How To Make Your Competitors Work For You

How To Make Your Competitors Work For You
By
Alex Smith

Conventional wisdom suggests that, as a business, nothing is more irritating and destructive than the actions of your competitors.  Their each and every move is designed to wrong foot you, to take your customers, and to diminish your market share.  If they had their way you wouldn’t exist at all, and so they’ll do everything in their power to make that wish become a reality.

So, imagine how convenient it would be if your competitors’ actions didn’t hurt you, but actually helped you – without you having to lift a finger.

Strange as it may seem, this scenario is not as far-fetched as it sounds.  You can indeed adopt a strategy that turns your competitors into some of your greatest assets – but it requires a somewhat unconventional approach to market dynamics.

Finding Balance with Your Competitors

As I discuss in this TEDx talk about “loving your competitors”, the secret is to position yourself as a balancing counterpoint to you competitors, rather than their adversary.

What does this mean?

Well, because most companies are going after the same business as their competitors, they tend to offer largely the same things – the things those customers want.  In order to win the tussle, their focus will generally be on offering those things “better” than their rival – which might mean enhancing features, polishing service, or cutting prices.  Over time this process tends to produce a clustering effect, as the competing businesses become more and more alike in their efforts to outdo each other.

We could call this a clustered, unbalanced market – and it’s quite normal.

However, in some scenarios, rather than rather than clustering with their rivals in order to win the same piece of the pie, companies do the reverse: they surrender that chunk of the market to their competitors, in order to unlock the flexibility to focus on a different part of the market.  If they do this aggressively enough, they can create a situation where no consumer would ever be torn between them and their competitor, because they offer something so markedly different that the decision would be a fait accompli.

We could call this a declustered, balanced market where each business looks after a different part, and doesn’t invade on the others’ turf.

In this scenario businesses become almost like photo negatives of their competitors, like yin and yang.  Everything their competitor is, they are not, and vice versa.  When you create a dynamic like this, your competitors’ efforts to strengthen their position actually strengthen your position too – as they provide increased contrast.

How Southwest Made Their Competitors an Asset

For an example of this, consider the strategy adopted by Southwest Airlines in the 1990s.  At that time the airline industry represented a classic clustered market, where all the major American carriers were bundled together trying to win over the highly lucrative “business traveler” market.  Rather than joining this huddle, Southwest chose to completely reject business travelers, and ceased to offer anything they valued.  They had no business class, no lounges, the wrong routes – in short, they became an airline no business traveler would ever consider.  However, in doing this, they freed up their business model to take a different approach, to serve a different part of the market better than they’d ever been served before – and consequently ended up inventing the low-cost airlines category that we now take for granted.

In this scenario all of the features and benefits offered by the other carriers ceased to be a threat to Southwest – they actually became a help.  Firstly, because every move to serve business travelers better prevented those airlines from matching Southwest’s service to low cost travellers; and secondly because the more luxurious those airlines appeared, the better value Southwest would appear.  That’s the magic of contrast.

The Most Important Tip

The crucial point here is that in order to make this strategy work for you, it’s essentially that you completely surrender the ground on which your competitors are trying to improve.  Whatever direction they’re moving in, whatever value they’re trying to bring to the market, that has to be something that you don’t offer at all.  Only in this way will their enhancements be ineffective against you.

What’s left when you surrender that part of the market?  Well, that’s up to you to decide.  It might be something that your competitors are indeed trying to offer a bit, but they are spreading themselves too broadly in order to offer it brilliantly (after all, American Airlines wanted low cost travelers too; they just couldn’t serve them particularly well at the same time as business travelers).  Or it might be something that doesn’t exist in your category at all yet – and it takes your rejection of the status quo to finally reveal it.

 

But for now, let it suffice to say that your competitors aren’t necessarily your enemies.  You make them your enemies by confronting them – a behavior that isn’t inevitable in a category; it’s actually optional.  So, when you’re next engaged in strategic planning, perhaps try a little kindness instead?

 

Alex Smith is the founder of Basic Arts and is well known in the strategy industry for his counter-intuitive takes on business future. Having spent his career advising brands such as The Economist, Innocent, and Hello Fresh on their positioning, he began to see flaws in the normal way we approach strategy, and so developed a new way of doing things by distilling the lessons of the elite few brands who get it right. He now works with some of the best talent from a combination of backgrounds to bring these ideas to every business. You can keep up with his writing by checking out his blog BasicArts.org.