A new take on competitive analysis is required if companies truly wish to outwit and outmanoevre business rivals, according to Dr Liam Fahey – Professor of Management Practice at Babson College USA, and author of new book ‘The Insight Discipline’.

IN our world of Big Data, managers often fail to ‘see beyond the data’ and discover new insights about competitive rivalry. To do so requires you to move beyond predominantly descriptive ‘findings’ to search for true insight – that is, new marketplace understanding that makes a difference to your organisation’s thinking, decisions, and actions.

Here is one provocative question that has helped many managers discover what is not evident in their data or even in their detailed descriptive findings: Are we outwitting, outmanoeuvring, and outperforming our rivals? Let me share an example of how one company used that question as a springboard to fuelling some deeper analyses that led to breakthrough insights and deft changes in strategy.

A company at a crossroads

A B2B firm which we will call Alpha Inc. sold a classic industrial component product used by manufacturers in many industries. A rapidly evolving era of IoT (Internet of Things) was increasingly generating ever more data for Alpha and its rivals to consider. Rivals were struggling to find value propositions that offered real customer value. Alpha’s management decided they needed a comprehensive industry analysis. In a competitive analysis workshop I organised for Alpha, we asked multiple cross-functional analysis teams to identify detailed current strategies of several competitors, make projections of their likely future strategies, and summarise the key forces shaping the competitive space and what it might look like three-to-four years into the future. As we began to assess which competitors were winning and losing, and why, I posed a question that the teams had never previously addressed: Who is outwitting whom? 

 

Outwitting implies out-thinking or outsmarting competitors by seeing change in the marketplace before others do. But not just any change: The emphasis is on understanding marketplace change that makes a significant difference to how the organisation thinks and what it thinks about, the strategy it chooses and the decisions it makes, and the actions it executes. Ultimately, outwitting means to develop marketplace insight that rivals do not likely possess. So, we asked the following series of questions about large and then smaller competitors.

Are we outwitting larger market share rivals?

Asking this question compelled Alpha’s analysis teams to identify specific insights they believed they had discovered or might generate about these three areas: competitors, customers, and the marketplace in general.  

1. Insight into Competitors: Outwitting often entails creating an understanding of a competitor and its implications for the competitor’s actions that may not be recognised or evident to the competitor – that is, understanding the competitor possibly even better than it does itself! Here are two examples of how Alpha gained fresh insights into competitors that helped Alpha outwit those competitors.

First, based on a detailed financial analysis of one corporate competitor with multiple divisions, the Alpha analysis teams concluded the competitor had experienced a serious downturn in cashflow in the division Alpha was competing against. This came as a shock to the analysis teams. That new understanding gave rise to the determination of a crucial strategic consequence for the competitor: It would not be able to fund the planned expansion of its global marketing strategy, thus leaving open new market opportunities for Alpha. So then the Alpha teams monitored the competitor’s statements and actions and determined that they needed to adjust their previous understanding and the implications.  The result: Alpha moved quickly to win customers in geographic markets in which the competitor was already showing signs of not competing as aggressively as it had in the past.

Next, based on an intensive analysis, the Alpha teams concluded that another traditionally slow-to-change competitor would be disinclined to respond quickly to Alpha’s new product launch that would include significant new service elements such as valuable new reports. The competitor’s long-espoused values centered on product functionality, not customer benefits. The new understanding of the competitor’s product-focused culture explained why it spent so little time working with customers to unearth their emerging needs. The result: Alpha subsequently outmanoeuvred the competitor by moving faster on the product launch than originally planned, added extensive resources to the marketing and sales plan, and focused on winning some key customer accounts for the first time. The competitor was indeed slow to respond and found great difficulty in adding comparable services to its offer.

2. Insight into Customers: Competitors’ current and projected actions often provide a source of customer insight. The analysis teams had to adjust their focus on customers, moving beyond the “piles of customer data” they had compiled to consider multiple questions: 

• What is surprising about the patterns we have detected in customers’ behaviour? 

• What are the indicators of changing customer needs? 

• What are the indicators of potential customer migration to products propelled by emerging technologies? 

• Are we detecting emerging customer needs and potential customer migration movements before they become evident to both current and potential rivals? 

Asking these questions forced the analysis teams to dig deeper into their data on current and lost customers, as well as lost prospects. Using data on lost sales from Alpha’s salesforce, the teams began to understand that corporate customers in this product space were moving away from purchasing individual products in favour of buying an integrated system of products.  There was little indication from competitors’ investments, strategy moves, and public statements that any of the major rivals had detected the new customer understanding. The result: Alpha subsequently outmanoeuvred almost all its rivals by investing extensively in creating and delivering customers a system of integrated products that would both reduce their customers’ operating costs and allow added value to their end users.

3. Insight into the marketplace: Often the dominant breakthrough insight underpinning the ability to outmanoeuvre rivals resides at the level of the overall marketplace rather than just competitors or customers. After extensive deliberations, Alpha’s teams concluded that customers’ needs, emerging technologies, regulations, and competitive rivalry were all changing so dramatically that radically new manufacturing, marketing, logistics, and sales capabilities were required for future success. The old way of doing business (e.g., hand-offs from one functional department to another) could no longer be sustained if the strategic intent of any firm was to be the dominant marketplace leader.  This insight alerted Alpha to an opportunity to outmanoeuvre rivals if it committed to building the necessary new capabilities, a commitment it was beginning to undertake. 

Don’t overlook the little guys

Small – and all-too-often underestimated – rivals frequently outwit their larger rivals, leading to dramatic strategy implications for the latter. Critical new insight often lurks within the worlds of rivals who may only occupy one geographic region and/or a small portion of the product lines of the larger rivals. Not surprisingly, in the workshop we found that the data on smaller rivals was scant compared to larger rivals. If you have several smaller rivals, choose two or three that represent different strategies being pursued by these rivals. Then ask: How are we outsmarting each category of rival? 

 

Surprisingly, informative insights can emerge. One competitor group was gaining market share because those firms had begun to use information technologies to build better customer data and to anticipate customers’ need to replenish product inventories. Alpha’s analysis teams believe this confirmed Alpha’s wisdom in moving aggressively to use digital technology to build customer intimacy and real-time data on product usage, education of customers on how to use the product effectively, and just-in-time deliveries. Augmenting digital capabilities would enable Alpha to further outmanoeuvre its rivals.

 

The dominant question to ask: What are the smaller rivals doing or saying that may reveal some new understanding of the marketplace (including our firm) that we may have missed? In analysing one category of smaller competitors, the Alpha teams discovered that these rivals were radically shifting their customer value proposition from a product focus (“Our product features are technically far superior”) to a service and customer relationship focus (“We can work with you to co-develop the next product generation, and we will collaborate with you to ensure maximum product application”). The Alpha teams learned that their traditional understanding of customers’ needs might be outdated, leaving them vulnerable to being leapfrogged by a more innovative and full-service competitor.  

Who is outwitting you?

It can be very profitable to assess which rivals, if any, have outsmarted your own firm.  For example, consider these questions:

• What is the evidence they anticipated our strategy moves before they were manifest in the marketplace? 

• What change did they see in the marketplace that we missed and how did they take advantage of it? 

• How does their understanding of customers exceed ours in ways that enabled them to create and deliver superior customer value? 

 

Answers to these types of questions may illuminate opportunities and risks associated with your current and projected strategies.

The analysis teams in the workshop quickly judged that one major rival had discovered far sooner than Alpha had that the major regulatory agency would loosen environmental restrictions on the use of the relevant product class. Alpha was able to make their judgment based on looking at moves their rival had made in the market, such as rapidly increasing their product supply and committing to larger customer deliveries. The analysis teams asserted that Alpha had been slow to adjust its marketing plans because it had not adequately monitored the regulatory agency’s shift in posture.  

The value of ‘small data’ for outwitting

One final point is worth emphasising: Outwitting sometimes is the outcome of attending to ‘small data’.  While Big Data may get all the attention in the business press, small data can be the source of valuable new insights. Here are two examples from the workshop – one of a missed insight and the other of a detected insight.

  

First, the missed potential for new understanding: One Alpha marketer was told by an industry consultant that the environmental agency was likely to alter its regulations in a way that would make it far more difficult, if not impossible, to market one item in the product line. The Alpha marketer treated this tip as speculation and did not seriously ask his team to consider the question ‘What if this tip turns out to be true?' So, here, Alpha lost an opportunity to outwit its rivals.

   

However, another time Alpha was more successful in detecting an opportunity to outwit its competitors based on a customer’s comment suggesting that the market for stand-alone components would disappear, and that the future lay in integrated or systems of products. Over time, this projection turned out to be true. This potential new customer need became a focus of analysis and led to a significant new market opportunity for the firm.

In summary: asking the outwitting questions leads to insights that can have major implications for your firm’s investments, strategies, and actions.

Dr Liam Fahey – Professor of Management Practice at Babson College USA, and Co-Founder of the Leadership Forum – is author of new book, ‘The Insight Discipline’ (Emerald Publishing, £15.99).