Considering competition based on customer choice

Customers choose to buy certain products based on a value equation, weighing the benefits of several products against their relative prices (see the earlier section “Understanding the Value of Competitors”). But which products do customers actually compare? If you want to know who your real competitors are, you need to know how many products — and which products — your customers typically look at before they decide to buy. If you know who your customers are and what their selection criteria are — that is, what they look for in a product or service — you can divide a list of competitors into groups based on how intensely they compete with you.

Travel and tourism is a multi-trillion dollar industry today (that’s a trillion with a T). Millions of people work in this sector, and hundreds of thousands are employed in jobs that help travelers do their trip planning. Taking a vacation, booking lodging and transportation, adding on some special visits to mollify the kids — that used to be the job of the thousands of travel agencies that dotted the landscape in offices spread throughout every city and town in the United States, and other nations of the world, too. Many were independent operators, some part of a larger chain like American Express or Thomas Cook, yet others affiliated with organizations like AAA (the American Automobile Association, where you got those free maps and travel books).

The live, in-person travel advisor is still there, but time and technology have restructured this industry. There are now two primary segments, based on how customers contact and interact with the provider: traditional brick-and-mortar agencies, and online travel agencies (OTAs) that began to flourish with the rise of the Internet at the end of the 1990s (and some firms, of course, offer services through both channels).

But if you’re in this industry, or planning to enter, is that all you need to know about your competition — just choose one segment and jump in? Hardly. To achieve your business goals and learn who you’re up against, you’re going to need to further subdivide the two basic segments along a multitude of narrower variables. For starters, the industry caters to different kinds of customers. Some are families on a budget, others are searching for a once-in-a-lifetime experience with an almost unlimited budget. Some focus on solo business travelers; others contract with large corporations to handle all their employees’ travel needs. And then there are agents who handle only a certain type of travel experience (like cruises or adventure tours), or a certain geographic region (southern Europe, Tuscany, Rome), or certain customer demographics (singles, senior citizens, LGBTQ, multi-generational family reunions). The only limitation appears to be imagination.

When you’ve decided on which particular sub-segment you want to compete in, you need to identify who else is already there. You might start by typing keywords into your preferred search engine (for example, “wine country tours”) and see what pops up. Here’s how you should organize your search:

• Head-to-head competitors: Together, these companies represent your most intense competition. Your customers probably look at them, too, before deciding. They might ask you to compare your features, benefits, and pricing with these competitors’ products. You want to know as much as you can about these competitors. If you’re an independent brick-and-mortar agent, try drawing a circle of five to ten miles around your location. What other agents are in this same space? Which ones are optimized to offer specific services similar to yours? If you specialize in a certain type of traveler experience, search the Internet for competitors targeting the same market.

  If you are an OTA like Travelocity/Orbitz/Expedia (all part of the same firm these days), Booking.com, or Trip.com, you need to know how big their supplier network is (airlines, hotels, restaurants, and so on). What unique features do they have, such as points programs or refund policies? How user-friendly is their online platform? Do they have any arrangements with airlines, hotels, or some corporate clients that give them a special advantage?

• First-tier competitors: These companies are direct competitors, but perhaps not quite as fierce as the head-to-head kind. In the OTA segment, this could be smaller incumbents like Tripadvisor.com or Trivago. For brick-and-mortar, maybe a lone agent working from a home office. You may run up against one of these only in certain areas and among particular kinds of customers. You don’t want to ignore this group too long, however, because any of these companies may have the desire and capability to become a head-to-head competitor. Or they get acquired, and now they have more resources to come after you.
• Indirect competitors: These competitors are the ones you don’t often think about. Some of the major transportation providers such as airlines offer their own travel agency services, giving airfare discounts if you book related travel services like car rentals or hotels through them. And AAA, as noted earlier, provides a wide range of travel arrangements for its members. Some credit card suppliers do the same. Their products surface as alternatives to yours only occasionally, and you usually have more important competition to worry about. Again, this group deserves a periodic review because indirect competitors always have the potential to surprise you with competing products that come out of the blue.

You should be able to count your head-to-head competitors on one hand. You may have twice as many first-tier competitors to track and an equal number of indirect competitors. Be careful to keep the number of competitors that you track manageable. Your head-to-head competition deserves much more attention than your indirect competitors, obviously, but you should set up a schedule for reviewing companies in each of the three competitor groups. Start with a weekly analysis of your head-to-head competition, a monthly review of first-tier competitors, and a quarterly review of your indirect competitors, adjusting the schedule to fit the pace of change in your industry.

One way to come up with levels of competition in your business is to ask potential customers to consider playing their product-selection process backward for you, as we describe in the following list. (For more detailed information on how customers make choices, check out Chapters 6 and 7.) Sometimes, you can also get this kind of information through your salespeople or customer-service representatives (if you have them):

1. Ask customers for the short list of products that they seriously evaluated for purchase.

   Your head-to-head competitors probably offer these products.

2. Ask customers for the larger list that they came up with when they started investigating what was available in the market.

   Your first-tier competitors are likely to offer these products.

3. Ask customers for the names of products that popped into their heads when they first decided to go shopping.

   These products may include those your indirect competitors offer.

Paying attention to product usage and unexpected new competition

Looking at products and services in the context of how customers use them gives you another viewpoint from which to eye the competition.

Consider this example: For centuries sufferers of hair loss (alopecia for the in-crowd) looked for a cure, especially males who saw this Samson-like curse as a threat to their masculinity. Lots of scammers touted snake-oil remedies, from ointments to more complex products. But nothing worked. In the 1950s researchers at the pharmaceutical firm Upjohn developed Minoxidil as a compound to treat ulcers; it proved a bust for that application, though further research showed it was effective in treating high blood pressure. It was relabeled as Loniten and approved for this indication in the 1970s. As physicians began to prescribe Loniten, however, some patients began to experience an unexpected side effect: hair growth. Not everyone was thrilled with this, but as word spread, some thought it was a miracle cure for baldness. In 1988 the regulatory agencies gave approval to the compound as a hair restorative under yet another new name, Rogaine.

Prescriptions grew rapidly, a women’s version was introduced shortly after, and by the mid-1990s, it was authorized for over-the-counter sales. The charlatan peddlers out there took a haircut. In 2006 Johnson & Johnson, the pharma giant, acquired the Rogaine brand, which now accounts for more than 50 percent of this nearly $8 billion global market. That’s a real growth story.

When you survey the competition in your defined market, you’ve got to be conscious that there might be something that comes out of left field and surprises everyone. These are obviously hard to track in any systematic way, but you can take some steps to stay on the cutting edge of your industry:

1. Ask customers to think about situations, applications, or occasions in which they may use your product.
2. Ask customers to come up with other kinds of products or services that would also be appropriate and may be just as satisfying in the same situations.

By viewing your competitors from a marketplace perspective — how customers choose and then use alternative products — you’re rewarded with a more complete picture of the competitive landscape that you face.

Spotting strategic groups

If you step back and look at the competitors around you, their differing appearances may amaze you. In certain industries, for example, companies that have a full product line compete with companies that offer a single product. In other industries, companies that gain recognition for their innovative research and development compete with companies that don’t develop anything on their own.

How can competitors in the same industry be so different? Over time, doesn’t every company figure out the best strategy for their industry, as well as the most efficient and effective ways to do business? And then they all converge on that one best way? These good questions have two possible answers:

• Companies don’t always discover a best way to do things. Markets and industries are complex, and different ways of doing business can exist side by side and be equally successful.
• Companies that do business one way can’t always easily change and start doing business another way.

Identifying competitors based on their unique capabilities and strategies has a great deal in common with some of the industry analysis topics we discuss in Chapter 5. Sometimes you can take that analysis one step further and divide companies in your industry into groups based on what they do and how they operate — sort of like the market segments that we talk about in Chapter 6, but this time applied to companies rather than individual customers.

A strategic group is a set of companies in a particular industry that look alike and tend to behave in similar ways. In particular, firms in the same strategic group have the following traits:

• They display similar characteristics (products on offer, size, geography).
• They operate in similar ways (degree of risk-taking, level of aggressiveness).
• They demonstrate similar capabilities (employee skills, special tools, brand image).
• They pursue related strategies (customer segments, distribution, marketing, and product-line decisions).

You can apply all sorts of business criteria to identify the most useful strategic groups. Although every industry is different, you need to consider these general variables:

• Companies that manufacture most of their product components versus those that outsource components or only resell products made by others
• Companies that produce name-brand products versus those that produce generic or private-label brands
• Companies that rely on their own R&D (research and development) versus those that license or buy technology
• Companies that have a full product line versus those that have limited or specialized products
• Companies that emphasize marketing versus those that focus on production
• Companies that compete in multiple industries versus those in only one

Strategic groups fall somewhere between an individual company and the entire industry. Lumping your competition into groups is helpful, because all the companies in a strategic group tend to be affected by, and react to, changes in the marketplace in the same ways. But grouping works only if those companies stay put in their assigned group long enough to be analyzed. Fortunately, they usually do.

As part of your industry analysis, you already may have discovered a few entry barriers — factors that make it tough to get into your business, such as high capital costs, expensive distribution systems, new technology, and the like. You also may have come up with some exit barriers — factors that keep competitors from getting out of the business, such as expensive factories with lots of debt and long-term labor agreements. Strategic groups can have the same kind of mobility barriers, which tend to keep competitors where they are, in one group or another.

Strategic groups can be a great time-saver in business planning, because when you put all your competitors in strategic groups, you know where to focus your energies. You can spend most of your time analyzing the companies in your own strategic group and deal with the rest of the companies in clusters instead of tracking each company separately.

To divide your list of competitors into strategic groups, follow these steps:

1. Put your competitors in a small number of groups, based on their similarities.
2. Add your company to one of the groups.
3. Looking at each group carefully, try to come up with the basic criteria that you used to make your selections.

4. Take a hard look at the group in which you put your company.

   Are these competitors really closest to you in terms of their characteristics and the criteria that you identify?

5. Ask a few trusted customers to look over your groups and see whether they agree.

   Viewing the world through your customers’ eyes is always worthwhile and can sometimes be a real eye-opener.

6. Adjust the groups, if necessary, and work on additional criteria that may point to other strategic groupings.

Strategic groups are relevant and useful in many industries; they often provide a means of organizing competitors in ways that can simplify the competitive landscape. But keep in mind that all industries don’t play by the same rules. If the mobility barriers aren’t very high, for example, or technology is changing how customers perceive a particular product or service line, then companies are free to adjust their capabilities and change strategies quickly. If you are an automobile manufacturer today, would you include Apple or Amazon as players in your group? What if local government authorities mandate new health and safety requirements for restaurants — will all the current incumbents be able to comply? Or what if these same public agencies decide that a company’s workforce must be considered as internal employees rather than external contractors favored by gig economy firms? Make sure that the groups you identify in your industry are still relevant before you have a chance to analyze them.

Focusing on future competition

A defining element of business in the 21st century is globalization. The lowering of international trade barriers and the revolution in communications technology as well as transportation paved the way (or perhaps smoothed the waters) for an explosion of cross-border trade. But for too many firms in too many industries, globalization was an update of the three monkeys who saw no evil, heard no evil, and spoke no evil. That is, they ignored the threat until it was too late.

We all know about management failures in the auto, consumer electronics, steel, and so many other industries in which domestic American firms once ruled the roost with their smug attitudes about foreign competition. When the new guys came knockin’ at the door, they were ignored at best or probably ridiculed for their exotic company names or new product features that no American customer would possibly want. And those low prices? Obviously low because the hardware was junk. But then again…

Talk about learning a lesson the hard way. Today we don’t need to warn you about keeping a constant lookout for competitors no matter what their country of origin. Globalization has opened our eyes as well as our markets. The following are the likeliest sources of new competition to scan for threats:

• Market expansion: A company that operated successfully for years outside your geographic region decides to expand into your territory, making it an overnight competitor. Those low-priced Mahindra compact tractors that now compete with John Deere came from India, home base for its world-leading market share (and in fact, it now operates multiple factories in the United States, too). Alternatively, a company that dominates another market segment sees an opportunity to target your customers as well — is there any place that Amazon won’t go?
• Product expansion: A company decides to take advantage of its brand name, its technology, or its distribution system and creates (or acquires) a new product line in direct competition with yours. Coca-Cola may have started with a single drink but now offers more than 500. Pepsi-Cola owns Quaker Oats cereals, Stacy’s Pita Chips, and Pearl Milling (what used to be called Aunt Jemima) pancake mix.
• Backward integration: One of your major customers decides that it can do what you do — and do it faster, better, and/or cheaper. So the former customer sets up shop and hands the business that it used to give you to its in-house group. Suddenly, your old customer is a new competitor. Ever notice all those Kirkland brands at Costco?
• Forward integration: Your company buys many products from many suppliers. One day, one of those suppliers decides that it can bring all the pieces together as well as you can. So it creates a new business and a product line that competes with yours. Huawei, the controversial Chinese maker of networking components for the telecommunications industry, now offers its own branded cellphones, laptops, speakers, and other such consumer electronic goods — in direct competition with some of its component customers.
• Change in fortune: Out of the blue, a major company purchases a minor competitor. With access to new resources (financing, marketing, and distribution), the minor competitor becomes a major player. Dollar Shave Club was a scrappy new online shaving start-up in 2012, with a disruptive business model. Then in 2016 it was acquired by the $60 billion UK-based Unilever, a global giant in FMCG (fast-moving consumer goods) markets. Now Dollar Shave Club competes in hair care, skin care, oral care, and even fragrance markets, among others. We bet Procter & Gamble is a lot more interested in this little guy now.

Keeping track of future antagonists is as important as tracking your current ones. You can avoid a close shave yourself by systematically watching out for these competitors. When they appear, they may catch you off guard and be all the more dangerous because of their unknown pedigree. So keep your eyes and ears open, and don’t be shy about asking your customers and suppliers about competitors on a regular basis.

Determining competitors’ capabilities

You need to ask the same kinds of questions about your competitors that you ask yourself when you complete a company self-checkup in Chapters 9 and 10. We introduce the basics here, but turn to those chapters for all the details.

What should be of the most concern to you is how well these others stack up against your own primary strengths and weaknesses. No need to get agitated about, say, a competitor’s ability to cut a few shekels of cost here and there when you’re in a luxury goods market that turns on brand perception more than price. But if the other guy hires that hot new celebrity with her new hit show to pitch its goods? Now that’s something entirely different.

To determine your competitors’ capabilities, start with this list of important business functions and areas. The following questions should get you going, but if you need more help, check out Chapters 9 and 10, especially the information on value chains in the latter. You can also take a peek at the later section “Organizing facts and figures.”

• Management: What do you know about the background and experience of the company’s chief honchos? What functional areas (marketing, finance, engineering) do they come out of? What about the board of directors? How many talented, qualified, and accomplished people are at or near the top? Do any managers hail from another industry? If so, what are their past track records?
• Organization: How structured and centralized is the company’s organization? Does it have tight controls in place, or does it delegate authority down through lower organizational levels? Does it promote from within or hire from the outside? How would you describe the corporate culture?
• Customer base: What is the company’s share of the market? Is it growing? How loyal are its customers? Are customers concentrated in one segment, or do the company’s products appeal to several segments?
• Research and development: Is the company known for innovation and technology? Is it even involved in R&D? How often does it come out with new products? Does it have patents and copyrights to rely on? How stable and committed are the members of its technical staff? Does the company have sources of outside expertise to draw upon?
• Operations: How modern are the company’s facilities? Has it gone digital yet, and if so in what areas of operations? If the company is a manufacturer, does it have flexible production facilities? What about capacity? Can the company count on its suppliers? What’s the general attitude of the workforce? Does the company have a history of labor disputes?
• Marketing and sales: How strong are the company’s brands? How broad is the product line? Does the company have a reputation for quality? Does the company put a large amount of its resources into advertising and promotion? Is it known for its customer service? Are the salespeople aggressive and well-trained? How are they compensated?
• Distribution and delivery: How many distribution channels does the company sell through? Does it have a good relationship with its distributors? Is it quick to take advantage of new distribution opportunities?
• Financial condition: Is the company’s revenue stable, growing, or shrinking? How about profits? Does the company manage costs well? Are profit metrics steady? What is the cash-flow situation? Is long-term debt manageable? Does the company have ready access to fresh funds?

As you start digging, it’s a good idea to compose a half-page or so corporate bio on each competitor. Each one should capture the company’s defining traits, and not just the usual data on sales volume, product line-up, and so on. Be sure to include the following:

• Capability to respond quickly
• Willingness to change
• Determination to compete
• Capacity to grow

This may sound like a poor imitation of some psychiatrist, but you won’t regret the effort. It’s not always what a competitor has that drives its behavior, but rather how it manages those resources it has. This was the sad lesson learned by too many U.S.-based firms that initially dismissed foreign competition when globalization began to churn the waters.

Assessing competitors’ strategies

Your competitors’ capabilities tell you something important about their capacity to get things done right now in your business. But what are they planning to do for the future?

To answer that question, you need to assess their capabilities strategically. (We talk a lot more about how to think strategically in Chapter 14, so turn there for the details.) The following strategies are sometimes called generic strategies, because they’ve been tried many times before and because they work well in almost any market or industry:

• Low cost: The first generic strategy comes from a basic economic principle: If you can offer a product or service at the lowest price in the market, all else being equal, customers are likely going to buy from you. In the retail food industry, Walmart, Costco, Aldi, and other discount chains compete almost exclusively on low cost. This strategy assumes that you can also produce your product at a low-enough cost so that the company makes a profit over time, which is why a lot of firms choosing this path tend to be big — production volume equals low cost (scale economies as described in Chapter 5). The strategy also assumes that to reach low-cost status, your product or service doesn’t compromise other things customers want, such as a given level of quality (that “all else being equal” caveat we just mention). How about this for a promotional come-on: “Hey traveler, fly us! Our prices are 35 percent lower and more than 90 percent of our flights get there safely!” Whoopee.
• Something different: This strategy is based on the simple notion that if you can come up with something unique in the products you offer or the services you provide, some customers — maybe a lot — will be willing to pay for the difference. Bottom-feeders, who buy only on price (see the preceding point), are always out there, but very significant numbers don’t want to be just like the Joneses next door. They prefer the alternate path. The potential for a strategy of differentiation usually occurs in markets where customers have higher incomes and where available marketing media provides mechanisms to communicate differences effectively. The private jet industry, for example, is thriving today; in the United States there are more than 20,000 of them up there, and the firms operating in this space generate close to $25 billion a year in revenue.
• Focus: The last generic strategy is about the specific kinds of customers you decide to serve. Instead of positioning yourself everywhere in the market and trying to sell products and services to everyone, focus strategies are about firms that carefully choose customers along some given attribute and cater only to them. This attribute might be geographic, demographic, or really just about anything that allows for you to narrow down your market beyond some basic differentiator. Taco Bueno, a fast-food chain started in 1967 in Texas featuring Tex-Mex dishes, has today about 150 stores limited to seven central southern states. Compare that to Taco Bell, started in 1962 in California and today operating more than 7,000 stores in more than 25 countries.

A competitor doesn’t have to go with just one of these three generic strategies. The Swiss-based Swatch Group makes that eponymous timepiece, hardly considered a luxury brand. But it also makes high-end Omega, Longines, and Breguet watches, more fine jewelry than mere watches. Chapter 14 shows that generic strategies are often combined.

Put together a short summary of what strategies you think your competitors may be coming up with (add it to the file you started with the short bios of your primary market opponents we suggest in the previous section). Review their capabilities and past actions, considering the following questions:

• What generic strategies has each competitor adopted in the past?
• Have the strategies generally been successful?
• Are changes in the industry forcing competitors to change their strategies?
• What kinds of change is each competitor capable of making — what limits their flexibility and what enables it?

Usually, you find that a long-term strategy requires time to implement and the total commitment of the company. It turns out that knowing a little about your competitors’ history is very useful in understanding their strategies. It also helps you keep in mind what you think your competitors are capable of in the future. Remember, you can use the concept of strategic groups to simplify this process. (See the earlier section “Spotting strategic groups.”)

Figuring out competitors’ goals

Your competitors’ mission, vision, and values statements tell you a great deal about what they expect of themselves in the future (see Chapters 3 and 4). These documents aren’t top-secret; they communicate a company’s intentions to all its stakeholders, and you should take advantage of them. You don’t have to read your competitors’ minds. All you have to do is read what they say about themselves and what they plan to do. (See the later section “Organizing facts and figures” for places to find such info.)

When the late Jack Welch was CEO of General Electric, he instituted one of the most famous — and emulated — business goals in recent history. Shortly after taking over in 1981, he spelled out the giant company’s new goals to his senior managers: market share, market share, and market share. There was growing evidence at the time that profits were disproportionately located in the top two market leaders in an industry, and then fell off precipitously further down the line. He wanted GE to become either first or second in market share in each of its many businesses — or else. No one misunderstood what the “or else” meant.

GE’s competitors could have listened to Welch, because the company sent a clear signal about how it intended to compete in the future. And he followed through, firing managers and ultimately selling off divisions that failed the number-one-or-two-in-the-market test. Any company that went head-to-head with GE for market share had a battle on its hands. The companies that understood this fact had both a warning and the opportunity to adjust their own strategies to meet a changed competitive landscape.

To discover the details about your competitors’ plans, take the following steps:

1. Get out your list of primary competitors.
2. Dig up as much information as you can find on each competitor’s values, vision, and mission statements, as well as any stated business goals and objectives.
3. Ask customers, suppliers, your sales staff, and maybe even former employees of your competitors for information about each of your competitor’s long-term plans.
4. Enter your educated estimation of your competitors’ financial and strategic goals in the dossiers you’ve been compiling.

Uncovering competitors’ assumptions

What your competitors plan to do is usually related to their assumptions about themselves, about you and other companies like you, and about your industry — how they think and the way in which they see the world. Sometimes you can get important clues about your competitors’ assumptions by going back over their goals and objectives. Companies can’t easily make a statement about where they want to go without giving something away about where they think they are today. You can often come up with valuable insights by comparing your competitors’ assumptions about the industry with what you know (and think) to be true.

Just as marketers tell us that consumers operationalize their perceptions of reality rather than reality itself, we humans also translate much of what we observe through a screen of assumptions — about the world, people, and also goods we buy in the marketplace. Many of these assumptions are formed early in life through a variety of sources, and over time they get deeply ingrained in how we see and interpret things. One result is that people from different generations can look at a similar product but see a different reality.

Take the Silent Generation we discuss in Chapter 7. These folks were there when Japan was defeated in World War II and also when that country began to get back on its feet as a dramatically changed market-based democracy in the 1950s. Japanese firms took advantage of lowered international trade practices and began to export goods to the United States. But how were they received? “Japanese junk! Those producers can’t make anything; remember how we won the war?” A fair number of the key decision-makers for American firms whose products were the target of the new Japanese competition fell within this group of naysayers. Based on assumptions formed in their formative years of development, these executives dismissed the threat. But the rising Baby Boomers loved the new stuff from Japan. Toyota, Sony, and Nokia became beloved brands. These new customers from a different generational era didn’t harbor the bias of the past.

As Korean manufacturers followed the Japanese into global markets, there were criticisms of the first wave of goods pushing into the United States from this emerging economy. But when Hyundai began to challenge Japanese automakers and Samsung took on consumer electronics brand leaders, opinions began to change again. These new products were pretty darn good by comparison, and the price was right. A Korean firm like TSMC, founded in 1987, is now rightly regarded as the world’s top supplier of semiconductors.

And today? There’s a whole generation of business planners who write off Chinese companies as purveyors of low-cost and low-quality goods based on what was on offer in the 1990s. What are your assumptions about the country of origin of the goods and services with which you compete? Are they valid assumptions — or shaded by your past beliefs? Might be worth a reality check; one place to start would be investigating how and where that top-end high-quality $1,000 iPhone you use got made.

Assumptions aren’t always true. As noted in our examples, false assumptions can be very dangerous for companies, especially when they lead to so-called conventional wisdom or result in competitive blind spots. Social psychologists have been pointing this out for some time now; one trap is called “confirmation bias,” which translates in normal English to only seeing what you’re looking for — and ignoring any evidence that might suggest otherwise. Avoid it! Here’s a tip or two:

• Conventional wisdom: Prevailing assumptions in an industry often become so ingrained that companies mistake them for the gospel truth. Conventional wisdom is almost always proved wrong when an unconventional competitor comes along. Watch your competitors for signs that they take their assumptions too seriously and have forgotten the importance of asking “Why?”
• Blind spots: Missing the significance of events or trends in an industry is all too easy, especially if they run counter to prevailing notions and conventional wisdom. A competitor’s worldview often dictates what that company sees and doesn’t see. As you track your competitors, look closely for actions and reactions that may point to blind spots and a misreading of what’s happening in the marketplace.

Business headlines of the past few decades have been dominated by stories about feisty little disrupters who challenged the industry giants and their conventional approaches, and won. In most cases, defeat was a function of poor judgment rather than a lack of resources.

Organizing facts and figures

To find out what really makes your competitors tick, take advantage of data from all sorts of places. (Refer to Chapter 5 for a list of resources.) Start your search using the power of the Internet. You can usually find facts and figures on the competition included in the following resources:

• Business, trade, and technical sites
• Trade shows
• Company documents
• Government filings
• Stock-market analysis
• Management speeches
• Suppliers and distributors
• Customer feedback
• Academic studies and papers
• Your employees

And let’s not forget the fee-based sources of data that are available. Throughout this book we implore you to do your own spade work when doing business planning. But we also admit that there are suppliers of comprehensive and up-to-the-minute information about your industry and the competition that inhabits that space. Sometimes these guns for hire can also serve up data that no other source could ever bring to the table. Be careful if the information you get from a paid source seems too proprietary — it could end up costing you far more than you paid. But most of these organizations can cut the time considerably in getting the dope on the competition out there. Here’s just one for your consideration: Fuld+Company (www.fuld.com), a highly professional consulting firm that employs state-of-the-art investigatory methodologies and serves clients throughout the world.

Whew! That’s a pretty hairy list we’ve compiled. It might take a lot of sleuthing to track down all the information you need to do a serious competitor analysis. But nothing’s worse than being blindsided. Where to start? Each of the target areas we specify has its own pot of potential gold. To gather information on management, for example, gossipy stuff is easier to find than you may think. People love to talk about themselves — and today everything is out there on the web. Have any of your employees worked for a competitor before? That person’s recollections could be a veritable gold mine.

How are other firms structured? Scan through the usual sources to find what you can — industry news media, company newsletters, the library. You might even try looking for so-called “case studies” of firms. These are short accounts of specific companies and how they handled some problem, typically used at collegiate business schools for training the future business leaders of the world. Most all cases are available in public files somewhere; there are thousands of them.

The last item in our list of competition data sources deserves a special note. Your employees are an invaluable source of data when it comes to the competition. As you look inside your company, start with your salespeople, who are smack-dab in the middle of the information stream. They talk with customers, deal with distributors, and occasionally run into competitors. They hear all the gossip, rumors, and news flashes that flow through your industry. Take advantage of their position at the crossroads of data flow and figure out how to capture what they know — and how to use it to your advantage.

But caution: Don’t push beyond the line of a legitimate request. Your salespeople should be seen as upright and conscientious, so don’t ask for something with which they would feel uncomfortable (and if they eventually move on to a competitor, would you want them spilling the beans on your operation to the new boss?). As for others in your organization, you can’t use certain pieces of information that a former employee may have about a competitor — anything that may be construed as proprietary information or trade secrets. High-tech companies are forever exchanging threats and lawsuits over alleged violations of trade secrets laws. If you feel you’re standing on shaky ground, check out Chapter 3 and your company’s values statement — and keep your company’s lawyer in the loop.

You need a way to organize the facts and figures that you collect from your many sources so you can turn the pieces into useful competitive information. Filing cabinets and file folders used to do the trick nicely. Now, however, it probably makes more sense to set up a computer-based system to keep track of the data. As you set up the system, keep in mind that information about your competitors won’t fall in your lap in the next two days — instead, it trickles in over weeks, months, and years.

More than likely, you already have bits and pieces of data on your key competitors stashed away. You just need to develop a procedure that keeps them coming in and brings them together to create a useful, up-to-date profile of the competition. The following steps should help:

1. Start with a pilot procedure for tracking competitors.
2. Set up a company-wide system for tracking competitors.
3. Make someone responsible for competitor analysis.
4. Make it your priority to see that the system is carried out.

Choosing your battles

The more thoroughly you understand your competitors — what they did in the past, what they do now, and what they may do in the future — the better you can plan for and choose the competitive battles that you want to take part in. Naturally, you want to go after markets where you have a strategy and the capability to succeed. But you have to keep your eyes wide open, because you’re never alone in any marketplace for long. By embracing the competition rather than ignoring it, you have the added advantage of knowing where the competition is weakest. Choose each battleground by pitting your strengths against areas where the competition has weaknesses.

It was the famed Chinese military strategist and philosopher Sun Tzu who said, “Every battle is won before it is fought.” If you do your competitor analysis right as we outline it in this chapter, chances are you’ll be on the right side of the fray when the medals and ribbons are handed out.