The changing face of competition that can knock you down
Cross-industry competitors are powered by technologythey can come from anywhere and deliver knockout punches
Till recently, competition was visible and direct. Car manufacturers competed with other car manufacturers and at best with makers of other four-wheelers like jeeps, or two-wheelers. In most cases, competition was benign—a company would get ample opportunity to respond and recover.
That is no longer the case. Competition has become invisible, indirect and lethal. Nokia, Motorola and BlackBerry are cases in point—they lost ground to Apple, a “cross-industry” competitor.
Cross-industry competitors are powered by technology—they can come from anywhere and deliver knockout punches—as seen in the following sectors:
• Banking: In Kenya, M-Pesa, a mobile phone-based money transfer service launched by mobile network Safaricom (Vodafone owns 40% of Safaricom) in 2007, has become a dominant way of transferring funds. It is giving traditional banking institutions a run for their money. In India, the Reserve Bank of India has given in-principle approval to 11 companies, including Vodafone, Airtel and Reliance Industries, to set up payment banks to provide basic savings, deposit, payment and remittance services. This will enable Vodafone to extend its M-Pesa service in India. Result: traditional banks will face stiff competition from these cross-industry competitors.
• Taxis: The decades-old industry is facing survival issues across the world since the advent of taxi aggregators, spearheaded by Uber.
• Retail: Walmart is ranked No. 1 in the Fortune 500 list of companies (turnover was $486 billion in fiscal 2014). It too is facing stiff competition from a cross-industry competitor, online retailer Amazon. Amazon’s turnover is merely $96 billion (fiscal 2014), yet its market cap, which reflects Wall Street’s confidence in its future, is $250 billion (as of July 2015), compared with Walmart’s $230 billion (July 2015). If one were to go with Wall Street’s optimism, Amazon has a better future than Walmart.
From technology-powered cross-industry competitors, let’s move to the world of Coca-Cola and fast-food chain McDonald’s. Beverage maker Coca-Cola is ranked No. 4 in Forbes magazine’s list of most valuable brands of 2015. During its over 125 years of existence, it has steamrolled all types of competitors. However, of late, one source of competition seems to have tripped it dangerously: emerging trends in consumer behaviour.
Young people are showing an increased inclination to shun taste in favour of health and wellbeing. Coca-Cola is perceived as being tasty, but harmful to health. Therefore millennials (born between 1982 and 2000) are shunning Coca-Cola in favour of beverages that are thought to be healthier.
Fast-food chain McDonald’s too has won many a battle against competitors over its 75 years of existence. But like Coca-Cola, it too is perceived as being unhealthy and is facing strong headwinds. Who is gaining at its expense? Subway, which promises fresh and healthy food.
However, trends evolve and Subway isn’t safe either. The preference for healthy foods is evolving into a preference for foods that are also produced with integrity and ethics.
So Subway, which finds itself short on this factor, is facing intense competitive pressure from Chipotle Mexican Grill, which promises to serve “food with integrity”. This means that it uses eggs from free-range hens and meat from animals that are treated ethically—their horns are not sawed off nor their tails cut and they are not fed with chemicals to fatten them.
Gillette is another example of shifting trends threatening competitive advantage. For decades it has dominated the men’s shaving market globally by offering “the best a man can get”, investing heavily in research and development and non-stop innovation. Today it finds a challenge in the form of a global fashion trend that has young men sporting a stubble or a beard.
Winston Churchill once said: “A lie gets halfway around the world before the truth has a chance to get its pants on.”
Diet Coke seems to be at the receiving end of this insight. An Internet rumour that has gone viral holds aspartame, an ingredient, to be carcinogenic. Most diet colas, including Diet Coke, contain aspartame. Result: millennials, who are constantly on the Internet, are exposed to this rumour and are shunning Diet Coke.
That brings us to a new source of competition—rumours.
What should your response be when faced with these indirect, invisible and lethal sources of competition?
To begin with, becoming “competitor focused” and single-mindedly drawing up strategies to outwit them is futile. Remember, these New Age competitors are versatile and strike you when you least expect it. To checkmate them, become customer obsessed. Endeavour to make your product so attractive, it wins their hearts and establishes an emotional relationship with them. Once that happens, even invisible and indirect competitors will find it difficult to steal them away from you.
Are there any other strategies to take on this new hydra-headed competition? Indeed there is. It involves becoming your own fiercest competitor, and disrupting and destroying your own business to emerge in a more formidable avatar. Has any company followed such a strategy? Several have, including Wikipedia, YouTube, Netflix and Gillette.
Every few years, Gillette launches a razor that makes the earlier version redundant. It started with a single-blade safety razor, then launched a double-blade razor, followed it up with a three-blade razor and now its Fusion Razor has five blades.
If the disrupt and destroy strategy sounds too “violent”, another strategic path is to buy out competition. That is what Facebook did to an emerging competitor, WhatsApp. Needless to say, this strategic move will leave a hole in your pocket.
Competition cannot be wished away. To paraphrase Gianni Versace, permit it to push you to become better.
Rajesh Srivastava is a corporate consultant, entrepreneur and academic.
An unabridged version of this article is available at foundingfuel.com
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Business NewsOpinionThe changing face of competition that can knock you down
First Published:25 Aug 2015, 12:10 AM IST
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