Don't Be Caught Off-Guard By The Competition
Many organizations have already faced the unpleasant surprise of an up-and-coming competitor moving into their market and many more will experience the same. In many cases, the source of these unwelcome surprises are rooted in shortcomings related to recognizing and responding to changes in the competitive landscape.
Businesses are often told to be wary of disruptive innovation (i.e., when a small company with few resources is able to challenge an established company; Christensen, Raynor, & McDonald, 2015). A notable example of this is Netflix. In the early days of Netflix, Blockbuster wasn’t threatened by the mail-based DVD rental service – a comparatively niche market compared to their empire of video rentals. They turned down the offer to purchase the then-struggling Netflix for $50 million – a sum that, in hindsight, represented a once-in-a-lifetime type of deal given Netflix’s current market valuation of more than $80B. However, Netflix's struggle lessened over time as both it and its customers moved to the internet for their movie-watching needs. Blockbuster caught on to this trend too late, and filed for bankruptcy while Netflix continues to succeed today as its niche market has grown into a booming customer base.
One of Blockbuster’s pitfalls was failing to examine their customers. They failed to see what Netflix saw – where the future of home movie-watching was headed. While Blockbuster were looking solely to the existing competition, Netflix had the opportunity to sneak up and fulfill their customers’ evolving movie-watching wishes, earning them the top spot over Blockbuster.
It’s not to say that keeping an eye on your competitors isn’t a useful practice. In fact, analyzing how your competitors are currently fulfilling customers’ needs is a critical way to examine your own weak spots, whether in your product/service itself or in your strategies. It can reveal areas you may be neglecting as well as areas that are growing or shrinking in significance to your customers. When considering how you can best pursue opportunities and avoid threats, you need to look at everything: your customers’ needs, where you currently fit in the market, and how others are currently (or may soon be) fulfilling the market’s rapidly-changing needs.
A comprehensive competitor analysis (one that includes not only direct competitors, but also indirect, replacement, potential, and SEO competitors) accompanied by a self-analysis can assure that you understand your current position and where your organization’s weak spots may be. When examining the market and seeking opportunities to pursue or threats to avoid, you need to consider all the alternatives to your business, and who might be fulfilling those needs either now or in the future. Performing a comprehensive analysis of all your competitors – both existing and potential – is a critical step in order to seize opportunities for growth, identify possible partnerships, or to mitigate threats. Examining how you fit your customers’ current needs and how you can adapt to fulfill them as they change over time will allow you to remain relevant, desirable to customers, and on top of your game.
Bonchek, M. & Cornfield, G. (2016). Focus on keeping up with your customers, not your competition. Harvard Business Review. https://hbr.org/2016/04/focus-on-keeping-up-with-your-customers-not-your-competitors
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation? Harvard Business Review. https://hbr.org/2015/12/what-is-disruptive-innovation