Can you see the elephant in the room?

There are many drivers of an organisation’s competitiveness, both internal and external. But one of the most important is knowledge of new competitors. By this I mean:

  • Competitors that have recently entered – or thought to be about to enter - a market segment important to you
  • competitors already strong in market segments your organisation plans to enter.

Either way you must know who they are and what kind of impact they are likely to have on your company's performance.

Seems so simple doesn’t it? Yet experience shows that ignorance of new competitors is common. Both in the private sector and among universities. True, effort does go into analysing customers or students and some form of market analysis is usually conducted. And much effort is frequently put into developing new promotional campaigns.

But assessment of new competitor threats or challenges is frequently sidelined. Unless, of course, a crisis happens. Such as a new competitor without any forewarning entering a market segment which is crucial for an organisation’s performance. Then all hell can take place in a business, and it’s all hands to the pump to discover everything they can about this new competitor.

So what’s a better approach? First, we’ve got to understand that competitiveness is crucial for financial performance. And second, that competitiveness is driven by five sets of factors:

  • What your organisation does
  • What your key competitors do
  • Changes in markets and customers
  • Changes in macro factors (eg government policies, demographics,
  • Economic factors such as exchange rates)

To remain competitive, or to increase competitiveness, an organisation has got to do two key things:

  • hold onto key market segments
  • enter successfully new market segments

You cannot do either of these without knowing which organisations are your current key competitors and which competitors will be your major adversaries in any new market segments you enter.

In an organisation I recently worked for, two of the business units were planning to enter new market segments without knowing that another competitor

organisation already had over 60% market share in both market segments. Both business units were totally unaware of this competitor. Truly an invisible elephant in the room! And, of course, neither business unit had a business plan to cope with the realities of the marketplace.

Some organisations place just too much emphasis on what they themselves do and believe their product or service is inherently superior. On the other hand other organisations do something about it. They carry out competitive intelligence. More particularly they “know their competitors”.

They:

  • Think about their competitors and assess how competitive they are against them
  • Discover their competitors strategies, strengths and weaknesses of their products or services
  • Translate their competitor intelligence into strategic options for action
  • Implement competitive action plans to gain and retain competitiveness

And if they do all these things, improved financial performance should follow. I say “should” because an organisation’s performance is driven not just by competitor actions but by macro factors too. Like demographics which is the subject of my second article. Demographics is a macro factor that is going to become increasingly important in the future. Enjoy reading it!