Ignore the Competition

Companies spend too much time examining the competition and not enough time focusing on innovation.

By Greg Kitzmiller

While it may not seem like good advice, ignoring the competition could be the best course of action for firms today. This is because focusing on competitors could lull firms into a stagnant category, instead of focusing on reinventing a category. This is especially applicable to the coffee market. Would Starbucks exist today if it had focused on traditional coffee shops like the one featured for years on the hit TV show Seinfeld? If Starbucks had concentrated only on traditional mainstream venues like this one, it would not be the market leader it is today.

The visionaries at Starbucks believed people were ready for a new coffee ex­perience. The company didn’t look at restaurants, traditional coffee shops, or any of the competitors as it worked to create a global brand. Alternatively, it considered what experiences and products were not currently available to the typical coffee drinker and worked to create a new atmosphere. In the meantime, it also pitched its coffee products as premium offerings.

This is not the case for many supplement manufactures. If one takes a stroll through the supplement aisles in stores today they will notice many look-alike products. The lack of differentiation between products only results in confusing consumers and, in many cases, turning them away from supplement products entirely. Going forward, firms must concentrate on reinvigorating the category, so that consumers become excited about taking supplements again.

Copy Cats vs. Innovative Products

How much yield is gained by copying products versus innovating? Studies clearly show that innovative companies have the highest profit. In fact, a recently released book, Blue Ocean Strategies (Harvard Business School Press, 2005), touches on innovation as a very important aspect of business. One of the major points emphasized in the book is that in most industries today firms spend way too much time on looking at the competition and not enough on innovation.

McKinsey and Company has called this a strategic flaw of the herding instinct. They say, “For most CEOs, only one thing is worse than making a huge strategic mistake: being the only person in the industry to make it.” (McKinsey Quarterly, 2003 number 2). Singling out the dot-com era, look at the number of firms that rushed to go online with no good strategy or reason for doing so and then failed. It’s just too easy to follow the herd and sometimes so lonely to break away from the herd that entire firms find themselves plunging over the same cliff as the rest of their industry.

The best way to gain new ideas may be to look outside, not inside your industry. While it is valuable for a firm to understand the best practices in their industry, they are likely to gain much insight by understanding best practices in a parallel industry. Still, industry practices are meaningless unless the overall focus is on the users of the product.

Starbucks was able to determine that many people would enjoy a high-priced beverage in an atmosphere where they could comfortably work or read away from either their home or office. If firms understand what their consumers want then they are likely to innovate.

Features and Benefits

There seems to be a great deal of focus within the nutraceuticals arena on features rather than benefits. Features might include items like ingredients, packaging, delivery system, strength of ingredient, etc., but ultimately it is the benefit that draws consumers to a particular product. Firms seem to be caught up in looking to see what competitors are offering and how they are offering it, instead of determining, just as Starbucks did, what customers might really enjoy and how the product offers a benefit or experience that is totally different from other products on the market. Focusing on the benefit first can help determine the value of any features.

The best new strategies lower cost while increasing customer value. Clearly that is what Southwest Airlines was able to do. The authors of Blue Ocean Strategy point to Cirque du Soleil as another example of limiting cost while adding value. What IS Cirque du Soleil? It takes some features of a circus, removes three rings, removes most animal acts, removes the tent, eliminates moving from place to place, and puts the performance into a venue (that is usually paid for by someone other than the show’s producers). It provides overall lower costs than the traditional circus, but at the same time increases the allure and raises ticket prices vs. a traditional circus. Brilliant! It raises customer value while lowering costs just as Southwest Airlines did.

Focus on the Future

McKinsey says one strategic flaw companies repeatedly face is based on something called anchoring—basing beliefs on some unrelated fact. For example, past sales are often no predictor of future sales in a changing world. Yet companies continue to believe in predicting the future based on the past. McKinsey suggests looking over long time horizons to see long-term, not short-term trends.

Don’t just think outside the box; eliminate the box! This is powerful advice for the nutraceuticals industry, which needs to step out of the “me too” box. For the future, companies need to ignore the competition, provide real value to customers, keep an eye on cost and maintain a long-term perspective.NW