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The debate continues about the wisdom of focusing on the competition. A recent article in a major U.S. financial newspaper posits that focusing on gaining competitive advantage is dangerous, primarily because it takes managers' eyes off of the needs of the customer and limits their thinking by making them follow the competition.
I agree. Obviously, if this is how a company uses competitive intelligence than it is doing itself more harm than good. I myself have said that "competitive imitation is the highest form of flattery but it is the lowest form of strategy." However, as you probably know, this is not how successful companies use competitive intelligence.
Smart managers use competitive intelligence to find out where the competition is going and then make plans to avoid their strengths and attack their weaknesses. They do the latter by going after holes in their competitor's product lines and meeting unmet customer needs, by creating new products to serve new niches and by advancing into unclaimed emerging markets. This is the proper use of competitive intelligence; leveraging what you know about the competition to attack open market space and differentiate yourself in the consumer's mind.
In the end you cannot ignore your competitor's moves, any more than you can ignore the needs of your customers. In today's marketplace you must know your customer, know your competitor and know yourself to win.
Quaker Oats Finds Snapple Hard To Swallow
Quaker Oats Company, which purchased the hot Snapple brand in late 1994 for $1.7B, just sold it for $300M. This led to not only to a direct $1.4B loss but according to Business Week, also led to other operational losses, layoffs, top employees leaving and missed opportunities. Quaker Oats did not avoid making alliances with the wrong company.
Why? Well, Quaker Oats' executives were eager to follow-up on their prior success of making Gatorade the top sports drink. In their eagerness to succeed, they either weren't aware of or discounted the myriad of problems Snapple had (lack of foreknowledge and preparation). Quaker Oats also did not reinforce success and starve failure. To buy Snapple they sold off their petfood and candy businesses, which provided consistent revenues and profits.
The real end result .... while the Dow has skyrocketed since late 1994, Quaker's stock has stayed flat the last two-and-a-half years.
P&G Changes Its Marketing Strategy
Procter & Gamble Company, known for its marketing prowess, is updating its strategy by employing two key principles of Sun Tzu. According to the Wall Street Journal, P&G is simplifying its product lines, making all allies of its distributors and working with them better to understand their marketplace.
P&G was making 55 price changes a day on 110 brands and providing 440 promotions a year to customers. By finding out more about buyers (practicing foreknowledge) P&G found out that the average buyer spent only 21 minutes per visit to buy 18 items. She performed this task in 25% less time than she did five years ago, yet picked her 18 items out of a total of up to 40,000 products in the store. This information led P&G to change its strategy.
Now P&G has cut the number of its products and new products must get to the top two thirds of division sales within a year or they are eliminated (reinforce success, starve failure). P&G is also working more closely with its distributors than ever before. P&G is moving from a strategy of forcing products through the retail stores to allying with them to get more info on what customers really want and then providing it to them (make skillful use of your allies).
P&G's strategy seems to be paying off; last year's revenue was a record-breaking $35.3 billion.
Southwest Airlines Moves Into Northeastern U.S.
Southwest Airlines recent move into the Northeastern United States exemplifies two of the principles from Sun Tzu and the Art of Business. According to the Wall Street Journal, this "invasion is Southwest's first maneuver in a carefully planned battle for East Coast passengers that is expected to drive down air fares and force some major carriers out of lucrative markets."
Southwest Airlines is avoiding strength and attacking weakness by avoiding Boston's Logan Airport and using smaller Providence, Rhode Island's airport instead. By going around the gates at Logan, which are locked up by the major airlines, and launching numerous flights from Providence, SWA is avoiding the strength of its competitors and attacking their weakness.
As a result, carriers such as American and United have already threatened to pull out of Providence because they know they can't compete with Southwest's cost structure and service. This let's SWA win-all-without-fighting.
Mark McNeilly brings Sun Tzu's strategic principles to life as the author of Sun Tzu and the Art of Business; with TV and radio interviews and with seminar presentations. For more information visit www.suntzu1.com
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