Are You Guilty of Making These Threat Assessment Mistakes?
Direct competitors can hurt you, but indirect competitors can kill you. Indirects leverage new technologies and/or approaches to address customer needs in new ways. They change industries. It can be difficult to see them coming.
It’s not that companies aren’t constantly looking over their shoulders – when pressed, most of our clients can identify at least 30 direct and indirect competitors. Sometimes many more.
But when it comes to assessing the threats these competitors pose, we’ve observed some very normal – yet dangerous – assumptions being made. Is your company guilty of any of these?
Misperception #1: “We’re Doing Well — So Indirect Competitors Are No Threat”
It’s natural to view success in relative, rather than absolute terms. Growth masks a lot of issues. Sometimes companies even experience what we call “the illusion of growth” – where they are temporarily picking up the business of dying direct competitors!
We’ve seen many industries be disrupted during times of total industry expansion (e.g., photography, travel, investing and food production, just to name a few).
It’s also natural – but deadly — to underrate new ways of doing business when growing at a healthy clip. Often, incumbents lose valuable time and fail to deploy their superior level of resources in new ways that would have kept them in front.
Potential Solution: Destroy Your Business Exercise
Jack Welch knew how to drive change. Back in the 90’s, he mandated an exercise at GE called “destroy your business.com.” Business units had to strategize how they would attack their very own business as a well-funded, technology-based competitor. It was effective in developing the type of proactivity necessary to identify and mitigate real threats to a business model.
This exercise might be even more relevant today than it was back in the early days of the Information Age. Recently, one of our clients in the medical device world tried this approach – and the resulting, very sobering debrief of their findings to senior management led to a successful change to their future strategy.
Misperception #2: “Customers in Our Industry Are Only Comfortable With a Trusted Brand”
We’ve lost count of how many times we’ve heard this one – even in industries where the fastest growing competitors are small indirect competitors. If the term “ankle-biters” is being used in your company with growing agitation but little action, it’s an early indicator that this misperception has taken hold.
Potential Solution: Leverage Your Own Company’s Millennials!
Millennials are famously brand-agnostic. In addition, Google reports that up to 50% of B2B buyers are Millennials. They can help you identify which ankle-biters can become giant-killers.
Millennials in your own company might feel pressure to toe the party line about your company’s superiority. But given the freedom to express their true opinions, they can be a great resource in identifying real threats from indirect competitors. It seems like this skill is built into their DNA.
Every company should have a panel of Millennials acting as an innovation advisory board.
Misperception #3: “Our People Will Embrace Change Because It’s The Right Thing to Do”
One of the things that indirect competitors do well is bundle together discrete solutions (think Nest, or all the things you can do on an iPhone). Most customers are looking for this kind of simplicity.
Unfortunately, sales reps for the same B2B company often pass in the parking lot, separately pitching their point solutions – and sometimes competing against each other! It makes sense that customers want these separate value propositions from the same company harmonized.
What doesn’t make sense: when executives expect that — simply by ordering teams to “work together on behalf of the customer” – the necessary cooperation will just happen. They need to fix the disincentives to cooperate that are built into their current rewards and compensation systems!
We’ve seen countless initiatives where executives believed they had full support on cross-portfolio coordination, and are baffled when the whole thing stalls. Dig below the surface and you’ll find that the players are tired of “getting killed for doing the right thing.” For example, they willingly reduce margin to help colleagues close a deal, and then get skewered in performance reviews for missing margin goals. No good deed goes unpunished.
Potential Solution: Pilot
In general, companies don’t do enough piloting. We’ll say much more about that in an upcoming Season 2 Accidental Marketer podcast. But customer acceptance and profitability aren’t the only things to analyze on a test run.
At least as important: what are the organizational obstacles, internal metrics and compensation hurdles that might torpedo the execution of a profitable value proposition that customers love?
Take a look around your organization and use the solutions offered above to combat any misperceptions. The company that you save may be your own!