6 Steps to Beat the Competition: Analysis and Discipline Pay Off

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.
Sun Tzu- The Art of War

I am a believer in the Art of War, especially applied to business and marketing. When I talk to groups on business and marketing subjects I use this quote and it has guided me in the way I approach building businesses and helping companies grow. I have listened to numerous investment pitches at TechCoastAngels screenings (a real Shark Tank) and have heard too many times that the entrepreneur believes there is NO competition. There is always competition, i.e. another way to solve a problem or provide a service. Even when a company realizes that there is some semblance of competition, many executives believe they have more attributes, a better business model, and a stronger brand than reality leads them to accept.

Sadly, this problem extends way beyond the startup world. In 2008, Jim Keyes, CEO of Blockbuster said: “Neither Redbox nor Netflix are even on the radar screen in terms of competition.” While Redbox had its glory days and has now faded, Netflix continues to soar as they are able to take advantage of streaming media and they have evolved their business model. Blockbuster and its ubiquitous blue and yellow stores have faded into oblivion after ceasing operations in 2013. When I was at RCA (when it existed as a standalone company) one of the execs in the tube division beat his plan but unfortunately failed to recognize competition from semiconductors. He was fired. And let’s not forget other companies such as Digital Equipment Corporation, Wang, Motorola and Nokia in the tech field. Not only did they fail to understand the competition, their business strategies did not evolve. We are now seeing consumer companies such as Macy’s and Kohl’s which failed to recognize the competitive environment fast enough (can you say Amazon and online shopping) and are now closing many of their stores.

There is hope though, for most companies as they consider their competition, the environment and the competencies they need to put in place to execute a new business strategy. To that end, here are the six steps companies must take to gain and/or retain a competitive edge.

1. The first step to beat the competition is to recognize that there is competition! Competition comes from direct competitors, i.e. those offering the same type of product or service; indirect competitors; and even the do-it-yourselfers. Even if a competitor is small today, should technology or macroeconomic trends change, a small new company can become dominant. That is what happened to Blockbuster. Competition doesn’t have to come from the same players in the industry. Who would have thought Google and Apple, both, would be developing an autonomous car or at one time a smart phone. As we celebrate the 10^th anniversary of the iPhone, there was a time when dominant companies in the market such as Nokia and Motorola did not consider Apple a threat and frankly, they did not believe companies like LG and Samsung were threats either. Both Nokia and Motorola have lost their luster.

Keep alert and be paranoid. Use user panels talk to “lead users” who are early innovators of new products, set up Google Alerts on companies that are current competitors as well as those which have the right competencies to become competitors. Your product might be better and that message needs to be conveyed to your target audience. You can recognize the competition through the use of user panels, discussions with “lead users’ and even setting up Google Alerts.

2. The second step is to know the competition. A couple of months ago, I was watching a classic war movie called Patton. Patton was reading the works and biography of Rommel, his nemesis, competition and enemy. Rommel in turn was trying to learn through books and other sources, how Patton thinks and how he would fight. It’s classic Sun Tzu! Even without teams of analysts and staff there are a few tips in understanding and knowing your competition.

Executives can become the equivalent of Undercover Boss. When I was the top marketing executive for US Cellular, I personally visited both my stores and those of my competitors. It’s easy to do even in a business to business environment. Other tools that can be used include Customer Advisory Boards, user panels, cross-functional teams that meet regularly to discuss competition and the environment. At ATX Group (now Sirius Connected Car), every other Friday morning I hosted a cross functional group of executives to discuss new technology and competition. Certain execs were tasked with following specific competitors and sharing that information in Microsoft Exchange folders for our sales, marketing and technologists to use. Other tools include Spider diagrams, focus groups and market research including subscribing to the industry analysts that cover your industry. In the tech field those industry analysists include Gartner, Forrester, IDC and Ovum among others. If a public company is a competitor, read their 10-Ks; it’s amazing how much information is available in that document.

3. The third step is to know yourself. Some of the same tools used to understand the competition can be used to understand your own company. Spider diagrams, side by side market research matrices that can highlight those attributes that are important to your customers and for which you perform well or poorly can help set your company’s strategic imperatives. I am a huge fan of developing a SWOT analysis which covers strengths, weaknesses, opportunities and threats. To do SWOT well companies should seek out key thought leaders in their company, regardless of level and even use newly recruited employees who have a different perspective because of their recent outside experience. Doing mystery shopping even in a business to business company is also relatively easy. At a telecom company in New Jersey, one of my marketing managers set up a false company called The Fred Racciopi Cement Shoe Company of Central New Jersey (obviously we set this up tongue and cheek) and became a customer of each competitor and well as our own company. It’s amazing what we learned and through those learnings we adjusted our training program, branding, positioning and marketing material.

4. The fourth step is to develop and explain the factors that make you different. Customers buy from companies that provide a unique value for their needs. If the value is significant, relevant to the customer, sustainable and credible, the company will have a differentiable advantage. This enables executives to create a “moat” around their company and its products, protecting the company from competitive incursions. The strength of your differentiation is akin to the size of the moat. Even commodities have moats. Think about salt or rice, two very basic commodities. Do you believe that Morton’s salt is better than other salt and worth a 15% price premium? Or how about Mahatma rice vs Kroger-branded rice? What about chicken? What company said: It takes a tough man to make a tender chicken?” (The answer is Purdue Chicken.)

If you can differentiate these commodities, you can differentiate any company and its products. There are several ways upon which to differentiate. Intellectual property (IP) or Patents is an obvious one. Even IP may not be sustainable or even relevant to your target market. Other ways to differentiate are based on what Adrian Slywotsky, author of Profit Zone, calls strategic control points which are defined as some type of unique advantage for a company based on competency or partner relationship. All companies can find at least one. These could include their brand, their business partners, distribution partners, unique processes, innovation, low cost of manufacture, unique customer knowledge, access to certain resources be they commodities or people and similar items. A company has to find those strategic control points that are relevant to their markets and be consistent and credible in delivering on those elements.

5. The fifth step is to develop plans: Developing and executing a plan is critical to success. A written plan should include specific elements. By target market, a goal needs to be defined, a strategy clearly enunciated, and tactics developed with specific milestones, costs, and a person responsible for delivering the tactics. Our opinion is that a plan should have one specific leader who is accountable for the entire result. Individuals who report to this leader need to be designated for each tactic and milestone. C-Level Partners also believes that these plans need not be long winded and in fact the best plans have focus and clarity and might even be codified on one or two pages at maximum. I personally am in favor of one page plans with specific deliverables. I like using a method called RACI (responsible, accountable, consultative and informed) to ensure that the right people in a company are involved in the development and execution of the plan.

6. The sixth and final step is to monitor, measure, modify. Each plan developed in step 6 should have a complementary set of metrics to track the success of the plan. Metrics vary depending on the plan and some of the metrics can include: average revenue per sale, total sales, return on investment, market share, win/loss ratio of business, aided and unaided awareness, average order quantity, SEO, the timeliness of performing the tactic, and other operational, business or product criteria. Each month these metrics should be added to a scorecard – preferably balanced – and reviewed with the operational or executive team. If a metric is not on target, then the executive responsible for the metric has to provide a corrective action plan. If the metric is very critical to the business strategy or to the overall goals of the plan, then a separate deep dive should be performed where the elements of the plan can be discussed in detail.

As an executive it is sometimes hard to see the competitor when you are mired in the day to day operations. You can always look to outsource part of these six steps or recruit internally some of the best and brightest less tenured people in the company. Successful companies couple strategy with competitive analysis to create and maintain an advantage. When I first converted from an engineer to a marketer, I cut my teeth on competitive analysis. It was the perfect start to figure out how to gain an advantage for the new products I was developing for my customers. I was fortunate to have the opportunity to help drive the strategic vision of my company at the same time. That integration is, in my opinion, critical to a company’s success.

Once you gain a competitive advantage, you have to stay ahead of the competition. That is a subject for a future blog, yet we at C-Level Partners believe that maintaining a competitive edge means companies have to continue to innovate, with technology, with their people, and through their processes. They must maintain contact with customers and open their ears and even seek out criticism. And they must strive for not only incremental improvements but also stretch for what we call the “art of the possible.”

As a technologist and business executive, I always keep in mind the title from Andy Grove’s book, “Only the Paranoid Survive.” Yet with discipline and a plan as outlined in these six steps we believe that companies will be able to develop a competitive edge and flourish in this hypercompetitive environment.

If you have comments or would like to talk further feel free to contact me at dfriedman@clevelpartners.net or call me on 949 4394503.

What Do You Want on Your Tombstone?

No.  It’s not the pizza commercial but a question I ask candidates when I interview them for a job.  I want to understand what they want to be known for in their business life- what they want to have as their business legacy.   My goal is twofold. First I want to understand what drives them to be successful: teamwork, innovation, creativity, competition, etc.  Second, I want to make sure that my style of leadership of mentoring and “one page management” will be a good match.   I have found that over the years, when I explore this question with a candidate, I will normally find the right one that will fit into the culture I am trying to build.

As many of my readers and colleagues know, I a huge fan of Investor Business Daily and one of the main sections I enjoy reading is the “Managing for Success.”  I was particularly interested in the July 16, 2012 column which highlighted Procera’s CEO, James Brear, and the way he communicates with his people.  He, too, is a results oriented leader and he “prefers that people focus on the three executable things they need to do in the next 6 months.”    This way he can prioritize the objectives and at the same time provide a basis to provide feedback regularly.

To me, the key to good management and leadership is to blend the goals of the organization or company with the unique skills of the individual.  When I am able to understand the drivers of the behavior – what a person wants as his/her business legacy – I can link that with the one page goals to monitor and measure performance and results.  These one page goals are based on the person asking their peers, subordinates, managers and colleagues what is important to achieve success and what things, if not achieved, will create a negative impression.   When a person is able to highlight 3 to 5 areas and then, for each, specify 2 to 3 milestones, I have the basis for quarterly reviews.

In those reviews, I do two things (and I require my managers to do this with their people too).  First we review the results of the quarter and set the priorities for the next.  This may include modifying the goals.   I don’t just wait until the end of the quarter to provide feedback, yet a quarterly review provides a good perspective on what went well and what needs improvement.  The second part of the quarterly review is a focus on personal development. I want to make sure I understand what my people want to do (makes sure it is consistent with what they want on their tombstone) and develop a plan to help them achieve their goals.  This is good for the individual and the company as well and creates loyalty.

Sometimes that works perfectly for the individual. Many years ago a young woman who was in charge of market research wanted to get out from under the research blanket and try her hand at project management.  To make a long story short, she took a chance on a project and did just ok.  But she realized that her real forte was research and decided to stay in that discipline.  Yet she was always grateful that she was given a chance to do something different.  Great employee by the way for many years until another organization hired her.

So back to the story told by Jim Brear.  He learned from his bosses and found a positive influence in the negative behavior of many.   He learned what not to do and determined a way to provide positive leadership.   I feel fortunate that I have had several good leadership models in my career.  But I also learned what not to do from some of the very bad managers for whom I worked and others whom I have had the misfortune to see in action.  That is why I developed the question of what do you want on your tombstone?   I want to find the right people and want to ensure I can have a positive influence on them. 

Prioritizing for the Long Run

I was meeting with another executive the other day and we were talking about his new consulting business. And as we talked, we latched on to the subject of product prioritization because this was one of his focus areas. We thought that it would be nice to share a basic tool that clients can use to help them prioritize their projects, development efforts, marketing programs and other activities that generate revenue.

It seems relatively easy to prioritize. Make a list. Rank them. Determine how much money you have to spend. Draw a line. End of subject. Now, in a small owner controlled business, it is probably just that simple- or pretty close to it. The owner can make the decision and have people execute his plan. However when a company grows and you have several “chiefs,” prioritization is not that easy. There is both the hard decision of which projects to do and the equally difficult issues of ensuring every one of your teammates (from executive team all the way down to work groups) understands and executes the plan.

Let’s look at one way to prioritize projects with this emphasis on revenue producing ones. We hear this all the time. The CEO says: “we need to grow our top line. Get people together. Get ideas. And let’s discuss what we can implement.” Is there a relatively simple way to make the decision on which projects to do and if you wind up with resource constraints which projects will fall by the way side?

Decisions can be made based on fiat, whim, or gut feel. But this company is more egalitarian, like most well run companies. Let’s say the CEO convened his executive group. By asking certain questions, it was determined that there are four attributes that are important to the executive team: Market Strategy, Financial considerations, Strategic Fit, and Competitive positioning. Let’s further assume that for each of these attributes, one or more factors can be determined which support those attributes. For example under the attribute of Market Strategy, both market need and market size were important factors. Similarly, the executive team determined several elements which supported the attributes.
All in all, a total of 10 elements were specified. If a project were rated on each of these 10 elements the executive team would be able to determine the goodness of each project. (Side note: It is easier said than done that the executive team will have to agree to all these elements and attributes. There are reasons why it is difficult to quantify not the least of which is that such a system takes away the emotion and the “gut feel” for the decision.). Once these attributes are determined, a simple system can be developed to weight each of the 10 elements from 1 (low weight) to 3 (high weight). Second, each of the elements can be scored on a 1, 5, 9 scale which correlates with specific measures that can be quantified. Finally, a weighted score – combining the weights and score of each element- can be determined. All projects can therefore be measured against each other. See the attached for the basic tool:
Basic Project Prioritization Tool

Once each of the projects is scored, an ordinal ranking can be determined. The executive team can have several options to make their final selection including a) taking the projects in sequence until all funds are used up, b) dividing the projects into quartiles and quintiles and only considering those within the top two groups, c) using 80% of the funds designated to the top projects with the remaining 20% at the discretion of the CEO or other executive, or d) variations of the preceding three options.

Prioritization is inherently difficult but I have described a tool that can be used to help the decision process. It’s not perfect and it will not work for all organizations and executive teams. But the tool can also be used as a means to get alignment on what is important in picking projects/products and instill a discipline for the company which can increase the probability of success. The reason for this is that in reviewing the projects/products each of the attributes and elements should be reviewed at each stage gate or review point.

What other tools have you used to prioritize projects and products? Did you have one tool for everything? Or do you have different tools for cost reduction and revenue producing projects? Do you have a tool for prioritizing IT projects and a tool for marketing projects? How do you allocate funds among marketing, IT, finance, product, R&D activities? These questions need to be addressed by all executive teams. And the good thing about business is that the answers will differ among different companies and in different industries. And those different answers and execution of the plan will make some companies high fliers and others also-rans.

If you need some help in developing these types of analyses, please contact me.

David Friedman