By: Richard Peters
http://ca.linkedin.com/in/richardpeters2/
http://ca.linkedin.com/in/richardpeters2/
Competition is a reality
for every business. Even when a company introduces a revolutionary new product
or pioneers an innovative technology, the window of opportunity provided by
being first-to-market is limited. In my experience, in both corporate and small
business environments, when I examine an organization’s competitive strategy, I
am constantly amazed at the lack of innovative thinking in terms of
anticipating increased competition and planning for it.
If you want to maintain
competitive advantage, you should constantly be vigilant of the following:
- The success of your product or service will attract competitors. There is always room and opportunity for a competitor.
- You create the window of opportunity for a competitor to exist and to thrive.
To
assess your competitive vulnerabilities assume:
- Whatever values or benefits your product or service brings to the market, someone else can do it better.
- Your product’s success could create a market demand that you will eventually lack the capacity to meet. In other words, assume your product will eventually increase demand at a pace which will exceed your ability to supply.
- Your product or service has weak points. You are not meeting the market’s entire need. Your competitor(s) will use your product or product strategy shortcomings or omissions as their point of entry and their competitive advantage.
- Product or service innovation needs to be a constant and done on a proactive basis rather than reactive. (Note: This applies to products and services of all types not just technology products. This a major area of vulnerability for most companies. Being first-to-market with innovations is as important to maintaining competitive advantage as being first-to-market with the initial offering. Employ tools such as social media to keep apprised of how your market is reacting to your product and to those of your competitors. Through the effective use of social media tools, your market will give you heads-up regarding opportunities for innovations.)
Admittedly these
observations are based on hindsight. Over the years, I have gained the benefits
associated with developing and implementing successful and not so successful
competitive strategies. Having spent time in leadership and executive positions
in a variety industries including media, software, insurance, consumer packaged
goods, digital and social enterprise, I feel qualified to say that competitive strategies
and tactics are highly transferable.
Over the next week, I
would like to share with you a few case studies that are based on situations in
which I have been involved. These are cases that I have often referred to when implementing
and advising on competitive strategies. I have found that the lessons they contain
are transferable to just about all industry verticals.
CASE STUDY - KEEPING
ONE STEP AHEAD
A number of years ago, I
co-founded a venture that provided branding and marketing services to the
software industry. The clients comprised recently launched B2B software
companies or B2B software products that targeted the office automation technology
requirements of companies operating across an array of verticals. For the most
part, the technology being marketed was innovative and leading edge. A primary tool
for selling these products was “in-your-face-marketing” which involved
assembling 100-150 corporate decision makers in a room and having the client
organization pitch its wares. My organization branded itself as best-in-class when
it came to designing and delivering roadshow programs for B2B software
companies.
When we entered this
market, new or early stage software companies were plentiful and well financed;
however, they were largely being ignored by the major ad agencies and the more
established marketing services groups. Very few agencies even targeted software
companies as a potential market, especially B2B focused software companies. For
the first year, business was good and we seemed to be establishing ourselves in
the industry. Then things got a bit more challenging. Our success drew the
attention of others who decided to give this market increased attention. We found ourselves pitching new business
against much larger, more established industry players. Our closing rate was
diminishing. Competitors were starting to gain a foothold on our turf.
Another significant development
arose with one of our lead clients. We recognized that this client issue while
specific to one client had the potential to be the harbinger of future client
difficulties. The client in question called us to a meeting to inform us that
they were considering dropping our company from their service provider list.
Their explanation was that despite our services the timeline for their sales
cycle had not declined, sales had not increased and therefore they were
considering other options.
Basically we were
threatened with losing our key competitive advantages:
·
First-To- Market Advantage: Others had awakened to the opportunity we had
identified. While our existing clients were reasonably secure, we had neither
the track record nor resources to compete against large agencies when pitching
new clients. Anything we said we could do they could easily sell a new client
on how they could do it better.
·
Brand Positioning – The threat of losing a major client
had implications far beyond this one client. We had neglected a fundamental
principle - “never lose sight of the client’s measure of success.” Our criteria
for measuring “best in class” differed from what mattered most to the client.
“GIVE THEM MORE OF WHAT
THEY WANT AND LESS OF WHAT YOU THINK THEY NEED!”
We had an outstanding reputation for developing and delivering well organized, memorable events using unique venues attended by “A” list corporate prospects. But the client’s measures of success were increased sales and shorter sales cycle.
Note: This “want versus need” is an issue about
which we all need to be more diligent. I have seen and experienced situations
where the users or consumers of products or services and the providers were
quite a distance apart on this matter. I have found it tremendously enlightening
to get out from behind my desk and spend face-to-face time, one-on-one, with
users or consumers of products and services my organizations were providing getting
their feedback on how well we were providing value and meeting their needs. I
discovered significant issues and opportunities that never surfaced through
research studies or focus groups. Senior executives need to do more of this,
the perspective it provides is remarkable.
SOLUTION
We reinvented ourselves repositioning
our company or brand as being “partners” rather than merely “service providers”
and in so doing accomplished the following:
- Mitigated the threat posed by increased competition.
- Ensured that the clients’ objectives were clearly understood and always the pivotal influence on everything we did.
How we did it:
We reviewed the chain of
events that clients, in this case a software companies, go through to move a
product from a concept to a sale. We
identified what elements in that chain we were better suited to handle than the
client and redefined our value-add as being able to take these tasks from the
client allowing them to focus their resources on their core strengths.
This involved transitioning
from merely providing implementation services to working with the client to
develop their branding and marketing strategy and then taking ownership of the
client’s entire marketing program. A consulting division was added to our
company and tasked with working with the client’s leadership team, facilitating
branding and marketing strategy sessions, creating not only strategies but also
the associated tactics. From the client’s perspective, we became their
marketing department developing brand and marketing strategies as well as creating
the marketing assets.
This reinvention
successfully separated us from the competition in a number of ways:
- Our company was repositioned as a leading provider of IT, more specifically, software branding and marketing expertise. Software was the only market we dealt in and, therefore, despite our small size, we had credibility that our competitors could not duplicate… no one – at the time- was putting all their eggs in the IT basket.
- All new client relationships began with 1 or 2 day facilitation session held at the clients’ location with their senior executive team participating. During these sessions the client’s marketing and branding strategies would either be created, if none already existed, or reviewed and enhanced. The client’s willingness to accept our consulting involvement was predicated on their acceptance of the fact that because of our IT focus, which was further substantiated by our IT client base, we could bring a level of expertise and experience to these sessions that they could not get elsewhere. The irony was that we actually knew very little about computers or software. What we needed to know was easily acquired through the consulting and facilitation sessions with the client. However, we did understand marketing and branding which were the key values to be added.
Note: I find it interesting that so many organizations
continue to place significant importance on industry experience for recruiting
senior executives when industry knowledge is seldom, if ever, the issue or
challenge they face. In my experience, as the senior executive recruited to develop
and deliver growth strategies for companies operating in an array of
industries, understanding the industry and its products or services was seldom
my greatest challenge. As a matter of fact, often the greatest challenge I
faced when trying to get executives in underperforming organizations to take
risks and accept change was their inability to think out of the box and be less
inhibited by industry norms and accepted practices. This reminds me of
Einstein’s quote: “We cannot solve our problems
with the same thinking we used when we created them.”
- Essential to the success of this strategy was our requirement that we handle all elements of implementation, every nut and bolt. Our pitch to new clients was that the only way we could guarantee quality of deliverable was to be in total control of supplier sourcing and relationships, media buying, creative services, call-center operations, printing etc. If anything was taken out of our control, we could not ensure the quality or schedules. We strongly discouraged clients from wanting us to use their preferred suppliers. Surprisingly, with only one or two exceptions, all clients gave us total control over the implementation process.
- It separated us from the competition. We were in a league of our own. No one was in a position to replicate the turnkey operation we put in place.
- The consulting/facilitation service, which was profitable on its own, virtually guaranteed we would get to deliver the much more lucrative branding and marketing programs and created a significant barrier to entry for competitors.
- Consulting allowed us to bond with the client’s management team early in the chain-of- events leading up to the actual provision of their marketing services. By the time the client arrived at the stage (i.e. link in the chain) where they would normally make the service provider decision we had already secured our status as “partners” and had proven our “value-add” to their marketing and branding strategy. It was extremely difficult for competing service providers to get their foot in the door.
- In addition to the competitive benefits associated with the consulting services, taking ownership of a larger piece of the client’s marketing chain-of-events also created numerous barriers-to-entry. Competitors had very few client access points and when a competitor did identify a gap in the chain we could quickly close it.
- We avoided much of the anguish associated with the “race-to-the-bottom line” pricing competition that can occur when you are in a competitive market.
After we had executed dozens of programs, I did an informal survey with a few of our more loyal clients. The purpose of the survey was to review our pricing and cost structure with particularly emphasis on our printing services.
In should be noted that printing was a significant ingredient of every contract. We printed very high end marketing pieces. Some of which, capability brochures for example, could cost the client $10 - $15 each. Clients spent hundreds of thousands of dollars annually on printing. We relied on the services of only one printing supplier who handled all our printing requirements.
I asked the clients: “Since printing was such a major portion of the costs for their programs and knowing that we only used one printer, why had they never asked us to show them competitive printing bids?” Their response was that they rationalized the cost of doing business with us against the totality of what we provided not the individual parts. One client stated concisely what others had told me:
“I pay you
to take a large monkey off my back. Because of the scope of the services you
provide and the fact that you helped create the strategy that you are
delivering, I do not need to dedicate extensive internal resources to the
supervision of your contract. I can allocate a junior staff member to managing
our relationship with you and devote my more senior people to other tasks.”
Being
able to project price versus service price greatly simplified managing our
margins and provided flexibility in our pricing strategy.
- Regarding the client who wanted to drop us. With this new strategy, we were able to introduce innovations into their sales strategy which their sales force embraced and which resulted in reduced sales cycle times. The opportunity for these innovations would never have been identified much less introduced had we not been able to sit with the client and their marketing department as part of the team to review their strategy, identify issues, make recommendations and execute .
Other case studies by Richard Peters include:
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