In case you hadn’t noticed, the key elements of a competitive advantage for your business have changed as businesses move online, and your domain is instantly global. The old approaches of controlling distribution channels, saturating retail, and methodically scaling your brand awareness don’t protect you anymore. The real challenge is to win massive consumer preference repeatedly.
As a business advisor, I have to recommend even to established companies that they review and revamp their competitive strategy now, even if it appears to be working today. I like the summary of the competitive reality in a recent book, “Rethinking Competitive Advantage: New Rules for the Digital Age,” by Ram Charan, who relates a wealth of current experience from global clients:
- Customers expect a personalized experience. Features, availability, and brand are just the price of entry. Customers today quickly get beyond these, and put a competitive priority on the experience of others, reflected in reviews and social media, and their own total experience with your sales process, delivery, returns, and support on their schedule. As a simple example, the Wal-Mart website now shows shoppers more products that they may like, based on previous purchases. The Wal-Mart home page is customized for each shopper based on location, local weather, and the customer search and purchase history.
- Algorithms and data are required to compete. Manual tracking and occasional surveys won’t keep you competitive in today’s high volume and rapidly changing market. Today’s digital leaders all have a digital platform – a set of algorithms stitched together to collect and analyze key data, and tune their algorithms dynamically for every transaction. You need a platform that is comfortable with the global scope of today’s market, with it’s wide range of social and economic cultures, trends, and needs. Simple metrics and your personal knowledge of the industry can’t keep up with all the relevant competitive forces.
- You need to be part of a larger ecosystem. Apple pulled ahead of other mobile phones in its early days largely because it cultivated an ecosystem of software developers who created iPhone apps to meet every consumer niche and need. Amazon attracts third-party sellers with tools and processes that make then all winners in the marketplace. In many cases, growing the ecosystem is so important that your best competitive move may be to invest in facilitating “competition,” such as Tesla Motors giving away their battery patents to other auto providers, without royalties, to build the ecosystem.
- Find funders who seek long-term returns. Money-making is different in the digital age. Short-term earnings per share may be low, even as revenues and cash burned are high. Look for investors and organizations who practice 10x or 100x thinking, rather than earnings-per-share (EPS) every quarter. These tolerate negative cash flows for growth. That means that many companies are now forgoing the rush to go public (IPO), in favor of major equity investments from specialized venture capital funds, such as Japan’s SoftBank. These have the vision and the resources to fund long-term digital success.
- Create a team culture for personalized service. Breaking work into bite-size missions and giving teams the autonomy to figure out the “how” leads to faster, better decision-making. If you have more than three organizational layers below the top executive level, you may not be ready for digital competitors. Select new hires with attention to values. Jeff Bezos at Amazon credits much of his success to this approach. He often talks about how he has learned how to disagree and yet commit to creative proposals from his teams, due to trust and the level of confidence he has for their customer insight.
- Leaders must constantly create change as a barrier. Competitive leaders today must be hungry for what’s next and willing to create and destroy. They need the mental capacity to imagine a future space that doesn’t exist, and the confidence to overcome whatever obstacles they might encounter, using AI, data, teams, and algorithms.
One thing hasn’t changed in the business world – competition. It’s now more intense than ever, with the cost of entry going down, and new players easily able to join the fray from anywhere in the world. Thus it’s more important than ever that you keep up with the latest trends and rules. Don’t be lulled into a false sense of security that what worked yesterday will work tomorrow.