Wednesday, November 4, 2009

Finding the competition's Achilles' heel.

We often see companies attempt to compete against a successful category leader through price cuts and other forms of discounting in an attempt to maintain market share. This is usually the sign of a company that is out of ideas.

A smarter strategic response is to see if you can turn the leader's strength into their vulnerability.

I was reminded of this while reading a Wall Street Journal article on how Illy has chosen to compete with Starbucks. Starbucks’ strength is its ubiquity. Illy cannot compete by building more brick and mortar. So its response is to piggyback on the ubiquity of local independent coffee shops, signing contracts with cafes that agree to serve Illy exclusively and allow Illy to exert quality control. Starbucks’ strength becomes its vulnerability – too many stores result in too much overhead and fewer opportunities to grow. Illy becomes the cool indie brand.

We see this same dynamic at work in other categories.

Amazon turned Barnes & Noble’s success in building bookstores around the country into bloated overhead that hangs around the retailer’s neck like a lead weight.

Apple reshaped Microsoft’s long time dominance in the corporate market into the image of a tweedy bureaucrat.

Enterprise built an entirely new category – temporary replacement cars for suburbanites – that Hertz and Avis cannot easily serve from their deeply entrenched airport locations.

And then there is Google, a company that uses the power of "free" as a competitive wedge to disrupt categories.

Your competitor's strength also can be its Achilles' heel. Find it and exploit it. Don't play the game by their rules. They'll win every time.

2 comments:

Adam Ronich said...

Interesting post David.

This sort of marketing aikido is something I've noticed during research. Marketers always seem to be focused on barriers to purchase. However, barriers to purchase are increasingly less interesting to me; unless you dig deeper to find the human problem. Currently, I'm finding myself finding out why people are in love with the things we have to replace, because ultimately that is what we have to overcome.

It's always fun to be a challenger brand though. But how do you change behavior?

Thomas Kuhn writes about paradigm shifts and says, In a nutshell, you keep pointing at the anomalies and failures in the old paradigm, you come yourself, loudly, with assurance, from the new one, you insert people with the new paradigm in places of public visibility and power. You don't waste time with reactionaries; rather you work with active change agents and with the vast middle ground of people who are open-minded.

Apple seems to understand this concept well.

Usually the problem with tackling the big guys is the established norms and ingrained behavior. So when taking on the giants it's fun to bring in new, instead of converting from the giants. People like to support underdogs. Obama understood this concept well.

A third interesting thing is how people make decisions. Human beings are very bad at making decisions in a vacuum. We can't judge things as absolutes and instead we compare things in relation to others. A byproduct of the strategy you suggest is that it leads to meaningful differentiation.

Anyway...just adding some thoughts to your idea to keep it alive. Also stuck at a coffee shop. Cheers!

Adelaide said...

Very interesting. I will agree with Adam in a way though. Challenging a brand is one thing but changing the behavioral patterns of consumers is another thing.

http://www.couchchange.blogspot.com/