“Businesses are not murdered, they commit suicide”
Sridhar Vembu
The first Austin Powers film was for better or worse a landmark cultural event for many young people when it was released. Watched endlessly over and over again. One memorable scene that of a steamroller, moving incredibly slowly. The heros are on board and unable to stop or for some reason change direction. Passing by in front of them is a helpless James Bond style henchman who stops in the way to scream and shield himself. The joke is that he’s a long way away from the steamroller and instead of easily moving to the side he stands there screaming as if he’s about to be crushed until he eventually is.
Just as in business, many companies act like this henchmen, they can see the threats coming, or at least should be planning for threatening changes in situation. They see the danger and yet through their choices and their action make no effort to avoid the disaster or avoid the threat until it crashes into them, seeing it as inevitable.
In this way, businesses are more often than not, not harmed by their competitors directly, but their decision not to do something differently meant harm came to them.
COVID-19 is an interesting current example. Perhaps only the most paranoid business would have predicted international lockdowns and a complete shutting of many businesses for months on end. But no business would not plan for this situation happening again and too many businesses have assumed nothing bad would ever happen that they failed to keep sufficient funds in their 3rd shoe box. Set aside for a rainy day.
Apple is frequently hounded by investors who want it to “do something productive” with its cash reserves (i.e. give it to the shareholders) but I’m not sure those same people are quite as vocal in their criticisms now.
The Perception of Competition
A chaotic bitter fight to the death, no prisoners taken, absolute destruction awaits the loser. This is the easier to understand, quicker to communicate version of business history, it certainly makes a good story and usually involves a winner and loser, David vs Goliath metaphor.
The reality is usually much less confrontational.
The Reality of Competition
Less like warfare and more like sharing your room with a Boa constrictor. Definitely dangerous but if you watch how it moves you at least have options to keep out of its way. Eventually the snake might leave. But if you fall asleep you might wake up with no more room to move.
Your choices and actions determine the outcome, the competitor merely sets the scene.
Competition
Definition:
“The activity or condition of striving to gain or win something by defeating or establishing superiority over others.”
The gentlemen’s duel by pistol (finally coming to an end in England in 1845) is perhaps one of the more extreme examples of a competition where the stakes could not have been higher and yet the rules and boundaries were set to make it as absolutely fair as possible. You stood a predetermined distance apart from your opponent, close enough that even a bad shot could hit (and remember this was before modern medicine, even a glancing wound could easily become infected and fatal). A friend would then hand you a loaded pistol and you would both take your time to aim. When a signal was given you’d both fire. Whoever was shot was the loser. Anyone who broke the rules (i.e. fired early) would be considered the loser if they hit their opponent or otherwise would be scolded as a coward and just have to stand there whilst the other took their time to fire. In the unlikely event that you both missed. No problem, you simply stop, reset and try again. All very civilised.
But business isn’t as straightforward (or as insane) as this.
The scene is much more confusing, much less confrontational, the participants much less aware of what’s going on and the rules are perhaps discovered as you go along.
So… Who sets the boundaries of the competition? Who sets the rules? Do we always know when we’re competing? What do we win? How do we know when we’ve won? Can we even win? Can you win business? Can you win a career, or win life? I think not.
So the whole winners and losers lexicon is unhelpful…
Business commentators love winners and the analogy of sports teams. Two teams competing for a prize, the initial similarities with a business scenario seem obvious. But to me it’s far too simplistic a representation to hold much useful value beyond management and leadership analogies.
To beat the snake I believe you have two choices:
1. Fight it
Use your fists. Carry on doing what you were doing, but be much more aggressive on sales, promotions, steal intellectual property if you can, lobby governments, bribe officials*. Do whatever you need to do, win at any cost!
*I’m obviously not meaning to endorse illegal activity, but simply reflecting on what some companies will do to ‘win’, if you don’t believe me just read the news.
2. Escape it
Use your brain. Change what you do to be different, fresh, better, easier than how they do it, change the boundaries of the game so that it’s not a straight choice, find new untouched customers and opportunities.
It is more important to out-think your enemy, than to outfight him
Sun Tzu
Escape everytime.
I’m sure my description of fighting sounded far fetched, maybe a bit too Hollywood, but you only need to read the business news for a few weeks and you’ll find stories like this popping up all the time. The fighting and winning above all else mindset is sadly ingrained deep into many people and usually involves breaking a few laws and morals to achieve.
So given the choice, always try to escape, avoid the snake and ‘win’ by being untouchable.
This is the very essence of innovation. Discovering new ways to escape the competition. To open up the game into a new arena, a new battleground, eventually the competition will give up or exhaust themselves chasing you.
Unintended Results of Fighting…
One problem with fighting is you make your intentions very clear to you ‘opponent’. Most of business is shrouded in mystery and confusion, but actively going out to stop another makes things crystal clear and can cause some unintended consequences when you force your opponent to act.
“In 1948 a 22 year old Swede named Ingvar Kamprad, with a small mail-order business selling Christmas cards, pens, picture frames and the like, added furniture to his list… his business grew enough to threaten larger Swedish furniture store owners. They had him banned from exhibiting at the usual trade fairs…
In response, Kamprad filled a large, empty warehouse in the countryside with samples of his furniture for customers to see before they ordered off his list. This was the first IKEA showroom. An employee trying to stuff a table into his Volvo realised he could save space by removing the legs and storing them under the table. Because shipping costs were rising, they decided to try the same trick in shipping to customers… and self-assembly was born.
Furniture-store owners retaliated by forbidding designers to work with Kamprad. He was forced to hire his own designers which led to the IKEA brands and style…
Once Kamprad began designing his own furniture the store owners banned their wood suppliers and other manufacturers from working with him. So Kamprad went to Poland and discovered high quality suppliers at half the price [no easy task, this was the Soviet controlled Poland at the height of the Cold War don’t forget]. He passed the discounts on to customers and business grew…
In 1965 when IKEA opened it’s first store in Stockholm. There were so many customers that the store manager let customers go directly to the warehouse at the back of the store and take their own items. Which gave birth to self-service warehouses. All future stores were designed to allow customers to shop the warehouse.”
Who knows whether we would have been successful as we were if they [the Swedish furniture manufacturers] had offered us an honest fight?
Ingvar Kamprad - Founder of IKEA
The Magic Mountain Race
There are many advantages to having competitors. Just like running with a pacemaker or a good running mate, a worthy rival is a great motivator and can keep you at the top of your game.
I believe running is a much more helpful analogy for thinking about competition than team sports. Imagine you’re in a race to the top of a magic mountain that never ends, and looking around you see a number of other runners with you trying to keep up, these are your running mates. Understanding who your running mates are is a fantastic way of building a convincing argument if you need to write a business plan.
Depending on how many other runners there are will affect your choices.
In my Magic Mountain Race, there are three levels:
Level 1: the base of mountain, an easy (relatively speaking) opportunity has attracted lots of runners, lots of competition so the innovation challenge and significance is low. The terrain is easy and lots of companies can get by by doing the same thing they have always done without much effort to be innovative above their competition. And who can blame them, there’s not a lot of pressure to be innovative as the market (in good times) can sustain lots of you doing the same thing and change could be a costly distraction.
It’s been fascinating to see level 1 businesses thrown into disarray with the onset of COVID. The majority of high street shops and businesses likely falling into this category, and I’d bet the ones with a long-term innovator’s mindset will have the fastest recoveries.
Level 2: higher up there a now only a few competitors, it’s a close match, the challenge to sustain your innovation is now harder as you’ve lifted yourself out of the mass commodity offerings of level 1. But you can’t just stop now, you have to keep going to maintain this position. Any success attracts competition, you’ve found a new route to the top of the mountain and others will try to follow you. If you stop, you’ll be overtaken and end up back at the bottom.
Level 3: the top of the mountain, you’re the only one doing something, an innovator’s dream. The challenge here, beyond trying to stay there, is to convince people you’re alone because you’re at the top and not alone because you’re lost down a track going no where! Being the only person to do something is a mixed blessing.
The significance of innovative differentiation vs the amount of competition. Any participant can move up (with focused effort) or down (as time passes and imitators appear) at any time.
Level 1: The Marathon
You’ve got competitors, maybe thousands of them (think coffee shops in Bath, there’s one on every street). Could you sprint faster and pull ahead of the crowd, maybe, but you won’t stay there for long, there are just too many and too many new ones joining all the time. It’s like a gold rush.
In the UK coffee scene, Costa (2000 stores), Starbucks (900 stores) & Nero (650 stores) are all level 1 ‘marathon’ companies, yes they are competing with each other and might think that they are competing only between themselves (level 2), but they can’t avoid competing with the thousands of independent shops and cafes who also offer the same product offerings.
There is nothing wrong with being a marathon company and being the same as everyone else, if the market is big enough and demand is rising, but be careful if things start to turn, the unremarkable, forgettable contenders will drop first.
So if you can’t outrun them, you have to escape them. Do something different, be the runner in the deep sea diving suit or the silliest fancy dress. Be the runner that the crowd cheers for, the one that stands out, the one that is memorable and can attract a long-term audience.
Escaping the Marathon
An example from my time as a PhD student always sticks in my mind as a great example of escaping the marathon and changing the competition to your favour. Every year the first year undergraduate engineering students took part in a fun exercise of making a spring powered dragster. They are given a spring, a piece of string and an axle set from which to build a vehicle around.
It’s a fun challenge and all 50 teams basically build the same thing, old CDs or DVDs for wheels, a piece of balsa wood as the body and lots of superglue to hold it all together. As a result of everyone building more or less the same thing their finishing times tended to be incredibly close.
As a PhD student wishing to enter the competition against students I’ve been helping to teach, I can’t try to beat them. The risks are too great and completely stacked against me, win and they’ll dismiss it as being predictable, I’ll have cheated or had extra time or resources. Lose and the humiliation will be unbearable. So the only option available is to change the game, do something none of them will do so that any result is a victory.
My plan: Do something where I can’t lose… build a dragster out of pasta.
Spaghetti for the frame and axles, lasagne sheets for the wheels and penne for bearings. The finished thing was a work of beauty and entirely edible. Orange peels make a surprisingly effective tyre grip…
The performance was somewhat predictable, a failure, although I was happy it moved at all, it failed to make it very far down the track. However it wasn’t the worst performing dragster that day and is still, many years later, the only edible dragster that’s ever entered. So by changing the rules to something no one else would do I created a situation where I couldn’t win in the traditional sense, but reassuringly couldn’t lose.
Level 2: The Sprint
A straight race, you’ve got competitors and they are clearly marked. This is the only scenario where a ‘fight’ approach to competition might be a temptation.
Airbus vs Boeing / Coke vs Pepsi / Marvel vs DC / McDonalds vs Burger King
But remember the goal can’t be to win, the race will never end, business doesn’t end. The goal is to find uncontested space, breathing space between you and your fellow runners. That’s either by exhausting yourself trying to pull ahead and staying there, or heading sideways and looking for something new, a level 3 opportunity.
Pepsi doesn’t want Coca-Cola’s secret recipe, it won’t help them ‘win’ the “Cola Wars”, instead they branched out sideways to a different race and Coke has been trying to catch up ever since.
Level 3: The Lone Runner
The innovator’s dream, you’re the first to do something, there’s no one to be seen, it could all be yours! No competition at all, you’re at the top.
But doubt starts to sink in, why are you the only person running here? (If you’re not thinking it, investors certainly will be). Is this a false peak? Are you forging a path to a brave new world or straight off a cliff? Are you truly ahead of the pack or just lost? A lack of running mates gives your idea a credibility problem.
Although it can often look like you don’t have any competitors there are always alternatives (perhaps the only universal one is ‘none consumption’, people simply choosing not to use you, no matter how good you are).
If what you’re doing proves successful, imitators will appear, and they might have more advantages than you think. I’m going to caveat this section slightly by saying if you’re working for a large established company the “first mover advantage” may be a myth and we’ll discuss it in greater detail in the Pioneers vs Conquerors section later.
The first follower is what transforms a lone nut into a leader.
Derek Sivers
[Or a level 3 pioneer into either a failure or a level 2 competitor]
Changing Metrics
Sometimes all you need to do to spur innovation and a new direction of travel is to change the things you are measuring or the way in which you are measuring them. There’s a story that during one board meeting (the highest management and shareholder representatives) of Coca-Cola they were being told:
"We have X percent share versus Pepsi and it's 52-48 or so on… It went back and forth and back and forth like, is this really the game we're in? And somebody said, “are we just competing for who can own the brown water market?” The board members were locked in to the ritual of obsessing over the brown water market share, and trying to get a few points up in the brown water market.
One of the board members said, "What if we thought about this differently? What if we thought about our goal as something like percentage of stomach?" And they ended up broadening their view to a whole lineup of drinks and now they make a whole range of drinks, [waters and foods].”
Worthy Rivals
The strength of others is an opportunity to improve yourself.
More than just running mates…
Your running mates are all the people or organisations doing something similar to you, all the people you could compare against. Your worthy rivals are the people or organisations you want to compare yourself to, the ones that do something exceptionally well, the ones that will drive you to be better. It’s not about beating them, it’s about learning from them. Pick whoever you want, pick as many as you want.
“All of your strengths are my weaknesses and you make me feel incredibly insecure”, Simon Sinek talking to Adam Grant, a worthy rival (in Simon’s mind) in the world of leadership and corporate psychology.