How to Kill the Competition
Written by Chris Barling
Tuesday, 22 February 2011 00:00
Killing the competition may be a controversial description of how a market economy works, but there is some truth in using the analogy of war in a business context. Those of us who have been on the losing side will certainly recognise the metaphor. In fact, the term “creative destruction” is now commonly used by economists to describe one aspect of capitalism.
When I worked at Mercury Communications, we were the only licensed competitor to BT, most of our staff had come from BT and our market was 100% held by BT. Little wonder that we were focussed on competing with them. And we found that we were able to because the regulator was on our side. Without that advantage we wouldn’t even have got started, but with it we took some significant market share.
And that’s the point. When you’re in competition with another party you must understand why you might win. It’s not just enough to be aggressive, which can be counter-productive. The factors going into assessing your strength versus the competition is not just financial, it’s whether you have a sustainable technical, commercial or regulatory advantage.
Once you understand which company is in the most powerful position, make sure that you adjust your strategy accordingly. And this means either head to head competition when you are stronger, or avoidance, if you are weaker.
A few years ago my company found itself competing with a much smaller player. There wasn’t a lot to choose between us, it had some advantages and we had others. It made the decision to focus on winning customers from us, and far from running away, we went head on. Given that we were seven times their size, there was only ever going to be one winner, and they’ve since faded away.
Lessons I’ve learnt:
- It’s important never to compete on a level playing field with someone more powerful than yourself, and you should always try to entice them to compete directly if it’s you that has the advantage.
- In contrast, face hard facts if you’re losing. Once it’s clear, take an ultra honest look at things. If the problem can be fixed, get on with it. But if there is no reason why the situation will improve, you have to find a different way to compete.
- When you’re in the weaker position, it’s best to redefine your offering. This might mean targeting a smaller segment within your current market where you can build an advantage, or it might mean moving from products to services in your field.
- If your competitor is doing things which are illegal or libellous, consider legal action. Again, be clear headed. Don’t start any action unless you are likely to win and have the resources and the energy to see it through. I’ve been involved in two major legal actions, and have threatened action in three further cases. So far, I’ve achieved my objective in every single one.
- I have avoided talking about starting a price war. That’s because it’s usually a bad idea and would require more comment than there’s room for here. I hope you will forgive the omission.
I have avoided talking about starting a price war. That’s because it’s usually a bad idea and would require more comment than there’s room for here. I hope you will forgive the omission. The last thing to say is … don’t over focus on the competition. At the end of the day, you need to provide something your customers want, at a price they can afford, delivered with good service. If you don’t do that, your strategy against the competition will be meaningless anyway.
Chris Barling, is CEO of ecommerce software supplier, Actinic. Originally published on Business Matters.
