Your Most Dangerous Competitors
Take a moment and make a list of your competitors -- you can build the list in your mind, write it down or type it as you see fit. Now, which of those companies are your most dangerous competitors.
I expect you are wrong.
When you listed your competitors, I expect you listed companies similar to yours (or, if you are in government, you probably listed a similar country, region or city. When I did a workshop for the Prime Minister's office in Dubai, I asked if they had a competitor. Participants immediately responded with "Qatar".). These companies probably make products and offer services similar to yours. Their business models, customers and marketing approach are all probably a lot like yours. Very likely, the market dynamics have remained consistent over the years (just as Coca Cola and Pepsi have held similar places within the global market for decades).
Yes, these companies are your competitors. But, they are not particularly dangerous. Unless one of you does something crazy, the market dynamics are unlikely to change for the foreseeable future.
The Deadly Competition
Your most dangerous competitor is not a business like yours. It is a small
start up run by a couple of kids out of student housing in Mumbai. It is an
IT company just launched by a small team of young people in Silicon Valley.
It is the latest new project by Google or Facebook or Apple, a company that
you never perceived to be a competitor. It may even come from a creative person
in your organisation whose idea was perceived as ridiculous by her manager.
So, she went and set up a competing firm.
In Detroit in the early 1900s, if you asked a blacksmith who his main competitors were, he would have named other blacksmiths. He would never have guessed it would be a engineer named Henry Ford who was making a cheap motorcar. Cars were expensive toys for the rich and no threat to the massive horse industry of the time. Or so he would have thought until he went bankrupt.
Up until about 20-25 years ago, if you had asked the CEO of Smith Corona who his top competitors were, he probably would have said companies like Royal, Olivetti and other typewriter manufacturers. If you had said, "No, it's actually Microsoft," he probably would have laughed. Today, Smith Corona is a shadow of its formal corporate self. My kids have probably never seen a typewriter.
In each of these instances, the most threatening competition came not from the companies perceived as competition -- but from unexpected start ups and existing companies in completely different sectors. It could happen to you too.
An unexpected competitor launches a product that is completely different to your (and your perceived competitors') existing, established product, but which accomplishes the things your customers want better than your products can do. They are, of course, disruptive innovators. And, if you do not pay attention, you will not notice the threat they pose to your business until your customer base begins to evaporate and you have to go into damage control mode to save your business.
The current fast pace of technology development means that game-changing products are being developed all the time. And a new generation of people who live a substantial part of their lives on line means a market where virtual products are as important as real-world products.
Moreover, I predict that in a few years, we will see self-programming software
in which you explain your needs and a software-making software programs it for
you. This will not only disrupt the software industry, but it will allow anyone
with an idea to build software to make that idea happen.
What Can You Do?
What can you do about it? There are several steps you can take.
Read the business press on-line and off-line widely. Pay attention to start ups and think about the threat they might pose to your business one day. If you are in a position to do so, buy those start-ups! Mark Zuckerberg of Facebook seems to understand this. His recent purchases of Whatsapp and Instagram partially reflect an awareness that these products could grow into something that threatens his social network.
Learn to identify and cast aside the underlying assumptions of your industry and see what your customers really value. As Theodore Levitt famously said, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!" Companies like Kodak felt that digital photography was not a threat because digital cameras could not produce prints of high quality. Yet it was not prints customers valued. It was -- and remains -- the ability to capture and share memories that mattered. This can be hard. When I ask workshop participants about the assumptions they make in their industry, they often fail to recognise them.
Establish an innovation facility, such as a skunkworks (a small business unit, free of most corporate bureaucracy and free to experiment with crazy, innovative ideas) or time to innovate, and give your people the opportunity to build the next disruptively innovative product. But be sure to watch what they are doing and exploit their ideas. This is hard, owing to the assumptions you are making about your customers. Kodak's research and development division was a pioneer in digital imagery. But top management failed to see the potential or the threat of a concept their people were developing!
Acknowledge potential threats early on and watch them closely, even if you do not believe that they are real threats. Reading the business press helps here.
Dream up an imaginary disruptive innovation -- or get a creative outsider to help you do this -- and run an anticonventional thinking (ACT) session to devise and explore actions your business might take. Similarly, look at new technologies -- such as 3D printing and robotics -- and use ACT or a similar process to dream up possible threats from these industries. Do not look only at the current state of the art, but also at where those technologies might go in a decade's time.
You cannot stop progress. Rather, you need to exploit it. Your competitors are not businesses like yours. But, if you can adopt the disruptive innovation that threatens your sector, you hope to survive the onslaught better than those other businesses. Better still, if you can create the disruptive innovation you can grab a massive market. But to do that requires an incredible commitment to innovation.
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