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February 25,2021 Strategic Planning

Market & Competition

Market & Competition

Market & Competition

Market & Competition

Competitive sports can represent a national identity. Some cultures enjoy sports for the elegance of the art. Other cultures see sports as the ultimate competition. With extreme competition comes ethically grey areas in trying to achieve a competitive advantage. Baseball pitchers prior to 1920 were able to spit on their fingers which would make the ball harder to hit. Even though it was outlawed, the spitball is still used in the game today, just under concealed conditions.

A common mantra with baseball has always been that if you aren’t cheating you aren’t trying. To complicate things further there are nuances to the game in which certain actions are considered gamesmanship where small variations to that gamesmanship turns into unethical cheating. For example, when a runner is on second base and they can intercept from the catcher what pitch will be thrown. They can then signal the batter and thus improve their odds of hitting the baseball. This is considered an approved application of in game espionage.

In 2019 however, the Houston Astros were exposed for going too far on this application. During the 2017, 2018, and 2019 seasons during home games a clubhouse staffer would monitor the catcher’s signals using a camera and signal to the Astros dugout what pitch was coming. An Astros player would then signal the batter with either a whistle or the banging of a trashcan as to what pitch was coming.

Competitive Balance

This quickly became an uncompetitive balance. The Astros went on to win the 2017 World Series, in 2018 they lost in the American League Conference Series, and lost the 2019 World Series. This was a significant achievement to place this high three years in a row. More interesting is looking at the statistical split during the playoffs. In the Astros’ nine road games, the team batted .208 with a .284 on-base percentage, a .347 slugging percentage, and scored an average of 3 runs per game, winning three games and losing six. In the Astros’ nine home games, they batted .273 with a .343 on-base percentage, a .519 slugging percentage, and score an average of 5.7 runs per game, winning eight and losing just game.

The competitive nature of sports can bring out stretching the rules to the point of cheating. The same can be said for business where regulations and interpretations can stretch the ethical boundaries. Conversely, these same ethical grey areas of competitive advantage in a military of war time environment shift from being concerning to a standard operating procedure. While your organization competes, your understanding of the market, environment, and culture will help you dictate what is ethical and not, and how to not cross the line from ethically grey to unethical.

Competitive Market

Success or winning is all about beating the competition. This follows the economic model of capitalism. Businesses compete daily to inspire the innovation of always improving and to ensure that prices match demand. The system ensures that there is never a chance to rest on your laurels. It is reminiscing of the Germans circa 60 B.C. The Germans maintained large unpopulated areas around them and focused on driving people off. This constant diligence and state of motion created the intimidation to keep areas safe and removed unexpected invasion.

The constant battle day in and day out sounds exhausting and is exhausting. It lets the mind run away with excuses. Namely that there is a lack of time to focus on strategy work. If believed, this leads to not paying attention to the market or your competition and puts your organization at risk. The essence of formulating competitive strategy is relating a company to its environment. There are several Mom and Pop shops that went out of business over the last 20-years because they didn’t focus on the marketplace, they didn’t stay relevant, and became so uncompetitive that they went out of business.

Situational Awarness

However, this can also be an opportunity to take advantage of the situation. If you are overly busy, your competitors more than likely are as well. They may even take small actions to reinforce their business that you’ve taken note of. Alexander the Great was embolden when the enemy put obstacles in the way, that reinforced that is was the weak spot and where to attack. By keeping a focus on your competitor, your watchful eye will let you see the cracks in their armor. That is your chance to attack and gain market share.

You can see examples of this every day when you see discounts on specific items. You know that if your competitor is discounting items, that they are having trouble moving these specific products. With that knowledge you have an unlimited amount of possible actions that you can take to gain an advantage. You can adjust your supply patterns to not carry those products anymore or you can lower your prices even more than your competitor expecting a loss but taking away their potential business and disrupting their supply system.

Competitive Mindset

Gaining information can be as exhilarating as gaining customers. The race to know the most drives many individuals. First-hand knowledge about the market, customers, and competition is prized information as it enables you to strike first. Privileged information is one of a business most important resource.

From a first level order of thinking you will need to defend yourself against your competition. On a second level of advanced thinking, you will want to use your competitor’s advances to improve your own business. Competitive analysis predicts strategic changes your opponent might initiate, offensive or defensive. You then act to impact their business before they impact yours. They have a goal and so do you, that is the free market. It sounds harsh and if you don’t want to compete and just focus on your own self-actualization, just realize that your competitor is not doing that but actively plotting on how to put you out of business.

Gentleman Competition

Gentlemanly competition is the free market model. Lawyers debate and argue for a living, they fight to maintain the integrity of the system, it’s a planned competition. Businesses are built the same way, when they don’t compete, you get stuck with a faulty marketplace.

Competition will work to drive down the rate of return on invested capital toward the competitive floor rate of return. This benefits the consumer. Like a lawyer, your active pursuit of competitive balance, protects the free market system from corruption. Your chief concern is keeping the competition legal and ethical.

Methods to Compete

To understand the competition is to understand market conditions. To analyze global competition you must examine industry economics and competition in various geographic markets jointly. This provides angles of insight and methods to attack. This can prevent you from making a catastrophic mistake by attacking a strength. It follows the adage that unless you can use a surprise assault, a siege is the most uneconomic war operation.

You will want to know your competitors’ current capabilities. You will not be able to view competitive advantage holistically but you will have to evaluate via discrete activity: design, production, delivery (Porter M. , 1985). Look at how they communicate commitment with their resources, intentions, and inability to backout. You’ll be able to evaluate your differences and know how they can hurt you.

The Cold War brought forward many innovations in espionage during the non-conflict. The East German Stasi were masters of their craft and at understanding competitive posture. They were so  effective at espionage especially with corporate targets that they were able to drive down R&D costs for the East German government due to all the corporate secrets that they acquired.

9m Application

Taking my business of change management for example, I needed to define the market and who my target customer would be. I prefer to look at this through five lenses of:

  • Behavioral: Loyalty, Engagement, Usage
    • I’m looking for the engaged manager who needs the organization to change but not overly upset the employee base
  • Psychographic: Lifestyle, Opinions, Interests
    • The leader that values team harmony and team alignment
    • Interests include team building, followers of the Harvard Business Review, and best practices applicators
  • Demographic: Income, Gender, Education
    • Typically, the college educated, millennial female manager
    • A change leader that places a high emphasis on team cohesion
  • Geographic: Density, Weather, Region
    • Located in Pacific Northwest
  • Firmographic: Industry, Sales Volume, Employee Size
    • More than 100 employees but less than 2,500
    • Greater than $50 million in annual revenue
    • Target industries of Creative (Marketing), Technology, Government, Retail, and Healthcare

Competitive Assessment

Knowing the market segment creates the ability to identify the basics of my competition which I broke down into three segments:

  • Enterprise Firms:
    • The Big 5 consulting firms have a firm grip and agreements with most enterprise businesses in the Pacific Northwest
    • These firms have numerous change resources and apply a customized model for their clients
    • During large scale change implementations though, they employ local contractors to manage the change process
  • Medium Sized Firms:
    • There are approximately, 26 medium sized firms in the Pacific Northwest that provide Change Management services
    • None of these firm operate fulltime in my current location of Boise and fail to grasp some of the local economic and business nuances
    • All firms typically run the same model of change management and fail to differentiate against their competition
  • Boutique
    • Unique to the local area are a handful of change practitioners
    • Their business is either supported by other incomes or their work is nomadic
    • All individuals typically run the same model of change management and fail to differentiate against their competition
  • Self-Funded Change Managers
    • Enterprise and medium sized businesses typically employ fulltime change management practitioners
    • Depending on the size of change they either manage the change or act as the interface with change consulting firms

This exercise clarifies that I cannot compete with large consulting firms with enterprise clients, but I can supplement their contracts. Boutique firms work is based on a heavy referral network which will be difficult in penetrating. However, medium sized consulting firms due to location and lack of product portfolio depth leaves them open to assault.

Competitive Best Practices

Corporate rivalry is a good thing. It increases risk taking, collaboration inspires higher quality. However, it can also inspire retaliation. Organizational and CEO posture can heavily influence their competition. If there is a likelihood of retaliation companies are less inclined to make move against the company. Recent studies have even found that submissive CEO’s are targeted more often than aggressive CEOs.

Commitment mirrors posture in terms of shedding competitors. The reputation to stick with a plan, to retaliate, and to ignore advances helps sway competition from acting against you. This becomes a subtle defense of positioning yourself against attack. If your competitors fear retaliation, they will hesitate in acting against you

Aggressive tactics are looking for ways to incur systematic costs on an opponent. This is impacting their ability to compete which will then drive business to you. A classic espionage example of this was when the United States secretly leaked a flawed design component of a nuclear weapon. The move was enacted to cripple Iran’s nuclear program but the flaw was spotted prior to it making an impact.

Crossing the Rubicon

Early Rome was the great republic of the people. Ran by Senators it was an early if not flawed model of democracy. Threatening this model was the significant military powers throughout the republic. This brought forward the First Triumvirate consisting of Julius Caesar, Marcus Licinius Crassus, and Pompey the Great. This was a power share of Roman Generals to balance the influence the Army could have over politics. Caesar & Pompey were long rivals in a power sharing dynamic but knew each other intimately. He was even Pompey’s father in law for a short time until his only daughter died in childbirth.

Caesar set out to conquer modern day France fighting the eight-year Gallic War. This made him a highly popular hero which made the Senate nervous when he called for reforms. The Senate acted first by reducing Caesar’s Legions and then demanded that he relinquish his Armies. Caesar refused and marched on Rome, crossing the Rubicon, Rome would never be the same again.

Civil War

A four-year Civil War ensued matching Pompey versus Caesar. Through numerous battles Caesar was able to maneuver Pompey out of Italy. Eventually they met in Greece during the Battle of Pharsalus where Caesar was significantly outnumbered 2 to 1 and held a weaker position. Pompey wanted to wait and starve out Caesar’s Army knowing he held the advantage, but the Senate pressed him into battle. Caesar used a hidden Army to surprise Pompey’s Calvary broke his lines and then attacked with all of his reserves fully committing to routing Pompey’s army.

Pompey was humiliated and his Army was broken leading him to flee to Egypt where he was subsequently assassinated. This led directly to Caesar declaring himself the Emperor and the change from the Roman republic to the Roman empire. The odds were against Caesar, but his strategy was guided by his understanding of Pompey’s mind and how he would react to Senate pressure. The ability to predict reactions is not the skill of a profit but one of an astute strategist that puts as much effort into speculating their opponents actions as they do in developing their own plans.

References

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