Playing To Win
Strategy & Competitors
I had two events last week that were similar and striking. I didn’t immediately know how to think about them. So, I decided to clarify my thinking by writing my 29th Year III Playing to Win Practitioner Insights (PTW/PI) piece is on Strategy & Competitors: Should We Pay Attention to Them? You can find the previous 139 PTW/PI here.
Last Friday, I had a strategy session with a client who had sent me a stack of memos and presentations to read before the meeting. I always ask clients to send me lots of the work they have produced on the subject of the meeting, and they obliged with nearly 100 pages worth of materials on its strategy. As I read the materials, it stuck me that in all those many pages, there wasn’t a single mention of a competitor in its main business. To be fair, there was mention of one competitor in a memo concerning the strategy of one of its small subsidiaries — but zero for the main business.
When I thought about it more, I realized that earlier in the week I had a two-day meeting with another client that also didn’t once raise the name of a single competitor. At one point, I posed a question about its competitive position vis-à-vis one competitor and we discussed it briefly. But that was it.
Both clients are the clear leaders in their fields — if given a chance, every one of their competitors would instantly trade places with them. Arguably, neither has been significantly damaged by not paying much attention to their competitors. Nonetheless, my immediate reaction was to think they were making a strategic mistake. But then I wondered whether in fact they were being smart to not distract themselves.
I thought it was worth thinking through both arguments to come to some conclusion on the question.
The Argument Against Paying Attention to Competitors
The way leaders achieve and maintain their leadership is through uniqueness. They do things differently than anybody else in their space, and that enables them to have a superior value equation. They either generate superior value at similar cost or similar value at lower cost due to a unique set of choices.
Against this backdrop, paying attention to competitors will cause convergence. In driving school, you are taught that you will instinctively steer your vehicle in the direction that you are looking. So, you are warned that if you are at the wheel, you should never look closely at an accident at the side of the road because you will probably drive right into it and increase the devastation. Despite the clear warnings on this front, many roadside accidents get piled into from the rear because drivers ignore the warning and look.
Similarly, that is what can happen if you stare closely at competitors — you will converge on them and come to see what they are doing as ‘how things work around here.’ And if a given competitor is succeeding at something, you are tempted to imitate. But as I have written before, benchmarking is for losers. All the time invested in imitating will take away from energy invested in uniqueness.
This has echoes of the logic of the question of whether we should listen to customers. The (perhaps apocryphal) Henry Ford quote demeans the idea with: “If I had asked people what they wanted, they would have said faster horses,” and is reinforced by Steve Jobs’ “People don’t know what they want until you show them.” The analogous argument against paying attention to competitors is that you can’t really learn from them anyway.
Net, the argument against is that paying attention to competitors is either a waste of time or dangerous, or both.
The Argument For Paying Attention to Competitors
The argument for paying attention to competitors centers on it being an effective insurance policy. You don’t want a competitor to get the jump on you in a way that provides it with the seeds of advantage. It is like one-on-one match racing in sailing. If you get ahead, you always want to ‘cover’ your opponent. When and where and how they tack, you tack identically. As a result they will always have the same wind condition as you and will always remain behind you. If you don’t make a basic sailing error (e.g., fouling your sails), you will stay ahead right to the finish line.
However, if you stop paying attention to your opponent, they may tack away from you, find better wind, and end up ahead of you at the finish line.The biggest competitive danger is not knowing what a competitor is up to.
And on the customer analogy, even Henry Ford and Steve Jobs would have never said to ignore customers entirely. They both made history by serving customers in new and valuable ways.
Net, the argument for paying attention to competitors is that it is sloppy and dangerous to do otherwise.
The Optimal Territory in Between
As with listening to customers, the answer to the question of whether you should pay attention to competitors lies somewhere between the extremes.
Rigorously benchmarking competitors — as many companies do with a dedicated competitor intelligence department — is likely to do more damage than good. Obsessing about competitors and simply mimicking anything that works for them is a recipe for the kind of convergence that I hate. As I have argued before, my favorite outcome is the right not the left. Obsessing about, benchmarking, and/or replicating competitors gets you the left. You should want the right.
But despite how good you are, you will never be the font of all customer or technology wisdom. If they are good, competitors will see things that you don’t see. For that reason, it is important and valuable to consistently ask: from the actions of competitors, can we infer that they see things which we don’t see? And if that is the case, we better start asking ourselves questions about those things. As I argued in a previous post, if a competitor is working on answering questions you haven’t yet recognized that you should be asking, you are in trouble.
When the 1991 Ford Explorer hit the market and fundamentally created the modern-era SUV, competitors needed to ask: what did Ford see in vehicle buyers that the other automakers did not? If they asked expeditiously, they would have been able to infer that the fundamental vehicle silhouette was transitioning from low at the front (hood), high in the middle (cabin) and low at the back (trunk) to low, high, high. And one way or another, they needed to be in that silhouette, which has overtaken the sedan silhouette in the past 30 years — even if you are Porsche. While traditionalists excoriated Porsche for launching its SUV, it now sells five times more SUVs than sports cars in the US market.
When Gain took off from being a tiny southeast regional brand to become the #2 US laundry detergent (after its family member Tide), its competitors should have been asking, what did P&G see about consumers that none of them did? The answer was that there is a sensorial segment that cares more about the scent of their cleaned laundry than anything else.
When BMW’s and Mercedes-Benz’s started showing up in Walmart parking lots, mainline retailers should have been asking, what is wrong with our model of well-to-do shoppers that would make this an impossibility?
When Nucor started making steel out of scrap in minimills, the traditional and then-still dominant steel manufacturers should have immediately asked what have they figured out about steelmaking technology and economics that we never thought about?
Financial Times didn’t create the genre of online news. But when it watched the early online entrants demonstrate this technology would attract readers, it created FT.com which has saved this venerable newspaper from economic extinction, unlike many of its competitors, including some, like the Washington Post, which are now the money-losing playthings of billionaires.
The key is to ask what competitors are seeing, not obsess about what they are doing. Focusing on what they are doing will lead to convergence which is bad for all. Focusing on what they are seeing will spur you to ask better questions and get to new and valuable insights faster. Obviously, what they are doing will be a window on what they are seeing, but the faster you avert your eyes from what they are doing to working on inferring what they are seeing, the better off you will be.
Had I thought this through earlier, I would probably have given my clients more astute advice. I would have encouraged them, as I encourage you, to ask yourself whether something that your competitor is doing suggests that it sees something about customers in your business that you haven’t yet seen and therefore are not yet working on. Or is it utilizing a technology to serve its customers that you haven’t yet seen as viable for use.
If you conclude that it is an interesting customer insight or a promising technology, don’t jump immediately to how to replicate. Think about how you can meet that customer need distinctively or use that technology distinctively. The Porsche Cayenne didn’t replicate the Ford Explorer. But it recognized, even though the auto press was outraged that a venerable sports car company was making an SUV, that drivers wanted a different kind of Porsche. FT.com didn’t replicate CompuServe, Prodigy, or AOL, but it utilized the new technology combined with its own uniqueness.
That is how you can pay constructive attention to competitors and avoid obsessing counterproductively about them.