January 8th, 2011
I recently had a conversation with the publisher of a start-up niche business-to-business magazine. We had pointed out several things that we felt were opportunities for him. For one, our view—confirmed with some informal research—that the “look and feel” of his product was not what it could be, and that with a small investment, he could bring it up to the much higher standard we feel he needs.
His reply was that, even though he’s always interested in making improvements, they weren’t needed here. The reason? He had just met with his chief rival, the CEO of another similar publication, and they both had agreed that my client’s product had the better approach.
This illustrates perfectly what in my experience is one of the most common hazards of conventional competitive intelligence—one I’ll call competitive myopia. Competitive myopia is defined as a focus on a competitor or rival that is so intense that it causes distraction from larger strategic threats or opportunities.
Competitive myopia results in a mindset that says: If we just manage to beat the other guys, we’ll do fine in our market. “I don’t have to outrun the bear,” goes the joke about the two men meeting the hungry bear in the woods. “I just have to outrun YOU.”
In any strategic situation, we benefit by identifying and examining our own hidden assumptions. One assumption my client is making here is that his customer is going to buy either his product (meaning an ad in his magazine) or his rival’s—so if his offering is better, he’ll win the match. He wins, the other guy loses—just like in sports.
An elegant, simple model. The problem is, business doesn’t often work like that. The biggest competitor to both you and your rival in a sales situation may be NO SALE—the customer decides to make do themselves, or to do without entirely.
A related hidden assumption limits what you perceive as your customer’s range of options. Your customer may view as alternatives or substitutes a broader range of options than you think she does. In my client’s example, an advertiser might skip both his and his rival’s publication, and instead put her ad in The Wall Street Journal or Business Week.
Even more insidious is the game-changing disruptive paradigm that renders both products sub-optimal in fulfilling a client need. In my client’s case, digital media could be an obvious disruptor to both his and his rival’s offering. To wit, the customer could advertise on the Internet and avoid print media altogether.
Many otherwise-excellent companies have fallen victim to competitive myopia. For example, Kodak ran a campaign in the 1980s called “Beat Fuji”, where the goal was market dominance—in the film business. Both of them invested a lot in this—and both were late to embrace the technology shift to digital cameras. They’ve both ended up as also-rans in this successor market.
A more recent example is the battle between Nokia and Motorola for leadership in the cell phone handset market. Again, both former market leaders missed the shift from analog to digital smart phone technology, creating an opportunity for Apple, RIM, and others to enter and gain share.
A current example (in the US) is the battle over the cellular phone network market between Verizon and AT&T. It remains to be played out who the dark horse disruptor might be here—but my hunch says it’s VoIP players like Skype, whose calls go over the Internet, not over the radio-based cellular networks. Something that, in other words, threatens the core assumptions and business models of both cellular leaders.
Competitive myopia is not unique to business; the US military has the same problem. In his recent report “Fixing Intel: Making Intelligence Relevant in Afghanistan“, General Michael Flynn points out a “tendency to overemphasize detailed information about the enemy at the expense of the political, economic, and cultural environment that supports it.” He goes on to say that an obsession with gathering intelligence about specific terrorists has paradoxically led to a diminished understanding of the overall competitive environment—a textbook example of competitive myopia.
Why does competitive myopia happen? Here are my hypotheses—I’d love to hear yours.
First of all, it’s relatively easy to follow your direct rivals. Executives move back and forth among a small set of industry players, attend the same trade shows, and read the same trade press. As a result, things within an industry are typically pretty well-known.
Secondly, business markets are often complex and confusing. But recent studies have shown that most people don’t like complexity, and may even be threatened by it. So it’s tempting to frame the competitive marketplace as more concrete and simple by focusing on one other player. Employees, for example, can be more readily motivated by a “beat ‘em” theme than a more nuanced strategic analysis.
Customers, too, find making clear, binary choices easier than complex ones. If you can convincingly frame the marketplace as an “us versus them” horserace, this can work in a tactical sales context. Just don’t confuse that with a business strategy, which too often is what happens.
Finally, there’s the alpha-dog ego involved. Studies have shown that, given a clear choice between besting a rival on the one hand, and creating greater shareholder value on the other—which is typically what they’re being paid to do—most executives choose the former. They’d rather “beat ‘em” than create value.
OK, maybe “beat ‘em” doesn’t really work…but is there anything actually wrong with that theme and mentality?
There can be, and here’s why. When competitor benchmarking becomes overly literal or obsessive, it can divert your team’s attention and resources from the actual threats and opportunities that exist in the marketplace. When this happens, “beat ‘em” begets competitive myopia. This may work for you in the short term, but in the longer term leaves your organization vulnerable.
You can outrun me and the bear—and still find yourself lost in the forest without a way home.
If you think your team has fallen victim to competitive myopia, it’s time to think “beyond the five forces” about the threats and opportunities in your competitive environment.