of these brands brings such a different value offering to the table there will almost never be a comparative decision for consumers to make. Nobody is going to ask, “Hmm, shall I get the Ferrari or the Skoda, or the Rolls-Royce or the Jeep?” In each case, the question would answer itself, based on the consumer’s need.
That’s what happens in a heavily decommodified market. Each brand cares for its own segment, little competition occurs, and high profits are reached due to freedom from the attritional costs of competition. This is the kind of market you want to operate in.
Stop fighting over the same pool of customers and monopolize a chunk of the market
In a fully decommodified market, not only are your competitors’ troubles not much use to you (because their customers won’t be particularly interested in your differentiated offering), but you actually in some ways rely on your competitors to act as counterpoints which strengthen your own position.
Think about the relationship between Häagen-Dazs and Ben & Jerry’s. Although both are seemingly very tight competitors, they actually strike a remarkable balance with each other in their category. Häagen-Dazs makes almost exclusively “classic” flavors (vanilla, strawberry, etc.), while Ben & Jerry’s specializes in “innovated” flavors they have invented (Phish Food, Chunky Monkey, etc.).
Brand wise, Häagen-Dazs speaks for quality, luxury, and refinement, while Ben & Jerry’s is casual, silly, and a touch political. Add it all together and you actually get two brands that somewhat thrive on each other’s existence, like yin and yang, or Kirk and Spock, or whatever other mutually reliant odd couple you can think of.
When you have a “counterpoint relationship” with another brand like this, the correct strategic approach is simply to do the opposite of whatever they do. In doing this, make no mistake, you’ll be doing them a favor. You’ll be driving their customers (the ones who appreciate their value offering) into their arms.
But in return you’ll also be further strengthening your own position; making it clear to people who are into what you do that you’re the only plausible option. And the rewards for monopolizing a chunk of the market like that are profound.
Other Articles From AllBusiness.com:
- The Complete 35-Step Guide for Entrepreneurs Starting a Business
- 25 Frequently Asked Questions on Starting a Business
- 50 Questions Angel Investors Will Ask Entrepreneurs
- 17 Key Lessons for Entrepreneurs Starting A Business
As you can see, the gains from attacking your competitors, while not non-existent, are cheap gains for cheap businesses, with no long-term prospect of success. However, the gains from propping your competitors up, in order to drive a wedge between you so that you no longer fight over the same pool of customers, are profound and long lasting.
You can get a more in depth look at some of these ideas, and how you win when you refuse to compete, via this TEDx talk I delivered recently:
Love your competitors – how great businesses do strategy | Alex Smith | TEDxFolkestone
By Alex M H Smith Generally speaking, what’s bad for our competitors is good for us. Any slip by them—any scandal, piece of mismanagement, or boardroom turmoil—we’ll tend to welcome with glee, seeing it as an opportunity to take a few slivers of precious market share from them before the dust settle
In the meantime, just take a look at your competitors. How would it look if you were to give them some breathing room? To make yourself unappealing to their customers, and thus make them unappealing to yours? Such thought experiments are well worth your time as they can uncover strategies that culminate in you leading your category.
RELATED: 5 Ways Business Automation Can Help You Outsmart Your Competition
The post The Benefits of Helping Your Business Competition—Yes, Really appeared first on AllBusiness.com
The post The Benefits of Helping Your Business Competition—Yes, Really appeared first on AllBusiness.com. Click for more information about Guest Post.
from neb biz feed 1 https://ift.tt/2sJlwBF
via Nebula Biz Local Loans
No comments:
Post a Comment