Marketers
need to bring out the telescopes and search for UCOs (Unforeseen Competitors)
far beyond their current horizons. Why Unforeseen? Because companies are not likely
to know what or who they are searching for. In today’s VUCA world, competition
is not solid ground which you can map, study and attack, but it is instead a
world of shifting sands where advantages are transient and the opponent
unknown. The basis of marketing strategy has always been about defining and
understanding your target customers. Today increasingly the basis of survival
strategy is also about finding your target competitors. Or at least locating
the source of potential competition. But of course this is easier said than
done.
In
a world where shorter product life cycles and transient competitive advantage
are becoming the norm, competitive strategy is no longer a regular game of
chess with long standing opponents. It is more like relay chess where you start
off with one competitor and a well thought out strategy but suddenly after a
few rounds the competitor changes and so do the rules of the game.
Another oft
cited example is Kodak, which for years had an edge in chemical and film
technology which it leveraged to dominate the camera and film market but when
film itself became redundant being the best in film did not help Kodak survive.
That competitive advantage held strong only against film competitors and traditional
camera manufacturers. Instead of focusing on the consumer need for capturing
storing and sharing images, Kodak focused only on strengthening their original
competitive advantage even though the advantage itself was losing relevance. The
death blow came from the digital and online players who Kodak had technically
not considered their competition.
Today the distinction between industries is even
more complex and blurred. So if we look at the smartphone manufacturers, who do
you think should perceive them as competition? Certainly all mobile handset manufacturers
but also makers of watches, cameras, computers, music players, TV and some
more. The mobile handset companies are closely watching each other, the digital
camera companies are already too late, and the rest need to add/modify their
competitive advantage if they wish to stay in the game.
The
concept of defining your market basis customer needs and not on the basis of
your product/service is not new. Marketing Myopia propounded by Levitt as far
back as the 60’s first brought to the fore this lesson. He highlighted that for
companies to ensure continued evolution, they must look for growth
opportunities and not growth industries. The basis for strategy has to be
customers’ needs and desires and not the presumed longevity of their products.bOther frameworks
like Vulnerability analysis also urged companies to identify the key
underpinnings of their business and plan for disruptive forces which could
alter or shake these underpinnings. More recently Blue ocean strategy focused
on redefining industries and recreating the value curves.
Building further on these concepts, Rita
Mc Garth brought the spotlight on transient competitive advantage highlighting
that in a world where a competitive advantage often evaporates in less than a
year, companies can’t afford to spend time crafting a single long-term
strategy. To stay ahead, they need to constantly start new strategic
initiatives, building and exploiting many transient competitive
advantages at once.
If we look at the automobile industry
today, competitive threats are emerging from online aggregators like Uber and
Ola. They also face competition from alternate vehicles, public transport and
car pooling. Recognizing that its focus should be enhancing mobility and
convenience for customers rather than selling cars, Volkswagen launched a new
digital business division (MOIA) in December 2016, to take on services such as
Uber, by catering for customers who prefer to pay for use rather than own a
vehicle. It plans to offer on-demand shuttle services in 2017. Earlier in 2016,
VW had invested in ride-hailing business Gett. And VW is not the only one to go
beyond selling cars. Daimler and BMW had already initiated their own car
sharing operations. In a recent article in Fortune.com, VW Chief Executive
Matthias Mueller was quoted as saying that even though not everyone will still
own a car in future, MOIA can help make everyone a customer of VW in some way
or another. Recently there were also talks about a possible VW collaboration with
Uber.
So Uber which is not part of the
automobile industry and till very recently was not even a dot on the
competitive landscape for VW, has now in a short span of time emerged as a key
competitor and possibly also a collaborator. Technology firms like Google and
Apple are also now an intrinsic part of the competitor/collaborative landscape
for automobile companies.
Banks today face competition not only
from other financial institutions but also from retailers offering easy payment
and financing options, digital wallets/payment apps, and mobile service
providers. Airtel Payments Bank launched on the back of the Airtel telecom
network in India, plans to develop a pan-India banking network and digital
payments ecosystem. Though Payments Banks by definition will have a limited
scope of activities, they would still be a challenge for the traditional banks.
Given Airtel’s reach, it can serve customers with significantly lower costs,
which traditional banks may not be able to compete with.
So banks are doing what Rita Mc Garth
has advised, developing multiple transient competitive advantages. State Bank
of India (SBI) is taking on mobile wallet player Paytm with their own payment
app. Kotak Mahindra bank Ltd. went with the philosophy of ‘when you can’t beat
them, join them’, by tying up with Bharti Airtel Ltd. in an 80:20 joint venture
to form the Airtel Payments Bank, turning a potential competitor into a
collaborator and ramping up their own competitive advantage in the process.
As pointed out
by Dawson, Hirt and Scanlan (McKinsey Quarterly, March 2016), companies can no longer survive by relying
on existing barriers to entry like infrastructure requirements or regulatory
protection. User demand can bring about changes in the regulatory framework,
competitors can share expensive infrastructure, or simply sidestep the need by
developing alternate means of producing and delivering value to consumers.
To
compete successfully in a world of transient competitive advantage firms have
to be willing to let go of the advantages which led them to success and
discover newer sources of differentiation and value addition to the customer.
Clinging onto past strengths when they are no longer relevant will lead to
fighting a losing battle. It would be akin to fighting with swords against
machine guns. The strategies which led the Mughals to success in conquering
large part of India failed against the European invaders. With new competition
come new rules and quicker the firms are to adapt and evolve and shed their old
skins, the higher would be their chances of success.
A
company like Nokia which clung onto its strategy in the mobile handset business
for too long, caved in completely and moved from being market leader to a has-been,
in virtually no time at all. However, they did eventually change strategy and
jettisoned the telecom handset business where they had lost competitive
advantage, and focused instead on the telecom network service business. In 2012
Nokia bought back half of Nokia Siemens Networks and subsequently also
purchased its competitor Alcatel-Lucent, to become one of the world’s largest
telecom network service providers. IBM has over the years transformed from a
leader in the computer hardware space to completely focus on software and on
demand services. Xerox once synonymous with photocopying has developed into an information
management and communications company.
When the
strength of the competitive advantage reduces as competitors catch up, the firm
needs to jump ahead by innovating, redesigning or reconfiguring its competitive
advantage. In case the competitive advantage becomes redundant then the firm
needs to jettison it and move onto focus on alternate sources of value which
may or may not be from the same industry.
Successful disruptive entrepreneurs have often opined that
just as they spelled the end of some traditional products/services with their
innovations, they also expect to be hit in the future by unknown or unforeseen
potential competitors. How then do we spot
potential competition and redraw our competitive advantage?
Competition can only step in if there are value gaps for the
customer. So the best source of spotting potential competition is the customer.
You may be vulnerable to competitors from outside your industry/ eco-system
when gaps exist in how the consumer buys, consumes and experiences your
product/service, or the context/technology /consumer preferences evolve,
leading to such gaps. Minor cracks in the customer landscape are sometimes all
the signal the marketers are likely to get. It depends on the marketer whether
these cracks are papered over, or whether a new foundation is developed to
solve the root problem. Cracks could be a result of varying factors like information
asymmetry, lack of customized options, cost or time issues due to
intermediaries, integration with related products and services, flexibility in
usage, etc. If the marketers are in tune with the customer’s pulse, they will
be able to anticipate potential gaps and take steps to rejig the value delivery
to the customer.
To conclude, marketers definitely need to get out the telescopes
and periodically scan the far skies for UCOs (unforeseen competitors) but most
importantly they need to keep a magnifying glass on the customer and zero in on
any cracks before the UCOs can use them as an entry point.