As published on Forbes.com
I was delivering a workshop last week for a leading manufacturing company. The company is so progressive that they invited their distributors from around the globe to gain and share insights into how they can improve the way they sell to their mutual customers. The participants were completely engaged, and actively participated throughout the program. Toward the end of the program, one of the reps for a distributor said “The competition is offering a program where they drop off inventory at the customer’s facility. Once a month, they come out to take inventory and just bill the customer for what they used. How do we compete against that?”
I asked a simple question: “Why is that program important to your customers?” The rep responded and said “If they offer it and we don’t, then how can we compete?”
Another Way To Look At Things
Maybe you feel that you have to take steps to position yourself against the competition. If the competition offers a new widget, you might feel like you have to offer a bigger widget. If they offer double rewards, you need to offer triple rewards. The problem, however, is that when you focus on the competition, you might miss something important.
Years ago, Blockbuster Video was the dominant player in home video rentals. They had huge stores. Their message was simple: If you wanted a first-run release, Blockbuster had more copies and more locations than the competition. Blockbuster’s top competitor was Hollywood Video. Each store worked to take steps to get ahead of their competitor. After a few years of fierce competition, guess who won?
It seems that while Blockbuster and Hollywood Video were worried about the competition, Netflix and Redbox emerged and decided to worry about what the customer wanted. Redbox realized that you could deliver movies in small kiosk instead of a large, expensive store. They placed Redbox units near convenience stores to allow customers to grab a movie at the same time they made common purchases. Netflix delivered videos by mail. They could see that the emergence of high speed home Internet service would enable them to deliver movies digitally, without shipping anything without you leaving the comfort and convenience of your home. Today, Netflix (NASDAQ:NFLX) has a market cap of roughly $34 billion. Outerwall (NASDAQ:OUTR), who owns Redbox and Coinstar, has a market cap of roughly $1.2 Billion. Blockbuster and Hollywood Video no longer exist.
The Competition Trap
It’s natural to worry about the competition. Maybe you are a law firm, and another firm has stopped charging a profit for copies. Maybe another firm has stopped billing their clients for the time it takes to prepare your invoice. Should you do those things to stay competitive?
Maybe you offer information technology services. Your competitor has shifted some of their development offshore to India. Should you do the same? How does that shift help your customer in the long-run? How does it help you stand out to the betterment of your customer? Avoid making the decision just because a competitor made that decision.
Similarly, the distributor who asked the question at the workshop last week was worried about the competition. But, he could not explain why that service mattered to the customer. Each day, businesses make decisions based on the competition instead of based on the customer. Don’t make the same mistake.
What You Should Ask
Instead of worrying about the competition, ask yourself a different question: “If I was the customer, what would I want that today we think is impossible to deliver? How can we make that happen?” It might mean offering fixed-price services in an industry that historically offered that service only on an hourly basis. The bottom line is that if you focus on the customer and how you can help them better than anyone else, you’ll never have to worry about the competition.
If you are doing great in your business already, you should be asking yourself that same question about what the customer would want that you think it impossible. The only time you might have to worry about the competition is if they thought about the customer, while you were worrying about the competition.
It’s Your Turn
What examples can you share of a company that failed by worrying about the competition, or succeeded by ignoring the competition and focusing on the customer? Take the discussion to Twitter and LinkedIn and share your thoughts.