why is my competitor doing that ?

Many companies assume that because a competitor is pursuing a new market, lowering prices, or launching a new class of products, “it must know something that we don’t.” As a result, competitive strategy is often an exercise of imitating a competitor’s actions instead of charting a unique course of action — an approach that rarely results in a company establishing a leadership position in its industry.

Becoming a leader in any given industry requires not just knowing what a competitor is doing, but what it does well — and what it does badly. Why? Would you rather compete head to head with someone where they are strongest, or identify, and then exploit, their weaknesses? Competitive intelligence (CI) is a systematic way of determining those strong and weak points.

In fact, the biggest mistake companies make when establishing a CI function is that they position it as a research function instead of a resource for informing strategic decisions. As a result, most of these CI functions often provide plenty of information but little genuine intelligence analysis, and hence they fail to deliver truly actionable insights about competitor behavior, strategy, and intent.

What can new CI functions do to get out of the information trap? The most important thing companies can do when establishing a competitive intelligence function is to develop a core set of analytic tools and models that help transform information into actionable insights. Such models can help companies understand the context behind competitor actions, assess rivals’ strategic intent, and develop strategies that serve to out-maneuver, instead of copy, competitor actions.

Three types of intelligence analysis methods are particularly useful:

1. Competitor analysis tools that go beyond basic Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis. For instance, the Four-Corners analysis developed by Harvard Business School professor and strategy guru Michael Porter is a model well designed to help company strategists assess a competitor’s intent and objectives, and the strengths it is using to achieve them. By examining a competitor’s current strategy, future goals, assumptions about the market, and core capabilities, the Four-Corners model helps analysts address four core questions: Is the competitor satisfied with its current position? What moves might it make? Where is it vulnerable? And what might we do that will provoke retaliation? From there, you can identify a competitive strategy that maneuvers around the rival’s objectives and strengths, and that plays to your company’s capabilities. A client of ours — a major financial services conglomerate — uses Porter’s Four-Corners analysis regularly to ensure that it both fully considers competitor market positioning and devises a unique course of action that reflects its own strengths, not the competitor’s.

2. Early warning analysis that helps spot and assess industry trends and facilitates a discussion of future contingency plans. By identifying, and then monitoring, a set of key industry and competitive events and circumstances, companies can anticipate the emergence of competitive threats and opportunities, and implement strategies to counter them. Indicator analysis lets companies anticipate future developments far more quickly than reading about them in the business press after they have occurred. This way, strategists spend less time trying to figure out what to do in light of competitor developments and more time executing preconceived plans. This is especially helpful in fast moving industries such as information technology and retail, where fast competitive execution is crucial.

3. Broad industry analysis techniques like scenario analysis that help spot relationships along a company’s value chain — changes affecting their suppliers and customers — that can aid competitive strategy. Good competitive intelligence functions help companies get out of the trap of devising competitive strategies against a single-point prediction about future industry conditions. Because we can’t predict the future, there is just one thing we know about such industry projections — they are wrong. Competitive intelligence functions that employ scenario analysis as a way to consider multiple, plausible, competitive and industry circumstances help their companies develop contingency plans for each. A provider of employee insurance and retirement plans with whom we work regularly employs scenario-based early warning to inform management of the threats and opportunities inherent in key industry trends. Another client was able to make appropriate adjustments in one of its major products when it learned early on that a supplier had to stop making a key ingredient.

Competitive intelligence methods such as these help companies know better how to leverage their strengths against competitor vulnerabilities, leading to strategies that are unique and based on core capabilities. Hewlett Packard’s resurgence against Dell provides an interesting example. According to an article in The Wall Street Journal (“Hard Drive: How H-P Reclaimed Its PC Lead over Dell,” June 4, 2007, page A1), in less than two years, HP bested Dell to become the world’s personal computer sales leader. It did so not by copying Dell’s highly successful direct sales model, but instead by leveraging its strengths in the retail channel and attacking a core Dell weakness.

HP concluded that it had been fighting Dell where Dell was strong, in direct sales over the Internet and phone. Instead, HP changed course and began to focus on its strength, retail stores, where Dell had no presence whatsoever. HP over the past two years moved quickly to fix logistical problems and build relationships with retailers, helping it surpass Dell in worldwide sales late last year for the first time since 2003.

Dell’s response? To mimic HP and try to begin to compete in retail outlets, HP’s current strength. That’s likely a losing proposition.

“If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful,” says Harvard Business School’s Porter. So ask yourself, what is your company’s strategic focus, to emulate a rival’s strengths, or to exploit its weaknesses?


One Response to why is my competitor doing that ?

  1. Industry expert ha detto:

    Getting comprehensive information about the competitors is hard. Only few companies have done comprehensive researches . Recently I came across this site – ecompetitors.com, which apparently has quality information on top 10,000 global industries.

    It is worth a look.


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