Know Your Competition

January 26th, 2010 by admin

Now is a good time to pull out the model we talked about in “Power Tools.” You remember: the Competitive Matrix Model. Draw a matrix comparing your and the competition’s price, products, and cost. Where do your competitors map to? How about you? Are you right on top of them, or are you in one of the gaps in the market? This exercise will show you how likely you are to be in their crosshairs, how aggressive you need to be with pricing, whether or not you can ride in their wake, and how much you need to compete or cooperate.

I don’t know if Ray Noorda at Novell coined this one or not, but the first time I ever heard the word “co-opetition” was from his mouth. The idea is exactly how it sounds: compete, but cooperate. Competitive relationships can and should be fun, lively, and challenging. Hate relationships (like those unfortunately existing between many competitors) are not a place you want to go. Haters are annoying. They just waste energy.

The amount of energy you can expend in a fit of anger or jealousy can be significant, and even if it was motivated by an idea that popped into your head, that idea is usually gone once the tirade is over. New developments inspired by competitive camaraderie are often longer lasting and more respected. Some try to argue the value of a good dose of angry, negative competition, but it is just a short-lived dead end.

As much as you would like to engage in “coopetition,” you still need to know when your customers or affiliates don’t feel the same way. Some years ago, Ron experienced the tip of this negatively competitive iceberg when caught between two companies that seemed to love hating each other. Here is how he learned about hateful competition:

While employed at a large software company in the early ’90s, I had the direct responsibility to sponsor a customer feedback forum. The forum was held at a location that was neutral to all our customers, as we wanted uninfluenced and uninhibited feedback on how we were doing as a service organization. These customers made up our Customer Advisory Council, and their input was critical to our success. In many cases, they had spent millions of dollars on our software and services. They were highly respected in their particular markets and industries.

About midway through the first day of meetings, break time came around. One of our customers, a representative from a worldwide manufacturer and distributor of soft drinks, made his way to the refreshment table. I was standing nearby, visiting with another customer, when I heard a loud expletive. Turning my head to see what was up, he locked on my eyes and exclaimed something to the effect of, “I see our competitor’s products all over this table, but not a single one of ours. Would someone like to explain to me why the %&*@ that is and what the %*#& I’m supposed to drink?!”

Not knowing the intensity of the competition had led us to commit a cardinal sin. As soon as our customers returned to the meetings, we cleaned out every bit of his competitor’s products and replaced them with his company’s brands.

This kind of competition is abundant. You need to do your homework to be sure that you know what kind of competition to expect. Don’t believe it? Well, of a hundred more that I could pen, here comes another example of a rivalry so intense that the companies did stupid, self-defeating things. Once again, it comes from Ron’s bank of stories. Read it, believe that competition can get brutal, and resolve to do better.

When Ron was building the professional services team for a startup software company, his field sales engineer (FSE) was invited to present at a large hardware and software business based in Texas. He was equipped with the latest laptop technology—albeit from a competing hardware manufacturer—and was prepared to give a sterling presentation. This was a presentation that was important not just for the startup company, but for the long-term IT strategy of the Texas company as well.

The FSE was invited into the conference room and settled in for the presentation. One of the potential client’s high-ranking employees watched the FSE set up for the meeting—laptop out, wires hooked to the projector, everything ready for the dog-and-pony show. The employee waited until the presentation was ready to begin and then stood up, walked around the table, stopped in front of the engineer, and told him to unwire
his laptop, pick it up, and follow him.

He led the FSE out of the room and into the hallway. There he “invited” him to stow his laptop in his bag and hand it to him. He then walked the laptop over to an administrative assistant and instructed her to return the laptop to the FSE after the meeting. Returning to the engineer, he said, “Don’t ever come into our complex again with our competitor’s laptops or any of their products. You will do the presentation without our competitor’s gear or not at all. What’s it going to be?”

Never underestimate or misunderstand how your competitor feels about you. You need to know the appropriate amount of sharing and communicating to do. If you can stay away from this kind of brutality, it will be better for all of you. In some cases, however, it’s best to leave the relationship alone completely. If you run up against negative competition, don’t touch it. This is for the good of both companies and anyone
else foolish enough to wander into the crossfire.

Porter’s Points – Know Your Competition

  • After you draw up your Competitive Matrix Model, determine when and how best to approach each of your competitors and then do it. “Co-opetition” does not always mean that you cuddle up with everyone in your market. Be especially careful with the timing of your market entry.
  • For those competitors who react harshly to your friendly overtures, figure out how best to observe their work from a distance and then stay away. As a startup, the last thing you need is for an established business to come gunning for you.
  • Whenever you interact with competitors or customers, think through every detail— technology, refreshments, location, and especially culture. If there is anything that could offend, eliminate it. In such situations, it’s much easier to be a friend up front than to ask forgiveness later.

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