Marketing strategist Jack Trout says that paranoia is essential for business success in a highly competitive world. He shares tips on dealing with competition with Chitra Narayanan in this exclusive interview-
Q- Is it really the age of competition or is it the age of alliances? We have seen unlikely partnerships being formed by business rivals to stay ahead today. Would you advice collaboration rather than competition?
A- It is, indeed, the age of competition, not alliances. Alliances tend not to work over the long haul since each partner has different needs and agendas. Consider the Hero Honda alliance, which was the dominant motorcycle brand in India. But when Hero wanted to move to export, Honda declared that unacceptable as they were already a dominant global brand. The result was a divorce and Honda is now a major competitor to Hero in India. Interestingly, Bajaj, the number three player in motorcycles, now has two tough competitors, rather than one. Their obvious move is to shift their focus away from commuter to sport motorcycles where they have a strong advantage, having pioneered the category.
Q- Quite a few business leaders believe in keeping an eye on the customer rather than on the competition. After all the customer is changing faster than competition? Is that the right strategy?
A- Customer orientation is necessary but not enough as all the company's competitors are customer-oriented or they will not survive. This is why competitor orientation is critical to survival as you must differentiate yourself from your competitors. Withoutdifferentiation, all you have is 'price' as a tool.
In India, Kirloskar's agricultural pump sets is an example. Their problem was Chinese pump sets that were selling on price. Kirloskar had to differentiate its sets as more reliable, thus lasting longer as compared to Chinese pump sets. It was a case of providing the consumer evidence of the greater value of the product. The beauty of this longevity strategy was that the Chinese pumps have not been operating in China anywhere near as long as Kirloskar pumps. This gave Kirloskar a built-in advantage when discussing time in operation.
In the age of competition, you avoid your competitor's strength and attack at weakness. Strategic planning will become more and more important. Companies will have to learn how to attack and to flank their competition, how to defend their positions, and how and when to wage guerrilla warfare. They will need better intelligence on how to anticipate competitive moves.
Q- Is the digital economy rewriting the rules of competition?
A- In some categories, the answer is yes. Retail is an example. People can go online to order as opposed to having to go to a store. And with the likes of Amazon in the US or Alibaba in China, these companies have become giant retailers that have, indeed, rewritten the rules of competition. But not everything can be ordered online, especially where there is service or customisation involved. An example in the retail world is Nordstrom, a department store that has made service the cornerstone of their strategy. They have been less affected by the online retailers.
Q- Today, the competition is fragmented - may not even be from within the same industry but come from somewhere else. How can a company watch out for the unexpected?
A- The key to the unexpected is to stay nervous. Paranoia is critical to success. What I mean is that constant diligence is necessary in a competitive world. Everyone is after everyone's business, so a good worrier is a good marketer.
If your competitor is smaller than you, you should move against your competitor as soon as you can so that they cannot develop momentum
What people have to realise is that flexibility is a necessary mindset if you want to succeed. You can't predict the future so you must be ready to adapt.
Q- What are your tips for dealing with and staying ahead of the competition?
A- If your competitor is smaller than you, you should move against your competitor as soon as you can so that they cannot develop momentum. General Motors hung back when the Germans and Japanese cars invaded the US market with small cars. They felt they could not make money on this type of car so they rationalised their position by convincing themselves that Americans wanted big comfortable cards. We know they were wrong.
Whilst if your competitor is bigger than you, the best strategy is to sneak up and never appear to be threatening. Southwest Airlines began with their service only in Texas, and non-hub airports. It then moved to the West Coast, spread to the Midwest and worked its way to the East Coast of the US - it maintained some real differences from its competitors that kept his cost down and today has kicked many butts!
There are times when it advisable to 'shift the battlefield', i.e., to shift the efforts to a place where you can take better advantage on your strengths.
Another key to staying ahead of competitors is 'new and improved'. You can't just sit there and become a target. No other company in the history of marketing can match Gillette's efforts in the razor blade world. They are constantly adding blades and features to products that often replace existing products in which they have invested heavily. Today they have over 60 per cent of the razor blade business, a number they have held for decades. They also have very few competitors because most have discovered that taking on Gillette can be costly and not very productive. If there were a competitive hall of fame, Gillette would be at the top of the list.
Jack Trout, President of Trout & Partners, is the originator of 'positioning' and other important concepts in marketing strategy