Learning will be the competitive advantage of 2020s
The nature of competition today is very different from what it used to be. It’s far less obvious, which makes the ability to gather competitive intelligence more important than ever. It is from this observation that I intended on writing an article about competitive strategy in the new decade and tools available to help assess the competitive environment.
However, the more I wrote I found this article is actually about learning. Specifically, the need for individuals and organisations to have the ability to evaluate their situation and adapt to the myriad of changes that will likely increase in velocity and impact.
It is no surprise that over half of all Fortune 500 companies since 2000 no longer exist and the average lifespan of Fortune 500 companies has reduced to sub 10 years. Much of this has to do with the pace of change and the lack of ability for organisations to adapt to the disruption that comes along with it.
Fuelled by the decline in the cost of technology and the corresponding rise in the ease and speed to bring a new product to market has created an exceptional opportunity for new competitors to enter untouched markets or disrupt incumbents who are asleep at the wheel.
So, you have a choice
Do you continue doing what you’ve always done and incrementally improve or make a conscious decision to understand your customer and competitive market and take decisive action?
I remember a time when conducting a competitor analysis was a straightforward activity. You knew who your competitors where, who they were targeting, where they operated, their proposition and pricing.
This situation has now changed with the competitive landscape far less obvious and more complex.
Examples of little known start-ups who have become dominant players in established industries are growing. Some of the well known examples include Uber for transportation, AirBNB for accomodation and Stripe for payments. All of these companies have their stories of starting out under the radar and being scoffed at by established companies as they gradually appeared from obscurity. All the while, these disruptors grew year-on-year at exponential rates to eventually emerge as leaders at the expense of incumbents who dismissed them.
Each year, CNBC releases a list of the top 50 disruptor companies. What is interesting is how many companies there are on the list that we’ve never heard of before. Notice below the majority of the top 10 disruptor companies are names you have likely never heard of.
The competitive intensity does not stop there! As Rob Llewellyn, from CXO transform highlights, there are the hyperscale businesses like Amazon and Google that continue to expand into new industries and in the process hoover up market share at a rapid pace.
There is also the added complexity of digital ecosystems and the emerging practice of “coopetition” whereby partnerships exist between competitors. For example, Amazon takes full advantage of this practice by offering a marketplace to burgeoning businesses, however, it is common for Amazon to also sell similar products in direct competition to other suppliers on its platform.
Competitive strategy in the 2020s:
For stable and predictable industries (if they exist at all anymore) there is a belief that classical models of competitive analysis and strategy work well. However, given the increasingly complex competitive environment, the trend is moving towards a model where advantage is temporary and competitors are not as easily defined. Competing in this environment requires a new way of thinking about competitive strategy.
Ash Maurya, creator of the lean canvas, has repeatedly claimed the speed of learning has become the new unfair advantage.
Outlearning your competition and using this information to continually refining your proposition to meet changing customer needs is key to competitive success. As Ash notes, in a highly changing environment, relevance is key and the only way to remain relevant is to keep your finger on the pulse of the job customers are hiring your organisation to provide. If you fail at fulfilling this job there are often plenty of other alternatives available to customers, some of which involve them hacking together solutions in unexpected ways to meet their specific needs.
This gives rise to the need to have an intimate understanding of the customer and an understanding of the obvious competitors and those who are less obvious (whether it is another business or a thing).
A BCG model that I came across provides a new way of thinking about competition. As highlighted in the related article, roughly two-thirds of all industry sectors experience high volatility in demand, competitive rankings and earnings, making long-term plans obsolete more quickly.
In short, the article argues the logic of competition has changed — from a predictable game to a complex, dynamic game that is played across many dimensions, with the rate of learning by an organisation a defining capability to be able to survive the onslaught of rapid change.
So how to get started?
One question to ask yourself is whether you have a consistent approach to gather and update your competitive intelligence. This includes understanding how differentiated your organisation is from known competitors and understanding the ever shifting needs of your customers.
Equally important to understanding your competitors and customers is to be clear on how prepared you are to act on these insights.
Tools to consider:
I’ve noted below a few tools to help you and your organisation evolve your learning around your competitors and customers.
- Understanding the context you are operating in. In taking a learning approach to strategic decision making, the lean canvas is an excellent tool to define and test your assumptions. In doing so, it helps to set the context you are operating in by understanding the key trends, industry forces, market forces and macro economic forces.
2. The trusty competitive matrix: The most common of tools to conduct a competitive analysis is the competitive comparison matrix. The criteria used to compare competitors can be adjusted based on the industry and competitive context. Below are a few standard criteria that you’ll find useful in most situations.
- Market share
- Value proposition
- Target customers
- Key products/features
- Point of differentiation
3. Capability assessment heatmap: Related to the competitor strategy canvas, the capability assessment heatmap provides a visualisation of how competitors rate based on a range of criteria customisable to the areas you aim to compare.
The tools above provide a way to gain better insight about competitors who are known to you. How about those who are less well known?
The two I’ve listed below help to provide a better view of less well known competitors or areas of potential new entrants based on understanding the various customer segments and customer needs.
4. Petal diagram: Steve Blank recently shared a post of a new way to look at competitors that provides a way to visually understand where competitors sit based on their customer segment focus.
I found this tool quite insightful in helping to gain better transparency of both established and emerging competitors through a customer segment lens. This tool is also exceptionally helpful in making choices of where you aim to play, who you aim to target, who the immediate competitors are and a view of potential substitutes.
5. Importance satisfaction framework: This framework helps to shed light on the competitive intensity around fulfilling customer needs and the extent to which there may be opportunities that are untapped or emerging.
What to do next?
So as you and your organisation enter the next decade I encourage you to make a commitment to adopt a learning mindset and consistently put in the time and effort to understand the changing needs of your customers and your competitive space.
Be skeptical of what you think you know. Challenge yourself. Everything changes, so be ready to act and respond to those things that are immediately visible and the unexpected disruptors that are growing right under our noses.