When Should You Ignore the Competition?

Michael Porter spent the last 20 years of the 20th century at Harvard Business School teaching the world how to confront and defeat the competition. His message made good sense in an era when large companies erected barriers of scale and access to dominate markets.

Work Harder.

When you set the rules, you don’t compete to win customers’ hearts. You compete to crush the other guy. You bring a bigger gun.

This old model of competition fought by clear rules. Standing toe-to-toe, peers duel, competing on the same vectors. Move faster. Hit harder. Go longer. Harder, not smarter.

Work Smarter.

Working harder confesses a failure of imagination. Find a shortcut.

As the 1990s gave way to the first internet wave, barriers began to crumble. New business models and new channels eroded the old fortress enterprises. Dell cracked HP. Oracle outfoxed IBM. Netflix busted Blockbuster. Amazon closed the book on Borders.

This was really an old strategy, consistent with Porter’s model. Get there faster. Use technology to build a short cut. Carve a canal across the jungles of Panama if necessary. Work smarter.

Think Outside the Box.

(Oh, and YOU are the Box.)

And yet, this way of working smarter is still not smart enough. Don’t fall prey to our most basic human foible. We think inside-out. To solve this challenge, and it is solvable, you need to think outside-in. The tool you need is Empathy.

In other words, forget your competitors. Get out of your own head. Worry about your customers. Study them. Know them better than they know themselves. Ask why. A lot.

• Who do you want to serve and why?
• What do they need? What do they want?
• What frustrates them? What impedes them?

Who Should You Study?

Who do you study, if you’re trying to determine what your customers truly want?

Do you survey your customers to determine what they love and hate? Do you run focus groups with customers to gather their ideas? That’s what most companies do, all the time, in a dozen different ways, often at huge expense.

That’s worse than throwing your money away. It’s like happily lighting a huge pile of your money on fire, only to be blinded by the smoke!

You’re looking in the wrong place. You’re getting bad data. But the worst part? You believe the data! You act on the data! Argh.

Go find your most aggrieved customer, your defected customer, your competitors’ loyal customer, and the customer you don’t have yet. Don’t study happiness. Discover pain.

Examine the clever and often unconscious “work arounds” people invent to avert that pain. For example, drivers shorten their torturously long commutes, at least psychologically, with well-curated playlists and podcasts. Watch yourself. You “fix” badness for yourself all the time!

First, find out where it hurts.

Why Do They Do That?

Use the methods of Ethnographic Research to study a small sample of real people in context. Not focus groups. Study customers or end users in situ like an anthropologist studies chimps in their native habitat.

Map it.

Record your findings. Personalize their needs as tangible points of pain on a “customer journey”. Map it out. Use quotes or video clips from your research to help others understand that these are real needs that remain unserved by any competitor. You have just defined your window of opportunity.

Solve It.

Employ design methods (AKA “design thinking” in training jargon) to design, prototype and test small solutions to those needs. Refine these cheap, lightweight examples until they really resonate with real target customers.

Then assemble point solutions into a system. Use tools like the Ten Types of Innovation framework to construct elaborate platforms to serve the customer in ways your competitors will find hard to replicate.

Keep Learning.

Go into stealth mode as you test your new offering under the radar in one or more test markets. Stay quiet. Learn and iterate continuously.

When you’ve demonstrated your business case and honed the offering, go big. Brand it. Announce it. Launch it. Drive it home.

That daunting competitor wakes up to find that they are burdened with a huge, staff ill-suited to the customers’ needs. They have too damn many expensive branches, throwing good money after bad to prop up the wrong channel. They will spend months or years if ever to figure out what happened and what to do about it.

If you’re lucky, they’ll make the mistake of studying you company to figure out how to compete. Meanwhile you’ll be studying the customer. Because of course the market never stops moving, and the customers change in profile and behavior and mix every day. They’re studying your business, which was designed yesterday to serve today’s customers. You’re already secretly designing for tomorrow’s customer.

Supply Follows Demand

Until competitors (ie “supply side”) ignore you and instead study the customer (ie demand), they can never catch up.

Two rules.

1. Invest to know customers better than they know themselves.

2. Ignore competitors unless it serves #1.

Make better.

(If you’d like to discuss the implications, please comment below or ping me. Roger@ampersand.vc)